Property Mortgage Fraud

Apex Bridging has said that between April 2022 and March 2023, there were 1.1 million incidents of fraud, which is 15.3% more than the previous year. Overall, mortgage fraud has climbed by 32.8% in England and Wales, the second-highest increase among all banking and credit industry fraud. Although mortgage fraud is certainly on the rise, luckily, in the grand scheme of things, it is a fairly rare occurrence with around 1,723 cases being reported.

What Is Mortgage Fraud?

Mortgage fraud is where a criminal tries to deceive a financial institution or private lender through the mortgage process for financial gain. There are different types of mortgage fraud, it can be committed by people who steal the identity of others to try and secure mortgage loans by deceiving lenders, or by an applicant using false information such as overstating an income. It can also be committed by manipulating the Land Registry and taking out multiple loans with different lenders or changing the title deeds to a property without the owner knowing.

People can also hijack a mortgage application by pretending to be a solicitor or conveyancer and writing to the lender to request money to be sent to their account. Criminals could also pretend to be property developers and apply for bridging loans to finance property purchases but keep the money instead.

Mortgage Fraud Warning Signs

Property professionals must look out for various signs that may indicate an attempt at mortgage fraud.

Lawyers and Mortgage Brokers

Mortgage lenders often place trust in a network of professionals to perform crucial verifications on their behalf. It’s essential to be vigilant, as criminals may try to manipulate this reliance for their own gain while deceiving lenders and other professionals involved in a property transaction. This may involve creating false documents, adding fake logos or letterhead to a document or inflating property values to secure mortgages that far exceed the property’s true worth.

When working with another professional that you aren’t familiar with, make sure to do your own due diligence on them. Check that they are regulated with the FCA or SRA for instance and do some research on Companies House to verify they are legitimate.

Client Red Flags

Identifying suspicious clients is a critical aspect of detecting mortgage fraud. Certain indicators should raise concerns, including a lack of genuine interest in the property purchase, significant age disparities between co-applicants, limited ownership history, an inadequate credit history, a lack of property market knowledge, and obscure or undisclosed sources of funding. These issues might suggest a potential attempt to exploit the mortgage application process.

Seller-Related Concerns

When dealing with property transactions, it’s crucial to take note of the background of the seller. Mortgage fraud often involves sellers who are either private individuals or entities that have recently acquired the property from a private company. These scenarios can be used as a cover for artificially inflating property values and can be a red flag for potential fraud. It’s important to scrutinise the transaction history of the property and the seller’s motivations to ensure transparency and integrity in the deal.

Property-Related Indicators

When assessing the potential for mortgage fraud, it’s vital to look out for signs linked to the property itself. These signs may include rapid resales of the same property, County Court judgments that suggest unresolved legal issues related to the property, and delayed mortgage applications following court-ordered land transfers. Such factors can be indicative of attempts to manipulate property values or misrepresent the condition of the property in question.

Transactional Red Flags

Identifying suspicious transactional elements is another key aspect of fraud detection. Be on the lookout for third-party fee payments that don’t align with standard transaction procedures, abrupt changes in legal representation, partial transfers of property titles that could be part of a larger scheme, or post-registration financing arrangements that lack transparency. These unusual transactional patterns may signal an attempt to disguise fraudulent activities or manipulate the property transaction process.

Property Value Anomalies

Recognising discrepancies in property values can help uncover potential fraud. Look for signs like an excessively fast inflation of property value, complete mortgage payment with subsequent requests to transfer any surplus funds to an unidentified account, dubious land transactions, or the inflation of chattel values within the sale. These tactics may be used to secure larger mortgage amounts than the property’s actual worth, putting lenders at risk of significant financial loss and legal complications.

BHW Solicitors is the leading residential property law firm in Leicestershire and is ranked in the top ten real estate firms in the East Midlands by the Legal 500 guide. We pride ourselves on giving our clients a seamless and efficient end-to-end conveyancing service and adhere to high-quality industry standards. We work with many estate agents and financial advisors as their preferred conveyancing partner. Due to our proactive approach to progressing our clients’ property transactions, we are constantly being referred time and time again.

Whether you are a property professional, seller, or buyer, we can help with your residential conveyancing queries. To request a personal conveyancing quotation, or to discuss setting up a professional referral relationship with your business, please call us on +44 (0)116 289 7000 or send us an email at conveyancing@bhwsolicitors.com.