Avoid Committing Mortgage Fraud

Avoid Committing Mortgage Fraud

How To Guard Against Mortgage Fraud

Following fresh warnings from the National Fraud Authority about the rising level of mortgage fraud in the UK, lenders want more done to protect their interests.

Mortgage fraud was a widespread problem before the financial meltdown and collapse of the property market back in 2007/8 due to the availability of self- certification mortgages with buyers, brokers and mortgage advisers able to ‘self-declare’ earnings with little, if any, proof required by an industry too busy to carry out proper rules and checks on applicants.

Mortgage fraud costs the industry around £1 Billion (GBP) a year, leading the Financial Conduct Authority to want to instruct mortgage lenders to better acquaint themselves with the solicitors they work with.

The new stricter mortgage rules introduced in the Mortgage Market Review in April 2014 are intended to reduce the number of people who attempt to make false claims and self-certification mortgages are now a thing of the past.

However, this won’t stop mortgage fraud or prevent homeowners and property investors from being a victim of identity or registration fraud.The mortgage market may now be a more circumspect place, with stricter rules introduced in April, but it doesn’t mean the mortgage landscape is now free of fraud.

A report by Experian in 2013 showed that mortgage fraud has been increasing again over the last 6 years, with 38 in every 10,000 applications deemed to be fraudulent.

The UK Council of Mortgage Lenders (CML) say that there are four main types of mortgage fraud currently existing in the UK, these are:

1. Application Fraud – Where the property buyer knowingly provides mortgage lenders with inaccurate or misleading information on their mortgage application, such as trying to hide a poor credit history. This type of fraud is on the increase with  cash-strapped borrowers trying to get their hands on funds but are continually being thwarted by the mortgage lenders’ strict criteria, according to Experian, and that trend is set to continue now that the Mortgage Market Review has imposed stricter rules on UK lending.

2. Identity Theft – When someone steals another person’s identity, including their credit history. This scenario can often lead to mortgage fraud, where the person using the stolen identity secures a mortgage on property.

This scenario has led to innocent people being evicted from their homes. Fraudsters often target the vulnerable by using data from public foreclosure lists or from delinquent borrowers. This information can be readily sought and purchased via the internet homeowners have discovered too late that fraudsters have used their identity to take out home-equity loans or in some cases even sold the home without the owner’s knowledge.

3. Registration Fraud – Occurs when the legitimately owned property is changed into someone else’s ownership, as registered by the Land Registry in England and Wales, the Registers of Scotland or the Department of Finance and Personnel in Northern Ireland.

The change of property ownership allows the new registered owner to secure money against properties, if the change isn’t picked up during the application process.

In 2011, some 22 of 26 payouts for fraud and forgery where the owner didn’t live in the property, according to the Land Registry.

Owners of empty properties and buy-to-let landlords are particularly vulnerable to this type of fraud.

4. Valuation Fraud – Not declaring information to mortgage lenders on discounts and incentives given by developers which could affect the property’s value. Common on new build and off-plan property purchases

According to Santander’s Financial Crime Manager, Tracey Carr, “Fraud accounts for  probably less than 1% of all mortgage applications but this is still a substantial figure, although the good news is mortgage lenders are getting much better at picking up fraudulent applications. Make sure you always see what the broker has submitted to the lender on your behalf, and if you are buying a property, ensure the agent has checked who the seller is and verified their true ownership.”

How to protect yourself

The new rules introduced in April 2014 under the Mortgage Market Review (MMR) should reduce the number of people attempting to make false claims. But this won’t stop the fraud entirely. However there are still a few things you can do to prevent becoming another victim.

  • Protect your identity: Sign up to one of the credit reference agencies such as Experian, Equifax or Noodle, so you will be alerted to any change in your credit score.
  • Take care of what you throw out: Shred anything that could give away vital personal information such as bills, bank statements or other paperwork with your name, address, and date of birth on it.
  • Do not provide your details to anyone sending unsolicited requests for information via phone, email or post. You may be asked to provide bank account and/or login details or passwords, but banks and building societies never ask for this level of detailed information, so don’t give it out to anyone.
  • If you have any of your identity paperwork stolen, such as a passport or driving licence, report the theft immediately and request they are replaced as soon as possible.
  • Always use a registered mortgage broker: If you require a mortgage but don’t want to deal with a lender directly, use a broker regulated by the Financial Conduct Authority.
  • Sign up to the Land Registry’s Property Alert service – Get notified if anyone applies for an official search or if an applications is made against the property, particularly important if you own multiple buy-to let properties that  aren’t visited frequently or are empty for long periods of time.
  • If you are suspicious about anything, carry out checks on who has contacted you.

If you think your identity has been compromised or require more information on protecting your identity visit Action Fraud or call 0300 123 2040

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