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Lenders should take a lot of the blame for mortgage fraud

After reading the story about a Glasgow man admitting to running up more than £250,000 in mortgage frauds via self-cert applications (Mortgage Strategy Online), I can only think there must be more to this story than meets the eye.

Self-cert mortgages were widely available at the time and obviously this meant that lenders required no proof of income apart from an accountant’s confirmation that a business existed or an Inland Revenue communication if the client was self-assessing.

Such mortgages were also widely used by the self-employed who had no accounts or accounts that showed little net profit.

In those days the net profit on accounts would usually not show true income due to tax avoidance measures which remain widespread today.

So I reckon the main portion of blame in such cases should be lain at the door of lenders that did not require proof of income – an open invitation for abuse which was obviously taken up.

Does this mean those clients of mine who went down the self-cert route are going to be investigated?



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  • Steve 12th April 2010 at 3:38 pm

    The self-employed had accounts by provididng two years worth of taxes. And a “Global Salary Calculator” was to be used using the average income if the borrowers income was to difficult to prove.
    The loan was soley based on the “Universal Residential Loan Application”. If it was mortgage fraud then the income had to of been increased using the borrowers Gross income. And the loan application was removed from the borrowers closing documents so that the fraud would never become discovered.
    Facing foreclosure the lender would refuse to provide any financing or underwriting demonstration so the borrower would call the Tittle/ Escrow office to collect copies of the loan but the Tittle office would also not have a copy of the loan application.
    After escrow closes on a home the borrower was set up to fail since there is no agency to protect or assist the borrower.

    Is that the part of the story thats missing?

  • Mike 12th April 2010 at 12:26 pm

    Whilst I do not personally agree with the concept of self cert mortgages I would suggest that those lenders who were dealing with you were under the impression that you and your clients were certifying that the client had sufficient income to meet their mortgage obligation without being placed in financial distress. I think this is called regulated mortgage advice and that advisers received fees from borrowers and lenders alike for providing it.
    Why then is the finger of blame so readily pointed elsewhere?