In the last five years mortgage fraud has more than doubled and last year fraudulent applications for mortgages grew to 3,431, 2.2 times higher than it was in 2006.
The danger of fraud is evoking fear and distrust in most risk and operations teams. Preventing early signs of fraud is crucial in the safeguarding of a company’s reputation.
Over 90% of mortgage fraud tends to come from individuals misrepresenting their financial circumstances, often in an attempt to purchase property unobtainable to them.
In 2011 both young, poorly educated applicants plus skilled working class applicants were each responsible for 15% of first party mortgage cases.
A lender who uncovered a £1.5m scam warned that mortgage brokers need to be more aware of ‘certain tell-tale signs’ of fraudsters such as when brokers are earning an extremely large fee or if they had not met the borrower.
To catch more fraudsters, the mortgage industry needs better information about customers and suppliers. The key is to know who you’re dealing with, which means having plenty of data about them.
It’s in brokers’ best interests, because they will be held to blame even if they unknowingly associate with fraudsters.
Smaller bridging loan companies are well protected. They lend a tiny proportion of what mainstream lenders lend. The higher level of human presence over checks and balances means that fraudsters have higher risks of being caught.
But for larger companies who deal with thousands of transactions, they cannot hope to catch fraudsters unless they can access a high quantity and quality of data.
The FSA has warned lenders that anti-fraud provisions are in need of reform. Lenders’ information coming from sluggish internal systems cannot be presented in a consistent format.
Poor quality means that lenders are not getting the clarity in their system that they require to prevent fraudulent trends. Lenders are reducing progress by using outdated control systems and by attempting to develop in house solutions.
Mark Blackwell is managing director of xit2
