Occupancy fraud
This is obtaining a mortgage for a property as an investment, for example as a BTL, and subsiquently the applicants live in the property as their primary residence.
The applicant is trying to get a mortgage by deception. This is also known as Sheme Abuse. This is Fraud because someone buying the property to let could get a larger loan, at a lower rate of interest than if they had declared they were buying a primary residence.
They would alos be in breach of their mortgage terms.
This can also happen the other way round, an applicant purchasing a property on a residential basis them subsiquently is letting it out. This is in breach of the mortgage terms, if they haven’t informed the lender and obtained content to let.
How to spot this type of fraud:
- 1st time landlords are a higher risk due to the clients being unable to afford the residential property purchase route.
- Ensure that all mainstream mortgages are for residential purposes and the proposed purchase is plausible reflecting the client’s circumstances.
- Would the client be able to obtain a mortgage on a residential basis? Consider higher income multiples. Is the client applying for a Buy to Let because the client would not meet residential criteria?
- Approach a Buy to Let application with the same level of scrutiny as a regulated residential mortgage application.
- If moving from existing property and letting out has consent to let been obtained from the lender?
- Is the property being purchased larger or of a higher value than the client’s existing residential address? For example, if a customer has two children would it be feasible that the client intends to stay living in a two bedroom flat when the client is purchasing a four bedroom house?
- Consider the location of the property to the client’s existing residential property and place of work.
TMA Compliance members are encouraged to speak to their Sepcialist Area Supervision Manager for further support.
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