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Preventing mortgage fraud: A guide for brokers – Coventry BS

by: Kirsty Jefferies, financial crime manager, intermediary and solicitor panel, and Andrew Bennett, financial crime manager, mortgage investigations at Coventry Building Society
  • 02/02/2024
  • 0
Preventing mortgage fraud: A guide for brokers – Coventry BS
An alarming trend is emerging in the UK property sector.

Between April 2022 and March 2023, 1.1 million cases of property fraud were reported in the UK – a 15.3 per cent rise compared to the same period during the previous year. 

Market dynamics and pressure from the ongoing cost-of-living crisis are contributing to this significant rise. Not only have some borrowers become more susceptible to fraud, but others are straying into it by exaggerating their incomes. 

This is not a petty crime, either – the consequences are severe for those caught in the act. There’s not only the obvious risk of prosecution – with up to 10 years in prison – but also the serious risk of borrowers defaulting on loans that they cannot afford, destroying any opportunity to secure loans or mortgages in the future. 

So, how can brokers spot the early signs of any manipulative activity and help clients at risk avoid becoming entangled in the shady world of fraud?  


The first impression

A broker’s initial meeting with a client represents the first line of defence against fraud. This is the most critical stage to risk assess and shut down potentially fraudulent activity before it escalates. If a client were to secure a mortgage and complete a property purchase with false information, the ramifications of their deception would be significant – and not just for the borrower, but the lender and broker too.  

The key is really knowing your customer. Where possible, brokers should organise at least one face-to-face meeting with clients to establish the legitimacy of the person in front of them and find out what to expect when they come to submit their papers. This also extends to third-party introducers and gauging their credibility.  

If your business does not operate in a face-to-face environment, having the correct systems and controls in place is crucial.  


Evaluating documents and threat assessment

When reviewing documentation that supports a mortgage application, look out for tell-tale signs of forgery, such as oversimplified payslips, rounded figures or even simple spelling mistakes and inconsistent formatting. 

It’s important to identify any inconsistencies in a client’s wealth profile based on their reported job, what they claim to earn and why they want to buy a property. Sometimes, a broker will need to make a plausibility judgement. If the falsification of documents is difficult to detect and something doesn’t seem right, don’t hesitate to ask the client for more information.  

Remember, too, to keep a good record in case it’s needed as evidence down the line. 

Brokers must not only be aware of the various types of property fraud, but also have some savviness as to the tactics and trends popular among organised criminals to try and deceive lenders. 

Using digital tools to alter documents, inflating income or hiding debts are all very familiar ways to try and achieve a more competitive mortgage product. 


Raising awareness for deposit redirection fraud

It’s not just lenders who are being targeted. The threat of deposit redirection fraud has many innocent homebuyers on edge, and it’s important that brokers raise awareness about this type of fraud, particularly with buyers new to the housing market.  

First-time buyers could be susceptible to these scams, with criminals posing as their solicitors and conning them into transferring deposits into their bank accounts.  


Notifying lenders and knowing your response

If you’re ever in doubt that documents have been manipulated, call a halt to the mortgage application immediately and reach out to the lender to flag your concerns. Under no circumstances should a broker submit a mortgage application to a lender if fraud is suspected.  

Instead, allow the lender to conduct their own independent review. 

With mortgage fraud on the rise, brokers need to maintain their continued high standards of due diligence to spot any potentially criminal activity.  

They are the first line of defence in this fight, and by following just some of the steps above, they can help to protect the market and importantly, customers from the legal and financial implications of mortgage fraud. 

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