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Mortgage fraud almost quadruples in 2010

Mortgage fraud has nearly quadrupled in value during the first six months of 2010, according to KPMG’s Fraud Barometer.

Some 21 cases with a value of £96m were reported – compared to the same period during 2009, where there were 18 cases worth just £24m.

The whole of 2009 only saw mortgage fraud totalling £77m.

Mortgage fraud accounted for over half of all fraud committed against the financial sector in this period.

One of the biggest cases was worth £50m, involving two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty, while an estate agent was jailed for six years after attempting to pull off a £2m mortgage fraud after stealing the identities of two homeowners.

Hitesh Patel, partner at KPMG Forensic, says: “The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate.  

“This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud.  Banks will be hoping that they have uncovered most of their fraudulent loans.  But the trend remains upwards and it could be some time before we see the peak.”

Overall, the Fraud Barometer, which considers serious cases of fraud with charges in excess of £100,000 in the UK courts, found 166 cases of serious fraud in the first half of this year – the highest number of cases in a six month period in the Barometer’s 22 year history.

It says managers in companies inflicted far greater fraud damage than their employees.

One example was of a Birmingham finance boss who manipulated the profits of a steel supply firm to ensure a bonus by falsifying the company’s accounting records. He spent over £100,000 at a local lap dancing club, and by doing so 11 redundancies had to be made at the firm, which was nearly brought to its knees as a result of his actions.

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  • t 10th August 2010 at 10:23 pm

    What does it matter whether you base it on number of cases or on value?
    No matter what part you play, be it lender, intermediary or customer, Fraud is Fraud…
    Yes we are seeing only the tip of the iceberg, but why are we so surprised that these severe problems are continually emerging? Are we surprised at the rise in prosecutions?
    I can remember lenders specifically “designing” schemes and “incentives” to “suit” certain brokers and even allocating “special” tranches of funds simply to generate volume business to targets. I remember Lender BDMs who could “fix” anything to get a case through! I remember underwriters being regularly wined and dined with introducer brokers! I remember the likes of NRock (125% ltv and more), TMB (** schemes), Abbey (**! Scheme) and many others designing and promoting products that allowed and assisted borrowers to transgress all “sensible” boundaries.
    And then of course we had the brokers who were only too delighted to utilise these facilities and direct their mortgage business to these lenders (often after purporting to have researched the whole market!), and in the case of N/Rock even get paid an extra enticement of £500 for doing so! And of course we have the various Valuation benefits such as the so called 10% discretionary margin which I don’t ever recall being applied downwards! It was all so rife so why on earth are we surprised at the results?
    It’s time the FSA stopped their concentration on self publicity and got to grips with the backlog of cases of rogues (including ancillary trades) who have “slipped” the net of the past but are potentially the facilitators of future fraud.
    I have personally a) whistle blown and b) submitted a written report (not anonymous) on such activities by a packager / broker more than 24 months ago about a situation worse than some of the ones I read about regularly in Strategy but I have yet to see anything happen. key 3rd party witness’s have not even been interviewed so I can only assume that it is not publicity worthy enough for our regulator (perhaps because it does not involve millions). I have recently found out that someone else made a similar report about the same person and is also puzzled at the lack of action!
    Yes, I am disillusioned, but I will “persevere” in an industry that has otherwise provided me with a very good living for many years.

  • salil chaudhari 9th August 2010 at 3:28 pm

    the headline should read “Mortgage fraud almost triples in value in first half of 2010” .
    I find it astonishing that lessons have not been learnt after the credit crunch.Statistics on volume of fraudulent transactions would be appreciated Natalie.

  • Anon 9th August 2010 at 3:23 pm

    The number of cases doesn’t matter. It’s the value of fraud that matters that’s what impacts your bottom line. Pretty short sighted to only look at the number of cases.

  • Bob Cod 9th August 2010 at 11:37 am

    Dan’s right of course. I calculate that the number of fraud cases in the abovementioned period has reason by less than 17%.

    This type of sensationalist reporiting just damages the Financial Services Industry further. Aren’t we struggling enough without distorted and inaccurate reporting.

    Natalie Martin, shame on you. You should know better.

  • Dan McGeehan 9th August 2010 at 9:36 am

    The fact that one case was worth 50M distorts the statistics.

  • Dan McGeehan 9th August 2010 at 9:36 am

    The fact that one case was worth 50M distorts the statistics.