Sharp Rise in Mortgage Fraud

by Mark Johnston

A bi-annual report just released shows that mortgage fraud now accounts for 20% of all know reported cases of fraud in the UK.

The study which was conducted by BDO, the worlds fifth largest accountancy firm reported that fraud had hit a record £1 billion in the first half of the 2010. Mortgage fraud accounts for around £6 million of this which is well up on the previous six months figure of just £1 million.Mortgage fraud is used to describe a number of criminal activities which are used to misrepresent information in order to obtain mortgages or larger loans. Many would be borrowers include false information on their mortgage applications whilst others even forge documents in order to secure a loan.The BDO report showed that over 16% of reported fraud came from the self employed providing false company accounts or under reporting gains in order to avoid tax and VAT payments.Simon Bevan, head of the fraud services unit at BDO, said: “fraud prevailed regardless of the economic climate and could not be blamed on the downturn.”But many industry insiders see things differently. The economic downturn and subsequent credit crunch may well have caused lenders to carry out more checks and instigate a greater level of control. This may well have identified a lot more cases of fraud which was always in the system but never detected. Others think that laid off employees are starting blow the whistle dodgy practises as a way of getting back at their old employer.Untrustworthy borrowers are finding many different ways to secure a mortgage through deception. Occupancy fraud is where a borrower is looking to buy an investment property but tells the potential lender that the property is for themselves to secure lower interest rates. Many lenders have moved out of the risky buy to let market and so mortgages of this kind are harder to get.Income fraud is where borrowers overstate their income to get a larger loan amount. This is a fairly common practise but is actually fraud. The FSA recently released new regulation that will force lenders to carry out much for stringent checks. Income fraud is one of the major causes of the credit crunch. Many borrowers lied on their loan agreements to secure larger sums but could not afford to keep up with the payments. These customers then defaulted on their mortgages and caused the crisis that we are in at the moment.Again, employment fraud is where borrowers lie about who they work for or at what position they work at. There have been some cases where borrowers have been found to be unemployed whilst they claimed to be a company director.



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