In our ever-changing digital world, the online risks we all face are constantly increasing. With mortgage-related fraud up by a third over the past year, it’s important for both businesses and individuals to make sure they’re as protected as possible against fraudulent activities. [1] In this article, we’ll go over what mortgage fraud is, what the different types of mortgage fraud are, and how you can recognise potentially fraudulent applications. At PRIMIS we’re here to help keep your businesses safe.
What is mortgage fraud?
Mortgage fraud is a type of property fraud. It involves deliberate deceit and manipulation – where one party (the buyer) deceives the other party (the broker or lender) by distorting information and facts, which would otherwise influence their ability to come to a valid conclusion. In regard to mortgage fraud, the decision which is being misled is whether or not a broker, lender or even a solicitor should successfully approve a prospective buyer’s mortgage loan. How the applicant deceives the approving party varies and will determine what type of mortgage fraud a given case qualifies for, which will in turn influence how the matter is dealt with and ultimately resolved.
What are the types of mortgage fraud?
These are different types of mortgage fraud you should be aware of:
- Scheme abuse – this is when a customer hides their true intention behind buying a property. For example, a customer could apply for a residential mortgage that they plan on renting out without the lender’s consent. The opposite, applying for a Buy-to-Let mortgage despite planning on living in the property themselves, would also be classed as scheme abuse.
- False and inflated income – this is when a customer will provide false documentation regarding their income or earnings in order to appear more favourably to lenders when undergoing affordability checks.
- Credit abuse – this is when customers fail to declare any adverse credit that could affect their affordability. This could be if a customer fails to give a previous address where defaults or CCJs are registered against them.
- Property hijack – also known as identity fraud. This is when a criminal will assume the identity of a genuine property owner to get a mortgage using the property as security. Once the criminals have the mortgage, they will disappear. Vacant properties are at an increased risk of this type of mortgage fraud.
How to detect fraudulent applications
As a mortgage broker operating in the UK, it is your job to be aware of the different types of mortgage fraud people could commit and to be diligent in the checks you carry out on your customers. By asking your customers the right questions, you can ensure the applications they submit are reflective of their circumstances. Here are some key things to check when trying to identify fraudulent applications:
- How long they’ve been in their current job?
- If they’ve recently had any significant increases in their income.
- If they’ve recently taken on a second job and if that second job seems genuine.
- Do they work for a family business?
- If their bank account activity matches their lifestyle.
- Cross-check the dates and net pay on payslips.*
- Check that the deductions and tax codes appear correct and what would you expect from their employer.
* fake or AI generated payslips are easy to obtain online so beware of false documentation.
Fraudulent red flags in mortgage fraud cases
When going through the application process, it’s imperative that you’re aware of what things might be considered suspicious and could raise be considered a red flag for mortgage fraud. Here are some key instances that could indicate that you have a potential mortgage fraud case on your hands which requires reporting:
Employed
- Recent and significant increase in income.
- Short time in role.
- New second job.
- Salary credits out of line with employer profile.
- Recent job change out of line with experience.
- Little day-to-day transaction activity on bank statements.
Self-employed
- Little to no attempt to mitigate tax income liability.
- Tax due being paid well in advance of the deadline.
- Year-on-year turnover or profit remaining virtually unchanged.
- Unusual, unexplained spikes in trading and income.
Online tools for detecting and reporting mortgage fraud
When going through the mortgage application process, there are some great tools available that can help you carry out checks. Incorporating these free, online tools and resources into your arsenal will go a long way in helping you and your team more effectively identify the red flags of fraudulent mortgage cases. With many of these digital tools likely to already be something you are familiar with, adding them into your toolkit should be a simple process that delivers great results.
- Google Street View – web searches to check if an employer exists and the business address given is correct.
- Social Media – use social media to check that customer profiles reflect the information given. Social media accounts may sometimes contain references to current employment.
- LinkedIn – check employment; current and previous roles as well as length of employment.
- Companies House – can be used to verify business information for UK companies, including directorships and formal trading disclosures.
- Land Registry – there’s a limited free search access or you can pay for a more detailed search on the subject’s property. Including ownership information and lease details.
- Rightmove or Zoopla – can be used to confirm if the applicant’s property is currently on the market.
- CIFAS Fraudscape – annual fraud report on trends observed across UK financial services sector.
- Take Five – a national fraud campaign that offers impartial advice to businesses.
Ensuring our brokers are safe and supported is our top priority. If you’re a PRIMIS broker and need advice on any suspected fraudulent cases, please contact mlro@primis.co.uk.
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[1] https://www.mortgagestrategy.co.uk/news/mortgage-related-fraud-up-by-a-third-over-past-year/
