In a nutshell, mortgage fraud occurs when an individual defrauds a financial institution or private lender through the mortgage process, covering false representation of information or failure to disclose specific details where there is a legal duty to do so.
The affect mortgage fraud can have on a mortgage adviser can be a great one, as fraudsters will often use at least one professional when looking to make a fraudulent application. Mortgage brokers and introducers have been used within this role in the past, so it’s important to be aware of this.
It goes without saying, no matter how much you want to help your client, you must not be party to any dishonesty by giving or allowing false information to be provided on a mortgage application.
Any incorrect information in respect to income, employment and financial commitments means that the mortgage is being obtained fraudulently. This can have a negative impact on your career if you’re party to any incorrect information within a client’s application.
With regards to avoiding mortgage fraud, creating strong relationships with reputable conveyancing firms is key. It’s important to have background knowledge of the firm you are looking to refer the conveyancing work to and to always ensure you are happy with its processes to protect yourself from any potential fraudulent activity.
Always be wary of a firm that may have suddenly ‘sprung up’ and is offering very cheap fees – there may be some obvious reasons as to why their offering sounds too good to be true.
To help minimise mortgage fraud, advisers and solicitors should work together to help spot unusual instructions and then raise any further questions with the client during the mortgage application process or once the mortgage offer has been issued. Remember a fraudster may look to change their mind about their circumstances after the offer has been issued, not just during the application stage.
As a firm of solicitors we can help support mortgage advisers by ensuring the mortgage offer satisfies the Council of Mortgage Lenders (CML) Handbook when it comes to the conveyancing process.
Even though spotting a fraudulent mortgage application can be tricky, there are a few key aspects you can look out for. These include:
– Always know your client – be aware of those you have never met or who have been introduced to you by a third party, they could be a fictitious buyer
– Watch out for unusual instructions – for example, being asked to send net proceeds to a third party
– Don’t try too hard to ‘help out’ a client – the purpose of the mortgage application should be obvious, it should not involve unusual aspects
– The purchase price IS the purchase price – this cannot be different in documentation. It should match the estate agent’s notification of sale, the mortgage offer and the solicitor’s contract and transfer
– Be wary of last minute price changes – documentation will have to be changed and the lender will be told by the solicitor of any price change
– Be vigilant when a client says deposits have been paid directly to the seller – lenders should be made aware if this happens
– Watch out for those transactions where the current owner has owned the property for less than six months or where there are substantial increases in the property value over a short period of time
– If in doubt, give your lender as much information as possible when submitting the application
If you are mindful of the tips above and ensure you’re working with the most reputable law firms around, you’re on your way to limiting the affects mortgage fraud can have on you, your clients and your business.
