Majority of 2010 mortgage fraud was via brokers, says CIFAS
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Mortgage fraud increased 18% in 2010, with 69% of fraudulent business being introduced by brokers, shows the latest report from CIFAS - the UK’s fraud prevention service.
There were 3,542 mortgage frauds recorded in 2010, up from 3,004 in 2009.
Application frauds now account for 96% of all mortgage frauds, with identity frauds and misuse of facility frauds dropping back to the levels recorded in 2008.
The report found much mortgage business is carried out at a distance, for example an intermediary such as a broker based in Manchester could be dealing with a client based in London and a solicitor in Birmingham. As the intermediary never meets the client face to face they may find it more difficult to identify fraudulent applications, especially those supported by high quality false documents.
It says it is therefore not surprising that the majority, 69% of mortgage frauds continued to be associated with businesses introduced by brokers.
The report says some brokers are under financial pressures due to the economic slowdown and struggling to keep their companies afloat and as a result some may have turned to fraudulent activities such as changing the details of clients’ incomes in order to obtain a mortgage.
CIFAS says the increase in mortgage application fraud was in line with 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.
In 2010, the most common form of mortgage application fraud was an attempt to hide adverse credit information linked to an undisclosed address, 43% compared with 30% of cases in 2009, followed by 22% of cases of applicants simply not disclosing a bad credit history.
There was another increase in those providing false employment details, 8% compared with 5% in 2009.
It found the decrease in the number of mortgage-related identity frauds can account for some of the reduction in frauds associated with the presentation of false documents.
These accounted for just 15% of cases in 2010 compared with 33% in 2009. Within mortgage frauds, using false or altered documents, stating false income, or providing false employment details have all decreased from over two thirds of mortgage application frauds in 2009 to account for less than half in 2010.
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Readers' comments (16)
john | 8 Mar 2011 10:49 am
Surprise Surprise
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Neil Bellamy | 8 Mar 2011 11:57 am
Surprise? Well is it? Did I not read recently that the percentage of mortgage applications for 2010 was around 60-65% from Intermediaries - if this is correct then this figure of 69% is more or less commenserate with the volume of applications - or in other words the same rate of alledged fraudulent activity by Lenders directly applied for mortgages! Quite frankly I find this report by CIFAS to be biased, with no attempt to balance the information they hold. Why is there no information regarding how 31% of alledged frauds were committed by Lenders employees?
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Anonymous | 8 Mar 2011 12:02 pm
are they ever going to point out that at one time during the peak of the market, lenders and packagers actually sent out their business development managers to discuss 'loop hole' applications with brokers? They often used these so called 'niches' as a way to draw in more business, so they would tell how to 'beat the electronic system' what checks were made etc.
I am surprised to hear brokers still at it now though, these days i don;t even look at a case until i've had the client show me all relevant income proof etc. and that's how it should be.
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Steve | 8 Mar 2011 12:10 pm
Not exactly surprising news. Staff in direct lenders are not paid the same way as brokers and their supervision is greater than many brokers. Go back to pre-credit crunch days and if a borrower wanted to borrow more than a direct lender would give they went to a broker who could find a way of getting them more money.
There are loads of excellent brokers out there but we work in a system where it is still possible for the unscrupulous broker and client to commit fraud.
Having said that, lenders need to increase their vigilance on broker business to stop these unscrupulous brokers or clients giving the rest of us brokers a bad name both with the public and with the FSA.
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Anonymous | 8 Mar 2011 12:24 pm
..Firstly, the lenders design products and underwriting with the emphasis of 'no proof of income' and 'self certification' - and then they have the cheek to blame the distribution channels for their own shortcomings?
The amount of BDMs that came into our offices in town pushing self cert was incredible, as were the number of packagers doing the deals - it was all just one big chain gang - thats the truth of it and brokers and lenders know it.
That's why there is so few brokers now - and only a handful of packagers. And its the solicitors and surveyors who are behind most of the fraud.
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Anonymous | 8 Mar 2011 2:11 pm
..........and I'm sure all you brokers would of just sat back and took it on the chin when a lender declined an application because '60k for a taxi driver isn't realistic'.
Without doubt the last thing on your mind would be to literally tear a rent in the Earths atmosphere with fury and anger whilst simultainiously threatening your BDM with all manner of God.
Companies make steroids to make you put muscle on quicker........I don't see many personal trainers recommending using them though.
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Anonymous | 8 Mar 2011 2:15 pm
The report states that nearly two thirds of all mortgage fraud in 2010 was applicants non-disclosure of adverse credit information. If picked up at application stage, this is surely attempted mortgage fraud at worst? And it might not even be that!? Clients may be genuinely unaware of adverse credit that they have picked up in the last three years and would probably not have informed the Broker either!!
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Dan McGeehan | 8 Mar 2011 2:30 pm
I briefly read the report and the article above along with the comments and a few points are immediately clear.
- introduced business accounts for around 60-65% of the market so the figure of 69% is what would be expected. What you dont know is what lenders this takes into consideration. It could be the whole market or it could be a limited amount of lenders who rely heavily on introduced business.
- they state that most business is done at a distance but do not provide figures. The majority of brokers i know operate face to face so i take this conclusion with a pinch of salt.
- With regards to the claim of changing client income the % of fraud this accounted for is not mentioned therefore to suggest this is why 69% of fraud occured through brokers is a joke. I can only speak for myself and other members of my network but on all cases a bank statement along with corresponding payslip must be present regardless if the case is fast track.
-turning to the actual figures 43% was due to non disclousure of an address by the client. Brokers enter the information supplied and beyond proving their current address this ia an area largely outwith their control.
- 22% of people did not disclose bad credit history. I have personally had cases as well as colleagues where a client has been declined for a default or missed payment. In the majority of cases this is because the client is not aware of the adverse credit. Unless lenders insist on the client obtaining their credit file beforehand this will continue but I would not lable it as fraud.
Undoubtedly this story will be picked up in the press and I can only hope that they also speak to a mortgage broker who can pour scorn on this poorly written report.
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Simon Charles | 8 Mar 2011 2:56 pm
It would be more useful to post what percentage of this fraud against the total volume of introduced business has generated would be. I have read lots of industry press recently with some claiming that as much as 90% of all new business last year was introduced via intermediaries.
If for example this equated to 90,000 mortgages in total and there are 3542 cases of fraud this is 4% of total submissions and therefore the 10,000 direct deals at the other 31% of the total is 1,550 deals which equates by maths to 15.51% of direct deals were fraudulent!
Even at 65% as per the previous posting a similar number would have the ratio of fraud to total apps at 5.45% introduced business and 4.43% for direct which shows that irrespective of channel of introduction we are all subject to being caught out by fraud in almost equal measure.
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Luke Atkinson | 8 Mar 2011 3:10 pm
Entering that the client has no dependants to boost affordability is fraud, entering a client's retirement age as 75 to ensure lending doesn't run into retirement, when they intend retire at 68, is fraud.
All practices that are encouraged by the lenders and actively carried out by SOME brokers.
Surely if a broker has submitted 100 apps into a lender and 95% of the apps have the client's noted as having no dependants or every one of the clients has a retirement age of 75, the lender should pick this up. I can assure you they do not, surely turning a blind eye to the fraud is as bad as committing the fraud?
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