Only Finance.com® - The Crisis of Mortgage Fraud

Mortgages - The Crisis of Mortgage Fraud

I am not a mortgage fraud expert. But I don’t need to be one to able to tell when a problem, which was almost non-existent some years back, blows out of proportion. And this crime, in question, is one such problem.

Only recently did a report by the Association of Chief Police Officers (ACPO) reveal that mortgage crime has become such a pain that it costs the industry about £700 million in 2007. While those legitimately transacting business are reeling in pain due to what criminals are inflicting on them, the perpetrators are smiling to the bank as business booms as usual.

At this juncture let us pause to ask a few questions: what is mortgage fraud, how does it operate and who are those behind it? Your guess is as good as mine. But let’s examine each of these questions carefully.

Mortgage fraud could take a number of forms as much as it is difficult to accurately measure. And it remains a significant element of the UK’s annual losses, said Commissioner of the City of London Police and lead on economic crime for ACPO, Mike Bowron.

By this definition one cannot say, specifically, what the crime means. But the best way to define it is by understanding how it operates, I believe.

It easily manifests in the form of manipulation of valuation, especially on newly-built properties, by corrupt surveyors. This essentially allows fraudsters to obtain much higher loans than what the falsely valued property deserves. Another form of it is that fraudsters can use fake applications to defraud lenders. In this case other people’s names could be used by others to obtain loans, which they end up failing to repay.

The ACPO report also exposed that nearly 50 per cent of all confirmed fraud cases happened in London and were committed by men from certain social backgrounds and in their mid 30s.

Like the crimes the victims are usually varied. They could be people who were defrauded by those from whom they purchased newly-built properties, as they later discovered that the value was not worth what they were made to pay. Or those on low income duped into taking out loans they were unable to repay, by corrupt professionals.

One big issue in tackling this crime is that its complications make it very hard to detect. With the risk of being caught very low, coupled with high profit opportunities, even people who ordinarily should have no business participating are now neck-deep in it.

A few days ago one notorious swindler by the name Andrew Kiplimo was banned by the Financial Services Authority from conducting any business within the industry. And last month two partners in a mortgage broking firm were also banned by the FSA for submitting bogus applications. The most disturbing case is that even lawyers are involved. This dimension gives it the perfect picture of organised crime. At least 60 lawyers are being investigated for their role by the Solicitors Regulation Authority.

This, in effect, means that tackling it would require more than kids gloves. This is true given that the ACPO report also said there’s a link between it and drug-related crimes. In addition to such measures as double-checking the identities of people making applications for or changing the ownership of properties, individuals need to, in their personal capacities, be very vigilant. We are, by the implication of being potential targets, in this business of fighting this crime together. Reporting suspicious characters to appropriate authorities may not be entirely out of place.