In the first half of 2021, it’s thought that criminals stole a total of £753.9 million through fraudulent means and schemes (up by 30% when compared with H1 2020).
Interestingly, almost one in every two crimes is now either a fraud or cybercrime, with mortgage fraud continuing to pose a huge risk to lenders. Currently, it’s thought that mortgage lending is worth around £1.3 trillion, while annual losses equate to a whopping £1 billion.
But what exactly is mortgage fraud, and how can it be avoided? Here are some ideas to keep in mind:
What is Mortgage Fraud and What Forms Does It Take?
In general terms, fraud describes the deliberate misrepresentation and the falsification of information, in order to deceive individuals or institutions (usually for financial gain).
In the case of mortgage fraud, this refers to instances where one party in a transaction (either the buyer or the lender) attempts to deceive the other or force them into an unfavourable financial agreement.
In this respect, classic mortgage fraud is perpetuated by potential buyers, who may use a fake identity or falsify documents in order to secure access to a property that they otherwise wouldn’t be able to buy.
However, mortgage fraud can also describe predatory lending practices that target vulnerable borrowers, who may be unable to keep up their repayments over time.
But what are the most common types of mortgage fraud? Well, most cases involve the simple misrepresentation or omission of crucial data, such as salary or employment status. However, more deliberate and advanced schemes include identity theft and income or asset falsification, in order to convince lenders to extend an offer of capital.
From a lender’s perspective, predatory lending activities may also be categorised as examples of mortgage fraud. These can include mortgage reduction scams or the provision of 100% mortgages without the requisite viability checks being satisfied, both of which contributed to the financial crash in 2007.
How to Avoid Mortgage Fraud
As a borrower, it’s important to take proactive steps to avoid mortgage fraud, particularly as so many cases may involve the submission of erroneous data or a simple omission.
So, the first step is to ensure that your mortgage application is filled in accurately, particularly when you enter your employment status, earnings and financial outgoings.
We’d also recognise that the best mortgage structures include a combination of deposit and borrowed funds. Ideally, you’ll be able to supply a cash deposit of at least 10% the property’s market value, in order to offset the amount that you have to borrow and create manageable monthly repayments.
If you own a home and are in mortgage areas, you may also be tempted to sell your house through a quick house sale scheme. This aims to facilitate a quick sale in exchange for a discount of up to 35% in some instances, but such deals often involve fraud and could put you at risk of being prosecuted.
Most importantly, if you do find yourself either accused of mortgage fraud or the victim of such practices, you may need to seek out expert white collar defence or legal advice.
This will ensure that you can move forward effectively and minimise the impact of financial and mortgage fraud.