Mortgage fraud – stay on red alert

Mortgage fraud – stay on red alert

Steven Howard is head of mortgage & lending intermediaries compliance services at SimplyBiz

As you know, the furlough scheme, which protected millions of jobs during the pandemic, was wound up at the end of September. This means that the government has stopped paying towards the wages of people who couldn’t work, or whose employers could no longer afford to pay them.

Recent figures showed that1.6 million people were on furlough at the end of July, and that a million were still expected to be on the scheme at the end of September.

What we may soon begin to see is the outcome of the scheme coming to an end and the impact that will cause in reality; will the many employers with workers still on furlough at the end of September soon find that they cannot afford to keep them on post furlough? Many forecasters (including the Bank of England) are therefore expecting a rise in unemployment rates in the short term.

In addition, we have also seen a Quarter 2 2020 to Quarter 2 2021 year-on-year rise in the number of County Court Judgements (CCJs) of 222% from £66,474 to £214,120.

Much of this huge percentage rise over the year is due to the fact that judgement numbers were artificially low in Q2 2020, as government and regulatory measures, and creditor forbearance, protected many households from the economic impacts of COVID-19. Despite the rise, numbers are still well below the pre-COVID levels seen in 2019, so when aligned with the end of furlough and a continuing return to some kind of “normality”, we should reasonably expect the figure to continue rising.

With all this in mind, I would like to remind everyone involved in the mortgage advice and application process (business owners, advisers, supervisors, packagers and administrators alike) to remain extra vigilant when assessing and accepting mortgage applications from clients. In particular I would urge you to pay particularly close attention to the supporting documentation that customers supply (pay slips, accounts, bank statements etc) during the process.

Many of the lenders to whom I’ve spoken recently have commented that their internal fraud teams are busier now than they were at the height of the banking crisis of 2007/8, and this situation is unlikely to change in the short term as pressure is exerted on clients to demonstrate income and affordability.

In particular, I would encourage you to always take time to question the plausibility of information that you are being given and that the client wants you to supply to the lender on their behalf.

Try to think like a mortgage underwriter when receiving and analysing documents and data and, if in doubt, always ask for clarification or additional information.

Lender panel monitoring and broker removal activity is very high at the present time, and you should look to try and re-visit education standards with all your relevant staff in order to help to maintain knowledge and appreciation of mortgage fraud risks within your firms.

Financial crime represents a serious risk to anyone arranging finance for members of the public or businesses, and fraudsters are highly competent, clever and plausible when making their approach.

The trick is to spot the warning signs early, so that this doesn’t have a significant impact upon your business.