In the UK property sector, a staggering 1.1 million cases of property fraud were reported between April 2022 and March 2023, a 15.3% rise compared to the same period the year previously1.
There’s also a disturbing rise in the number of borrowers becoming vulnerable to mortgage fraud, up by around a third2, and even straying into it themselves by overstating their incomes.
The consequences for those caught in the act could be severe and could lead to prosecution and risk of defaulting on loans they cannot afford, making it more difficult to borrow again in the future.
This blog should serve as a practical guide to help brokers protect their clients.
Know your client
A broker’s initial meeting with a client represents the best opportunity to risk assess and potentially shut down fraud before it escalates. Where possible, brokers should organise at least one in-person meeting to establish the legitimacy of the client in front of them and what to expect when they come to submit their papers. This also extends to third party introducers and gauging their credibility.
Assessing documentation
When reviewing documentation that supports a mortgage application, be on the lookout for tell-tale signs of forgery, such as oversimplified payslips, rounded figures or inconsistent formatting compared to what is typical of genuine documents.
It’s important to identify any inconsistencies in a client’s story, so compare their reported job and what they claim to earn with why they want to buy a property. From time to time, a broker will need to make a plausibility judgement. If the falsification of documents is difficult to detect, don’t hesitate to ask the client for more information, and keep a good record of communication.
Stay a step ahead
Brokers must not only be aware of the various types of property fraud but also have some street smarts as to the tactics and trends popular among organised criminals to try and deceive lenders.
Using digital tools to alter documents is very common to try and achieve a more competitive mortgage product.
Deposit redirection fraud
But it’s not just lenders that are being targeted. Deposit redirection fraud has many innocent homebuyers on edge. In these schemes, criminals pose as solicitors and con homebuyers into transferring deposits into their bank accounts. Solicitors rarely change their bank account details and will tell clients in advance when they need to transfer their deposit monies.
Know your response and how to notify lenders
If in doubt, call a halt to the mortgage application process immediately and reach out to the lender to flag your concerns. This will allow the lender to conduct an independent review.
As the first line of defence against mortgage fraud, brokers must continue to maintain their high standards of due diligence. Coventry for intermediaries has previously hosted webinars on identifying false documentation and has recently released a free guide to help brokers prevent this potentially devastating type of fraud.
By Kirsty Jefferies, Financial Crime Manager, Intermediary and Solicitor Panel, and Andrew Bennett, Financial Crime Manager, Mortgage Investigations
2 https://www.mortgagesolutions.co.uk/news/2023/09/06/mortgage-fraud-rises-by-nearly-a-third/
