Kirsty Jefferies, financial crime manager, intermediary and solicitor panel, Coventry for intermediaries, and Andrew Bennett, financial crime manager, mortgage investigations, Coventry for intermediaries, answer the most popular queries they receive from mortgage brokers.
- What are the most common types of mortgage fraud and what are the latest tactics used by fraudsters?
Mortgage fraud is an alarming trend in the UK property sector, with financial institutions, borrowers and mortgage brokers alike continuing to feel the impact. There are several common practices of this activity, including income fraud, where applicants are exaggerating their own incomes to secure larger loans; product abuse, where applicants make a false declaration regarding the property usage, and property hijack where criminals impersonate others or use false identities to create a fictitious property transaction in order to abscond with the mortgage funds.
Challenging market dynamics and pressures from the ongoing cost of living crisis have contributed to a rise in this activity, with 1.1m cases of property fraud being reported between April 2022 and March 2023 – a 15.3% rise compared to the year prior. The consequences are also far from lenient, with those caught facing up to 10 years in prison for their actions.
It is essential for brokers to spot the early signs of mortgage fraud to help their own clients manage the homebuying process in a safe and secure manner.
- What are the telltale signs for forgery when checking client documents?
Reviewing documentation is one of the key touch points to identify fraud. Oversimplified payslips, rounded figures and spelling errors are important to look out for when reviewing mortgage applications. If something doesn’t seem right, brokers shouldn’t hesitate to ask for more information, especially if they find themselves having to make a plausibility judgement.
Brokers that pay close attention to a client’s wealth profile will be able to notice any discrepancies between their reported job and the income that they claim to be earning – as well as the explanation they have given for why they want to purchase a property.
- How can we make sure initial meetings effectively spot potential fraud?
One of the first steps in spotting mortgage fraud is to set up a meeting with a client. In many cases, this can immediately distil concerns that they may be committing fraud, particularly if errors were made in the application process by mistake. This meeting is also the most critical point to risk assess and prevent potentially fraudulent activity before it escalates. If a mortgage was secured through false information, the consequences would be significant not only for the homebuyer, but also the broker and respective lender.
Organising in-person or virtual meetings with customers will help brokers to understand the legitimacy of the borrower and will usually iron out concerns that they may have misleading intentions. The same should also apply to third party introducers to gauge credibility.
- What steps should we take if we suspect a mortgage application is fraudulent, and how should we inform lenders?
If a broker does suspect that documentation has been manipulated, they should immediately stop any further progress on the mortgage application. Brokers must then flag their concerns to the lender in question, who will conduct their own independent review of the situation (in no scenario should brokers submit applications to lenders if fraud has been suspected).
Maintaining high standards of due diligence will ultimately be the most effective way for brokers to stop fraudulent activity before it can gain any traction.
- What are some of the preventive measures that can help to safeguard clients against deposit redirection fraud?
Brokers are not alone in tackling mortgage fraud. Borrowers themselves face the risk of deposit redirection fraud, where a criminal will convince them to send their property deposit to the wrong bank account by impersonating solicitors by email or over the phone.
Many borrowers, including first time buyers, could be susceptible to these scams, with criminals posing as solicitors and manipulating them into transferring money into their bank accounts. It is essential that brokers are able to educate their clients on the risks of fraud, advising them to double-check emails or messages that are requesting financial transactions.
Brokers should be encouraging clients to always verify the authenticity of such communications by directly contacting the supposed sender through an official and trusted channel, ensuring they avoid any deceptive practices.