CFI: Bridging


Mortgage fraud is a real and present danger by


Christian Faes, managing partner, Montello


Mortgage fraud is a serious issue in


the UK. Research


done late last year by Experi- an estimated that 26 of every 10,000 mortgage applications are expected to be fraudulent in 2013. Tis represents an increase of 13% from 2012 (which was up by 6% on 2011 numbers), and shows that lenders – and the brokers and intermediaries that work with lenders – need to be particu- larly vigilant against this grow- ing issue. Over the years we have seen


a number of potential fraudu- lent loan applications but have been fortunate to never have suffered a fraud. However, we have also heard stories from colleagues in the industry that would simply shock most people.


All sorts We have heard of or seen ev- erything from ‘dummy’ law firms pretending to act for borrowers,


bent solicitors,


overseas ‘fake sheiks’, to spous- es trying to simply rip each other – and the lender – off. We take mortgage fraud


seriously and weeding out po- tential fraudsters forms is an integral part of the two hun- dred or so searches we will make, before advancing a loan. For a start we access the


SIRA national fraud database. Te SIRA fraud database is an extremely sophisticated fraud detection system – a central- ised database that most of the main financial institutions in


the UK are a member. When a loan application is received we can cross-reference every piece of data concerning a bor- rower, with all previous loan applications that the borrower may have made in the UK with other financial


institutions.


Tis includes cross-referenc- ing everything from previous addresses to mobile phone numbers – even if the phone number is (or was) associated with a different person previ- ously. If any of the information is different to what may have previously been supplied to another institution, then this will come up as a red flag. Another reason why the


SIRA system is important for us, is because research has shown that a fraudster will typically make numerous loan applications for the same loan, to as many lenders as possible at the same time. Tis allows the fraudster to try and weed out the weakest link as far as the lenders are concerned. Tis will immediately be picked up by SIRA. SIRA is also useful because


its database runs across finan- cial industries. Research has also shown that fraudsters oſten don’t start at mortgage fraud in the first instance.


History lessons A fraudster will usually try and work their way up to a mortgage fraud, and oſten be- gins with making a dodgy ‘slip and fall’ claim against a com- pany, through to a number of insurance claims, and then to the big one – mortgage fraud. Our searches will alert us to what the borrower’s history is with regards to these sorts of claims. Whilst SIRA is the ‘first de-


46 MORTGAGE INTRODUCER SEPTEMBER 2013


fence’, it merely forms part of a comprehensive line of defence that we have against incurring a loss from fraud. Other things that we do include checking the borrower’s passport de- tails against the UK Home Office’s database; and doing a full credit check against the borrower. If the borrower’s passport is from a foreign ju- risdiction, we have access to a database that can also check those details. We do the credit checks with two separate and independent credit agencies, and then we cross-reference all of the information provided by the two agencies to look for discrepancies. As an active member of the


Association of Short Term Lenders we also have access to the ASTL’s proprietary In- formation Register. Tis reg- ister provides internal notes amongst ASTL members on potential problem borrowers, intermediaries and solicitors. As we move some of our


business online, especially through our recently launched LendInvest venture, we have also been building our pro- prietary in-house systems to check out a borrower. Tese searches range from every- thing from utilising Google’s search algorithms,


Linke-


dIn, and other social media, through to Companies House records, through to old-school phone calls to referees. We will also do searches against UN, EU and HM Treasury ‘asset freeze’ target lists, and ensure that there are no international financial sanctions issues with the borrower.


Extra checks Another line in our defence is concerning a borrower’s solici-


tor. We will always ensure that a borrower’s law firm has at least two partners that are reg- ulated principals of the firm. Statistics apparently show that it is a lot harder for a partner within a multi-partner part- nership to perpetrate a fraud. We will then ensure that the


law firm is registered with the Law Society. Without wanting


to give


away too much, the reason that the borrower’s solicitor is important is because we will have the solicitors provide us with various certifications concerning the borrower. Tis will include a detailed account on how they know the bor- rower and their history with that law firm. We will also have our solici-


tors do very similar credit and reference related searches on the borrower to what we have done, and we will then triple check their search results against the search results that we have obtained. We also have an industry


standard title insurance policy, which includes cover against various potential


problems,


but includes cover for fraud which could be perpetrated by the borrower or the borrower’s solicitor. Ten as the final line of de-


fence, we have a business-wide bespoke insurance policy that we have negotiated with a Lloyds of London syndicate, covering all loans originated by Montello for crime related issues ranging from employee fraud, through to borrower or solicitor fraud. Tese are just some of the


defences but when it comes to fraud – or even anything that looks like fraud – we’re not go- ing to be lending.


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