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27 in every 10,000 mortgage applications fraudulent

Some 27 in every 10,000 mortgage applications were detected as fraudulent in Q3 in 2010, shows the latest fraud data from Experian.

The mortgage market experienced the second highest fraud rate during Q3 2010.

Some 27 in every 10,000 mortgage applications were detected as fraudulent, compared with 25 in every 10,000 in Q3 2009.

Some 96% of mortgage fraud attempts during Q3 were first-party frauds, which typically involves individuals attempting to hide adverse credit histories or misrepresenting their employment status to try and secure credit and other financial services which might not have been suitable for them.

Experian says there has been a surge in loan fraud over the past 12 months, with a 57% increase in fraudulent activity recorded during Q3 compared with the same period in 2009.

Loan fraud activity is now approaching pre-2008 levels, with seven out of every 10,000 applications identified as fraudulent. 

In Q3 2010 first party fraud accounted for 73% of all incidents of fraud, up from 52% in Q3 2009. 

The increases in first party fraud were particularly prevalent in loans, where first party fraud increased to 89% from 35% in Q3 2009, and current accounts, where first party fraud increased to 72% from 40% in Q3 2009.

Nick Mothershaw, director of fraud and identity solutions at Experian, says: “We have witnessed a rise in fraudulent activity across several sectors of the market in the last quarter when compared to Q3 2009. There has been a significant increase in automotive fraud compared to the same time last year and loan fraud is up by almost 60%.

“Increased fraud levels mean that it has never been more important to ensure that applications for new credit facilities are analysed for signs of fraudulent activity.

“Simple steps organisations can take to mitigate risk include robust checking of new applications for credit using tools that reveal first party fraud and organised fraud rings, continually reassessing fraud risk across existing accounts, and introducing true identity authentication using facts only a genuine applicant will know on all products, not just the higher risk ones.”

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  • alex 24th December 2010 at 10:05 am

    Grey Haired Underwriter – Spot on

  • Steve 23rd December 2010 at 3:26 pm

    I am always interested in Experian PR to see how they use statistics to get the story they want across. This message behind this story is mortgage fraud is increasing (albeit by a tiny percentage). However, if you look back at their last mortgage fraud statistics reported in Mortgage Strategy

    http://www.mortgagestrategy.co.uk/economy/attempted-mortgage-fraud-up-37-in-2010/1018024.article

    This has the headline – Attempted Mortgage Fraud up 37% in 2010.

    Good scare story to lenders from a credit reference agency.

    When you look at the numbers you see that Experian say that in the first half of 2010 35 out of every 10,000 mortgage applications were identified as fraudulent.
    They also say that mortgage fraud was up 37% in the first half of 2010 compared to the second half of 2009.

    Now wait a minute here. The article on 22 December shows that in Q3 2010 27 in every 10,000 were detected as fraudulent so over 2010 comparing Q3 with the first half we have seen a reduction in mortgage fraud over 2010 of over 20% according to Experian’s own figures.

    Funny then how they chose to ignore that and compare Q3 2010 with Q3 2009 which shows a small increase.

    This piece of PR from Experian looks more like them trying to keep lenders scared rather than give a true picture of the market.

  • Robin 23rd December 2010 at 11:56 am

    Dear Grey Haired Underwriter. I did not mnean to infer that, the lenders invented self-cert, not a broker, fraud was not part of self-cert. However we must now face the consequences of those mortgages, and the more fraudulent fast-track manipulated cases, where people can no longer borrow. They are stuck and cannot even re-mortgage, never mind move houses. These are the ones that will look at any means, either themselves or broker, whatever they sign, provide, or just plain lie!

  • Gray Haired Underwriter 22nd December 2010 at 1:49 pm

    @ Robin. So it would be alright for them to make a fraudulent declaration as long as it was done on a self cert/fast track application? Sorry but that’s what your statement seems to indicate.

    To the other contributors I would have thought the basis of the story was about fraud and not about a ‘let’s pin the blame on the broker’ story. We all know that fraud comes from many places and that brokers are duped as often as lenders. Stop being so defensive and accept that these frauds are a fact of life and have been with us a long time.

    My gripe with this article however is that it just seems like a nice little ad for Experian to sell more of their scoring services. Perhaps if they had been more effective in the first place or if scoring had not been so easy to manipulate by Senior Executives of now failed lenders perhaps we would not be in the mire we are already in.

  • stuart 22nd December 2010 at 12:28 pm

    Out of these 27 cases how many have been submitted through brokers with the deliberate aim of defrauding lenders, i.e. obtaining funds without the intention of honouring their mortgage commitments. Then match this with the resources the FSA are employing in ‘monitoring’ the mortgage broking industry. Once you have these results you will be able to arrive at a more progmatic conclusion!

  • stuart 22nd December 2010 at 12:27 pm

    Out of these 27 cases how many have been submitted through brokers with the deliberate aim of defrauding lenders, i.e. obtaining funds without the intention of honouring their mortgage commitments. Then match this with the resources the FSA are employing in ‘monitoring’ the mortgage broking industry. Once you have these results you will be able to arrive at a more progmatic conclusion!

  • GMS 22nd December 2010 at 12:05 pm

    Has anybody bothered to split these figures between broker and direct applications? Brokers using Fast Track are required to retain evidence of income for most networks and lenders yet the banks can operate with a ‘computer said yes’ attitude with no back up.

  • Robin 22nd December 2010 at 11:07 am

    Is this really surprising? With the withdrawl of self-cert/fast-track mortgages people are unable to obtain a mortgage/remortgage and despearation will bring in fraudulent applications. I can only see this increasing.