20 finance
Paying the price for mortgage fraud
How is Mortgage fraud affecting legitimate home buyers? As is ever the case, the honest majority are collectively paying the price for the dishonesty of the few, writes Andy Nicholls, mortgage adviser from Beaufort Asset Management
Last year the BBC reported that a former police officer was one of five people to have been convicted of massive mortgage fraud worth £20 million. The prosecution said that the deceit was achieved by inflating the actual value of the property used as security, hiding the fact that in some cases no deposit was put down, or inflating the rental income potential to make the mortgage rate more acceptable. Some of the apartments on which mortgages were advanced didn’t even exist.
This is not a one-off case. These stories are regularly appearing in the news. In May of last year, the London Evening Standard reported that a multi-millionaire London property tycoon had been convicted of Britain’s biggest mortgage fraud and was given an extra four years in prison.
Particularly picky
It is not surprising that following on from these stories and others, mortgage lenders are being particularly picky with regards to documentation in support of a mortgage application. Demands for proof of deposit, three months’ payslips, the latest p60 and six months’ bank statements and a fully
completed budget analysis are a regular requirement by lenders pre-underwriting teams. While traditionally this is not unusual for the first-time buyer and high loan-to- value end of the market, the good credit and low-risk buyers are now subject to the same lender demands.
The increased level of inflexibility and hurdle jumping is being driven by lenders concerned about significant levels of mortgage fraud. This is not just the high- profile cases mentioned above, but due to an increasing number of borrowers looking to create histories and affordability levels for themselves to gain mortgages to which they are not entitled.
Against this background it is therefore unsurprising that demands for documentary proof have increased. Frustrating, yes, but understandable all the same.
MMR (Mortgage Market Review)
The MRR is set to make the documentation and ‘t’ crossing and ‘i’ dotting even more demanding.
The MMR was a comprehensive review of the mortgage market which sets out the
case for reforming the market to ensure it is sustainable and works better for consumers. Several changes will be coming into effect from April 26, 2014. Centred around affordability and proof of income, lenders will be forced to assess every case with a fine tooth comb. This combined with the identified concerns of mortgage fraud, will only be adding to the pressure on lenders and increasing the paperwork for home buyers.
Details: Andy Nicholls 0118-9879400
anicholls@beaufortasset.com
www.businessmag.co.uk
THE BUSINESS MAGAZINE – THAMES VALLEY – MARCH 2014
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