Mortgage application fraud on the rise

11 March 2011

A new report has revealed that the amount of fraudulent mortgage applications is on the increase. 

2010 saw the level of mortgage frauds increase by 18 per cent. Mortgage fraud at the application stage increased a staggering 27 per cent during the same period.

This is according to new figures released by CIFAS, the UK's fraud prevention service.

The figures have been released as part of Fraudscape, a report compiled by CIFAS's 260 members throughout 2010, which examines the patterns in the context of previous years.

Richard Hurley, CIFAS Communications Manager, said: "The findings presented in Fraudscape clearly demonstrate the benefits of mutual collaboration, in bringing about a holistic understanding of an immense problem.

Application frauds now account for 96 per cent of all mortgage frauds - there were 3,391 in 2010 compared to 2,677 in 2009 - with identity frauds and misuse of facility frauds dropping back to the levels recorded in 2008. 

 "While the small decrease in fraud identified in 2010 is welcome, the threat has not gone away, and it must be viewed in its proper context, as the latest in a series of changes that have taken place over several years," he said.

The increase in mortgage application fraud was in line with CIFAS expectations that falling house prices and tighter lending criteria have exposed falsified mortgages, especially those where key information on the original application form, such as salary, was untrue.

Mr Hurley continued: "Whether it is malicious software, data compromise, inflated insurance claims or money laundering through bank accounts, fraud is a pernicious crime whose effects are widespread and whose prevention can only come about through cross sector collaborative measures.

"The findings presented in Fraudscape can be considered a tip of the iceberg in terms of society at large, thus proving clearly that industries should not operate in silos, and other sectors would also benefit from pooling their resources in order to stop fraud."

In 2010, the most common form of mortgage application fraud was an attempt to hide adverse credit information linked to an undisclosed address, which stood at 43 per cent compared with 30 per cent of cases in 2009.

Ray Cohen, Managing Director of Jackson Cohen, said: "I would hazard a guess that the reason for this is mortgage lenders paying more attention and spotting the fraud. This would be particularly true of income inflation cases which used to sail through under self fast track (self certification). Lenders running checks themselves would have increased detection.

This was followed by 22 per cent of cases where applicants failed to disclose their damning credit history. There was another increase in those providing false employment details which was at eight per cent up from five per cent in 2009.

"Firms can only combat it by being vigilant and asking themselves if the intermediary is complicit, in which case they should remove them from the panel," said Ray.

"Also the financial crises may have tempted more intermediaries, solicitors and clients to try to bend rules, especially in tighter lending times."

Source: www.bridgingandcommercial.co.uk