Costing the country £38bn a year, Bowron said that fraud comes only second to drugs for the devastation it wreaks on people’s lives. “It is not white collar crime; it is organised villainy,” he said.
Yet, within the mortgage industry itself, who is the victim of fraud? Covering everything from someone inflating their income with every intention of repaying the mortgage to organised criminals systematically abusing the system, everyone is potentially at risk.
However, brokers seem to have taken much of the flack recently as the side of the industry letting fraud through.
AMI rebuked lenders’ claims in the FSA’s thematic review into fraud that third parties, including advisers, solicitors and surveyors, represent their biggest threat.
Yet, does this suspicion of one another merely distract from tackling the central problem, at a time when criminals are becoming increasingly sophisticated in their methods?
David Sheppard, managing director of Perception Finance, said: “Banks and brokers need to come together on this and have a discussion about what each expects of the other. It seems to have been a them and us scenario.”
He added: “To say that brokers are the main source does a disservice to the industry. I worked in a bank with someone who went to prison for their actions. In every industry, you will find people prepared to do what they shouldn’t.
“I don’t think the public at large would say the industry is tainted. Fraud is part of the world we live in today and it doesn’t matter what industry you’re talking about.
“But everyone suffers in terms of reputational and financial damage.”
Indeed, Mike Fitzgerald, sales director of the Emba Group, said that people within the financial industry are working hard to regain its lost reputation following the banking crisis and far more co-operation on fraud is needed.
He said: “Every sector has role to play in ironing it out. It’s strange that it is at its biggest when regulation is at its most onerous.
“There was a time when fraud was a like a cancer at the heart of the industry and it needed more investigation. Not now. Bodies can see patterns and quickly clamp down, but we need more cohesion between the FSA, Law Society, police, valuers, lenders, brokers – everyone.”
Sheppard added that the banning orders currently being seen are for brokers who conducted business at the height of the market, when checks were not as stringent as they should have been.
He said: “Now levels have gone down and lenders are taking more time to assess cases. We’re at the point where the market needs to be more vigilant.”
Vigilance is certainly the key word when it comes to fraud in the current climate.
Bernard Clarke, spokesman of the CML, said: “At the end of the day, lenders’ funds are at threat. There is a constant need to maintain vigilance because criminals will always look for the loop holes.”
Part of this vigilance has resulted in lenders culling their conveyancer panels to mitigate their exposure.
Goldsmith Williams’ head of conveyancing, Lynne McCaffrey, said: “Lenders only want to work with firms who can demonstrate effectively that they’ve done all they can to minimise the potential for fraud.
“This can only be a positive for the industry and will improve the confidence that both lenders and consumers have in the integrity of the mortgage industry.”
She added that lenders, conveyancing firms, police and intermediaries are beginning to work together to tackle the problem: “If they continue to work in partnership, it should help to raise standards and improve due diligence.”
Many including AMI believe that moves such as the delayed individual register will help oust rogue brokers from the industry, prevent fraudsters coming in and improve the sector’s standing.
Yet, Clarke said: “It doesn’t provide a fail safe; criminals will try and get on it. To think it provides an absolute protection portrays a deluded idea of how mortgage fraud works and lenders’ defences.”
Of course, Clarke points out that, despite its size, mortgage fraud remains relatively small compared to the sheer scale of the mortgage market, even in its diminished state, allowing lenders to absorb the cost.
However, someone has to ultimately pay and that is the consumer, said Fitzgerald.
Nevertheless, he believes that consumers are taking the matter into their own hands by being far more active in seeking out referrals for good brokers. He said: “That’s when it gets back to a solid market.”
Mortgage fraud is nothing if not an insidious crime. It is clear that the industry understands it must work together in order to combat it.
However, if collaboration is not truly forthcoming and different sides of the sector remain closed off in suspicion of each other, fraud could make victims of us all.
