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The changing face of fraud

by: Nick Mothershaw
  • 01/12/2014
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The changing face of fraud
There's no disputing the past 12 months have marked something of a stellar year for lenders. The Council of Mortgage Lenders estimates gross mortgage lending for the third quarter of this year was £55.5bn - marking an 8% increase on Q2-2014 and a 13% jump on the third quarter of 2013, which just topped £49bn.

But despite one of the most buoyant housing markets in recent years, it’s also worth noting the number of applications detected for mortgage fraud has actually continued to decline, says Nick Mothershaw, director of identity and fraud, Experian

Clearly there’s no escaping the fact that fraud continues to be a critical issue for lenders and it still represents a lucrative opportunity for the criminals who relentlessly test defences. But vigilance counts for 79 out of every 10,000 applications detected as fraudulent in August 2014 – compared to 82 for the same period last year.

Rising demand and rising house prices have coincided with lenders’ increased vigilance and regulatory scrutiny coming in the shape of extended mortgage applicant interviews, questionnaires and stress-testing, which could soon pave the way for an overall rise in detected fraud attempts, as borrowers attempt to disguise credit commitments and exaggerate their incomes.

Among the emerging trends we’ve noted is the prevalence and rise of attempts by fraudsters to make applications under different guises, or try to side-step increasingly onerous affordability checks and stricter lending criteria by hiding credit commitments. Misrepresentation on this scale is a clear indicator of the continued financial stress and restricted cash-flow some households continue to feel.

At the same time, detected third-party mortgage fraud has also recorded a modest up-tick, again highlighting the need for lenders’ vigilance particularly when dealing with brokers, intermediaries and external advisers. It also highlights the need for lenders to retain a trusted panel of solicitors and recommended legal representatives.

The numbers really speak for themselves with more than 100 individuals having now been handed bans by the regulators within the past eight years. It’s also a clear indicator of just how critical reliable ID and document checking platforms are in helping cut the incidence of third-party mortgage frauds.

Many lenders are now readily accommodating consumer demand and the mass-market switch to digital platforms. Although the need for applicants to provide traditional, paper-based documentation is still a requirement by many institutions, there are now mobile ID document and verification solutions available to help support and speed up back-office approval systems.

Identity theft

Identity theft is still an issue for all – and it is a trend that continues to relentlessly rise across all financial products. Its significance and impact to both lenders and their customers cannot be understated and both must share responsibility in safeguarding their respective positions.

The nature of identity-related crimes during the past five years has evolved with those regarded as more affluent being targeted less now than they were. In the meantime, the less affluent are now falling prey more frequently to fraudsters. It’s a trend that shows their flexibility, adaptability and willingness to target the easiest or most readily available victims.

This is especially notable among younger, less affluent demographics, which has also coincided with a shift in behaviour, marked by their ease, use and reliance on the internet and online channels, highlighting the need for lenders to invest in device intelligence fraud detection.

But it’s not all bad news. Despite the volume of attempted fraud, continued investment in fraud prevention by the UK’s banking and financial services sector is paying off with institutions now uncovering even greater numbers of application fraud – when compared to the same period last year.

We work closely with National Hunter in maintaining a close eye on mortgage fraud trends. Despite it being at a relatively low level compared with other financial products, it’s an area which continues to be heavily targeted by fraudsters, reflecting the lucrative opportunities on offer.



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