Despite sizeable falls in lending during the past five years, mortgage fraud is estimated to cost the industry £1bn-a-year. At the same time, FSA investigations into misconduct by mortgage brokers has paved the way for more than 100 individuals being banned from working in the industry along with the imposition of more than £2m in fines.
But regardless of the sizeable numbers at stake, the frequency of fraud attempts stubbornly refuses to ease off and with increasing pressure on household incomes, lenders are now more vigilant than ever when it comes to scrutinising mortgage applications.
The trend is typified by the numbers of people now willing to misrepresent their personal, employment and credit information in an effort to get properties that may realistically be out of their reach.
With brokers on the frontline of the mortgage industry, it’s always worth sounding a note of caution to over-leveraged clients.
It may seem obvious, but the main indicators in mortgage applications which set the alarm bells ringing are adverse credit, a prior track-record in fraudulent behaviour, falsification or inconsistencies in income and financial commitments.
The presence of adverse credit data at an applicant’s given address, or at an address that is linked to them, also suggests that they may not be skilled in managing personal finances and a bad risk.
At the same time, the presence of fraud recorded against an applicant is clearly a warning sign highlighting historic misdemeanours and behaviour patterns.
Inconsistencies in income and any other deliberate falsification of application data – including inaccurate employment history, incorrect time at address history and deliberate denial of outstanding credit commitments – will usually be noted and will always raise an alert.
Analysis of suspect bank account details and document check failures also provide lenders with subtler ways to check applications.
Any applications handled or associated with third-parties – be they brokers, lawyers or IFAs – that are deemed by a lender to be risky will also always come in for close scrutiny.
But it’s not all doom and gloom. Despite the challenges posed by the economic climate, brokers have an opportunity to save their clients and themselves time, effort and money by simply carrying out a bit of extra due diligence before a mortgage application gets underway in earnest.
From an intermediary’s standpoint it’s all about peace of mind. If an applicant can confirm their identity, document their income, understands the principle of affordability, has a sound grasp of their credit commitments – and is made fully aware of the personal cost of lying to a lender – then they should always be taken at face value.
Bullish brokers that constantly fire off optimistic, over-leveraged applications will continue to simply waste their time, while the likelihood is they will lose business and quickly undermine their reputations among legitimate clients.
