Mortgage News
Mortgage fraud set to rise as recession bites
Law firm Optima Legal has warned that the level of mortgage fraud is likely to treble over the next 12 months because the recession will continue to uncover more fraud cases.
Although mortgage fraud jumped from £4m in 2007 to £36m in 2008, the full extent of cases has not yet been revealed, according to Optima Legal.
Rachel Hutton, associate solicitor at Optima Legal, said lenders needed to look closely at their risk procedures in order to prevent and minimise the losses caused by fraud.
She added: “It is essential that lenders are aware of the cases which could be affected by fraud. Fraud is a massive risk issue but there is more chance of prevention and recovery for lenders if it is spotted early.”
Melanie Bien, director at Savills Private Finance, said she believed lenders had enough stringent checks and balances in place to protect against fraud.
She added: “While the recession may be more motivation for people to engage in fraudulent activity, I cannot see this translating into a rise in fraud because lenders are increasing their checks on cases and the FSA has stepped up its crackdown on fraud.”
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David Sheppard, managing director of Perception Finance, said the recent proposal under the FSA’s Mortgage Market Review for individual registration of advisers may help in the fight against fraud.
He added: “The industry must ensure that advisers who commit fraud do not continue trading. If advisers are registered with the FSA, they will not be able to move around the industry and I believe this may go some way towards stamping out fraud cases.”
Optima Legal’s research was backed up by the 2009 Annual Global Fraud Report from risk consultancy firm Kroll.
It revealed that combined average losses to fraud in the financial services industry over the last three years rose to $15.2m (£9.1m). This was 18% above the corresponding figure in the 2008 survey.
Blake Coppotelli, senior managing director in the business intelligence and investigations unit at Kroll, said the current economic crisis has increased the motive for fraud, and companies must work to bolster their existing anti-fraud strategies.
He added: “As lenders continue to increase scrutiny over their mortgage books, more fraud
will be uncovered, and it remains likely that bad debt provisions are hiding large fraud exposures. The key to preventing mortgage fraud remains due diligence over borrowers.”