Banks’ restrictive approach to mortgage lending and business loans will create more mortgage fraud. Why? Because borrowers often have no other option.
I can use a simple example to explain. Let’s take a fictitious person, Andrew, who has let his home for the last two years because he was living and working abroad and so got a buy-to-let mortgage.
He has now decided to return to the UK and move back into his home. To rearrange his mortgage and get a residential one, most lenders would require him to live in the property for at least three months.
If he did that while he still had the buy-to-let mortgage he would be breaching his mortgage terms because he would no longer be letting to a third party. So what does a borrower do?
There are many examples where borrowers are forced into such situations, not because they want or intend to.
I am not condoning mortgage fraud in any form, I am just trying to explain that these things may happen because borrowers feel there have no alternative.
Not all mortgage fraud arises because borrowers have criminal motives – restrictive lending criteria based on everything but common sense is becoming increasingly responsible.
ASC Finance for Business