The answer lies in the fact the opportunity is greater when you have assets worth thousands and sometimes millions of pounds – an attractive proposition for organised crime.
When you have a large and reasonably quick transaction in the hands of only a few people; the consumer, valuer, surveyor, mortgage broker and conveyancer, temptation can be rife for the unscrupulous.
Usually you are investing a relatively small amount for a fund in a longer-term process, for example an ISA is £15,000 this year, which means fewer IFA opportunities are involved and the platform drives the investment direct to the active fund manager, who are also closely regulated.
The larger scale IT solutions of the platforms in IFA arenas provide additional reassurance to consumers and regulators.
When I worked for a lender, the large mortgage losses in the main were when the broker, valuer and conveyancer were all in cahoots – i.e. a sophisticated consumer fraud. It is for this reason I believe packaging will never come back to anything like its level before the recession.
Significant checks and balances are now in place to ensure the end-to-end process is split and in the hands of the many, not the few. This will remain the case and the automated checks will be increasingly important.
It is also important to recognise the input of an independent RICS surveyor, who checks the property exists, is in good shape and suitable for a mortgage. MMR also helps to as it makes the fraud harder to do with the complex income and expenditure systems and makes items like back-to-backs easier to spot.
I do think mortgage fraud will reduce. Around 85% of all mortgage brokers are now managed by people who have as much to lose in any scandal as the consumers and the lenders. Legal & General, Sesame and LSL are all stock market quoted entities and Openwork, Intrinsic and PTFS have corporate backers.
The regulator is looking very closely at this and putting in place a lot of conduct risk consumer tests to ensure advice can be proven and fraud is actively and consistently fought. There will always be someone doing things they shouldn’t but I do believe we are all getting better at recognising mortgage fraud, because it is in all our interests to do so.
Nigel Stockton is financial services director at Countrywide
