Why agents need to warn clients about mortgage fraud

26 September 2019 9928 Views

As an agent, it’s part of your role to protect and advise your clients throughout the buying and selling process.

Mortgages are one area which can often be complex and confusing, which also makes them vulnerable of being susceptible to fraudulent activity.

According to fraud prevention service Cifas, there has been a 5% increase in the cases of mortgage fraud as growing numbers of house buyers appear to be exaggerating their income in an effort to obtain loans. The 5% growth took place over the first six months of this year, compared to the second half of 2018.

How does mortgage fraud happen?

Mortgage application fraud takes place when documents provided in support of a mortgage application are either altered or falsified. Fraud by production of a false document rose by 14%, while fraud by submitting altered documents rose by 32%, according to the Cifas figures. 

The firm said such applicants typically provide false or altered bank statements and proof of income in order to validate their income for mortgage applications, with nearly half of those caught committing application fraud aged between 31 and 40. This group witnessed a 16% increase compared to the last six months of 2018.

They were followed by those aged between 41-50 years old, an age group which saw a 6% growth in mortgage application fraud.

On a regional basis, we must look to the West Midlands for the highest increase in fraudulent mortgage applications, at 43%, while the number of cases in the North East grew by a third.

Not a victimless crime

The consequences of those taking out a mortgage based on a false income could be that homeowners are unable to repay their debt later on because they don’t have the funds to afford their mortgage repayments.

Other possible consequences could include blacklisting against future product purchases, or possibly being reported to the police for investigation. This, in turn, could potentially lead to a criminal conviction and a prison sentence.

“It’s easy to assume that making exaggerations to improve the chances of your mortgage being approved is harmless, but the reality is that this is fraud and the consequences can be very serious,” Mike Haley, Cifas chief executive, commented.

“Mortgage providers carry out rigorous checks, and so exaggerating your income or withholding any change of circumstances could result in it being harder to obtain financial products in the future such as mortgages and loans.” 

James O'Sullivan, policy manager for the Building Societies Association, added that mortgage fraud is ‘far from being a victimless crime and is something that lenders take rigorous action on’.

How can you help?

You can advise those who are selling and buying at the same to not exaggerate or falsify their incomes as this could cause major problems at a later date.

Equally, you should advise your clients to beware of wider property fraud – a rising trend which costs the average victim more than £107,000 – with the eight main types of mortgage scams including Friday afternoon fraud, quick sale scams, holiday home hustles, property auction scams, intercepted deposits, buying a house from a fake seller, ‘free land that isn’t free’ schemes, and investments that are too good to be true.    

Stealing a property’s deeds or using free online information about property titles in England and Wales to take out a mortgage using a victim’s identity are common types of fraud you should make your clients aware of.

To give you more time to advise and support your clients, it helps if you have a fast, reliable and secure software system in place, allowing you to manage all parts of your business at the click of a button.

For more information on the software and website design services Gnomen offers, please get in touch with us today. You can also book a free demo here.

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