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16 | Mortgage fraud
The fraud
squad
With mortgage fraud in the news again, it seems prudent
to take a quick look at the issue including tips on how to
avoid the handcuffs
ortgage fraud hit the news been committed and a special team is
M
as we were going to press. going through each case as we speak to
The release of Chelsea see if fraud actually has been
Building Society’s half-year committed.
results last month shows Earlier in August Bradford &
that it has put aside a Bingley said it had set aside a involved in the
staggering £41 million as a further £100 million to cover transactions" didn’t help. Or
result of potential mortgage fraud on some of itself against losses from maybe it is the record of mortgage
its buy-to-let loans. mortgage fraud and brokers committing fraud that hasn’t helped.
In a statement releasing the results, the "professional negligence" Eradicating fraud is one of the FSA’s four
society says: “Chelsea has identified that there on its loans, bringing to statutory objectives – and one it takes very
are cases within its buy-to-let mortgage book £271 million the amount seriously. You can’t have missed the fact that
where fraud has occurred. This relates it has set aside for these practically every week a mortgage adviser is
primarily to lending during the period 2006 to problems since the start of fined and/or banned as a result of crime. The
2008 and is mainly as a result of the artificial 2008. total amount of fines imposed by the FSA in
inflation of property values by third party The Chelsea says that 2009 up to 17 August was £11,840,410; more
professionals involved in the transactions. other lenders will probably than half of that was for mortgage fraud. There
External consultants have completed a review find themselves in the same has been a definite increase in fraud - in 2007,
of the entire mortgage book for suspected or situation if they undertook a just five bans were handed down. This rose to
proven fraud and the results of that review similar review of their 29 last year, with four individuals fined a total
have been incorporated into the half year mortgage book. of £289,500 and ten firms fined £216,000 in
results resulting in a charge of £41 million. total.
“The Group ceased new buy to let lending Blame The FSA is cracking down on mortgage
(other than pipeline business previously But the blame has already started fraud by “working to encourage greater
committed) in the last quarter of 2008. Apart to be attributed to mortgage collaboration and coordination
from a small confirmed recovery, the half year brokers. I was listening to the radio
results exclude third party recoveries which the whilst I was driving and was
Society is pursuing vigorously.” gobsmacked to hear the news presenter
The Chelsea discovered the problem after a put the fraud down to mortgage brokers. I
review of all its mortgages following losses suppose the Chelsea’s description of the fraud
incurred through Icelandic banks last year. It as being caused by "the artificial inflation of
has set aside the £41 million in case fraud has property values by third-party professionals
September 2009 Mortgage Introducer www.mortgageintroducer.com
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