title insurance
For King and Country
Title insurance can be a risk management tool as organisations move to comply with Basel II rules. Adding a further layer of security to riskier tranches of business through the application of title insurance is not a bad thing
by Christopher Taylor, CEO, London & European
The latest KPMG Fraud Barometer reveals that mortgage fraud nearly quadrupled in value during the first six months of the year. While the number of cases was up just over 15% compared to the same period last year, the value of those cases was some £96 million. The whole of 2009 only saw mortgage fraud totalling £77 million.
It seems we can’t read the trade
press from one week to the next without news of a broker being banned for failings in relation to mortgage fraud - the Financial Services Authority has banned over 90 brokers in the past three years. However, the problem does not sit squarely on the shoulders of intermediaries. An estate agent was jailed for six years after attempting to pull off a £2 million mortgage fraud after stealing the identities of two homeowners. One of the biggest cases highlighted by KPMG involved two solicitors charged with commercial mortgage fraud, obtaining a money transfer by deception and dishonesty.
NegligeNce
Solicitor negligence is a significant contributor to our title insurance claims
book. The first port of call for any solicitor acting for a repossession case is to try and challenge the conveyancing. As possessions have increased, more solicitors are experiencing claims against their professional indemnity insurance policies, and this is having a severe impact on renewals. Insurers have withdrawn from the marketplace and it is likely that some solicitors – particularly those heavily involved in conveyancing – will be forced to take PI insurance wherever they can get it, irrespective of the quality of the insurer behind it. This sadly says something about the propensity for solicitor negligence, and L&E could well experience a rise in this type of claim whether a case of genuine sloppy conveyancing or not. Putting the issue of unscrupulous or shoddy professionals to one side, we should not forget homeowners. Claims triggered by acts of fraud or forgery by borrowers represented a significant percentage of the cases we processed between 2001 and 2005, and in the summer of 2007 I predicted that trend would continue. With repossessions on the increase, it was highly likely that more fraudulent acts would come to light. I have sadly been proved right. Although they don’t occupy the number one spot, L&E is now experiencing a steady flow of claims for borrower fraud. With government cuts of at least 25% forecast across all departments, we are facing the likelihood of public
42 mortgage introduCer SEPTEMBER 2010
sector job losses on an unprecedented scale. The knock-on effect across the whole economy is unimaginable. Interrelated private businesses are likely to suffer and while there will be pressure on the private sector to mop up a superfluous public sector workforce, this seems improbable. Those who said unemployment wouldn’t reach three million this year might be right, but I wouldn’t rule out the needle tipping over the edge next year.
It is a sad but inevitable fact that many of those unfortunate enough to lose their jobs will be unable to keep up payments on their homes, and will face the stark reality of repossession. Desperate times call for desperate measures. When faced with repossession, homeowners will resort to just about any tactic to delay or postpone the action. Our past claims information shows that they will lie about their state of mind when they originally took out the mortgage or that signatures were forged … anything to challenge the validity of the mortgage.
Validity of a mortgage There are so many ways in which the validity of a mortgage can be challenged. A recent example we saw was regarding a property held jointly by the husband and wife. It had been subject to a remortgage, ostensibly for home improvements which was then apparently spent by the husband on paying off credit card debt. Credit cards
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