What is mortgage fraud and how can I avoid it?

mortgage fraud

In 2012 the National Fraud Authority estimated that UK mortgage fraud cost the economy £1bn every year. Mortgage fraud continues to be a growing issue, but there are some steps advisers can take to avoid becoming a victim of the crime.


Mortgage advisers introduced to prospective applicants via third parties pose the biggest risk of mortgage fraud. Whenever introducers are involved in a transaction, steps should be taken to assess their validity.

Although it is not a legal requirement, setting up an introducer arrangement will often be sufficient to chase off potentially fraudulent operators. Contact fraud solicitors who can provide further advice on this type of contract.

Look at historical evidence of transactions made through the introducer. This might be all you need to spot fraudulent activity. Other indicators include an introducer who is excessively involved with the process, reluctance of the client to meet at home and the provision of all income evidence and related documentation by the introducer (not the applicant).

Evidence of Earnings and Occupation

It is very easy to obtain fake payroll evidence online. It is therefore important that advisers are easily able to spot fraudulent wage slips. First, check the company named on the document. Does it exist and are the contact details correct? Look at pay figures and employee details. Do they seem realistic and are they consistent? Do the details match up with other documentary evidence supplied? Small inconsistencies, such as payslips looking too new or the employee number being too low (if the applicant works for a large company), could point to potential fraud. Only accept original documents, as copies are much easier to fake. It is also a good idea to check the applicant’s bank statements to ensure they match up to payslips supplied.

Manipulation of Various Schemes

Another very common form of mortgage fraud involves the manipulation of schemes such as Buy to Let. Residential mortgage applications may be made, when in reality the client intends to rent the property out. The lender is then exposed to a higher risk than they were anticipating, reflected by the typically lower interest rates of residential mortgages when compared to Buy to Let. You should look out for the following:

  • Applicants moving far away from their place of work.
  • Applicants who have a number of Buy-to-Let properties but then decide to buy a residential property.
  • Clients taking out several mortgages on a residential basis.
  • Couples who split up, purchase a new property for one to live in and then get back together. If this happens more than once, further investigation may be necessary.

Deposit Fraud

Lenders need to ensure that mortgage applicants have the means to make repayments. Taking out a personal loan and using this as a mortgage deposit could potentially stretch the client, who could then default on either or both commitments.
Other examples of deposit fraud include attempts at money laundering. If a client claims a relative gifted a deposit to them, it is reasonable to ask for evidence of its origin.

Other Steps to Take in Preventing Mortgage Fraud

Additional steps include:

  • Disclosure of liabilities. Check bank statements and perform credit checks to ensure the applicant has not concealed debt.
  • Pay attention to valuations. Having some experience of the local area and approximate house prices can help to expose fraud. The knowledge will enable the adviser to investigate further if a valuation appears too low or too high for the type of property, or for the area in which it is situated.
  • Always certify ID. Photographic ID can only be accepted if the adviser is face to face with the client.
  • Seek advice from business crime lawyers if you suspect attempted mortgage fraud.

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