What is mortgage fraud?
Mortgage fraud is a criminal act that involves obtaining a mortgage by making false claims on your application and it is becoming increasingly common. Even if you tell a 'little white lie' when applying for your mortgage, you are still committing mortgage fraud.
If you omit information, under-represent your income or financial situation, or don’t disclose any information regarding your financial obligations such as loans or credit cards, you could be putting your home at risk, while at the same time breaking the law. This is true of whether you are buying a new property, or simply remortgaging a current one.
Why do people commit mortgage fraud?
Recently it has become more difficult to obtain a mortgage as mortgage lenders have become stricter regarding their borrowing criteria. This has resulted in more people making fraudulent mortgage applications in order to buy a home. Nearly 4 in every 1,000 mortgage applications turn out to be fraudulent.
What kind of mortgage frauds do people commit?
There are various forms of mortgage fraud, but the most common is lying about income, which accounts for 25% of all mortgage fraud. Attempting to hide a bad credit history is also a common type of mortgage fraud, and around 20% of mortgage fraud involves lying about an employment situation.
Another kind of mortgage fraud is failing to tell the lender about the use of the property. For instance a borrower might tell the lender that the property is being bought for them to live in while it is really being bought to let. This way they hope to avoid the higher buy-to-let mortgage rates.
While most mortgage fraud is committed by individuals, it is increasingly being targeted by organised crime groups too.
How does organised crime use mortgage fraud?
Mortgage fraud is popular with organised crime groups as it can be profitable and relatively low risk. Frequently it is used as a way of laundering money obtained from illegal activities such as supplying drugs and trafficking.
One way in which it happens is by over-valuing properties, forged documentation, and inflating the value of commercial property using fraudulent leases.
How easy is it to get away with mortgage fraud?
Many people who try to get away with mortgage fraud, such as lying about their financial circumstances in order to secure a home loan, do get found out.
This might happen through normal credit checks, or through the Mortgage verification Scheme which is run by HMRC, the Building Societies Association and the Council of Mortgage Lenders. Lenders can pass applicants' details to HMRC which will then check them against their tax and employment information.
How is mortgage fraud detected?
As well as the normal checks and balances carried out by lenders, there are a number of unusual circumstances that are likely to raise suspicion. Some of these include several remortgages and sales of the same property; a large and unexplained increase of the purchase price; a deposit paid by a third person; and sales proceeds to be paid to someone other than the seller.
What happens if people committing mortgage fraud are found out?
The least serious form of mortgage fraud is when a person is accused of making a false statement, for instance regarding their income, in an attempt to obtain a residential mortgage. It is unlikely to result in a charge and if it does proceed to court it is unlikely to attract a custodial sentence.
Where there is considered to have been a conspiracy to defraud, all parties involved in the transaction may be charged with conspiracy to defraud and if found guilty, the court may impose custodial sentences depending on the severity of the case.
How do I defend a charge of mortgage fraud?
If you are facing the possibility of prosecution for mortgage fraud then it is important that you speak with a solicitor as soon as possible. It is essential that the solicitor you chose understands the nature of mortgage fraud as it can be highly complex.
Most people accused of mortgage fraud are unacquainted with the English justice system and are of good character, never having been convicted of a criminal offence. Our specialist local solicitors understand that your good reputation is very important to you and they have experience in defending complex fraud cases.