Credit, Collections & Insolvency News
UK’s leading fraud prevention service, Cifas has revealed that mortgage fraud has seen a 5% increase in the first six months of 2019 compared to the last six months of 2018. The figures are released as part of the Cifas ‘Faces of Fraud’ campaign, which aims to highlight the fact that what some view as a victimless crime, is both illegal and could have serious consequences for those involved.
Mortgage application fraud occurs when either false or altered documents are provided in support of a mortgage application (fraud by production of a false document increased by 14% and fraud by submitting altered documents increased by 32%). Such applicants often provide false or altered bank statements and proof of income as a way to validate their income for mortgage applications.
Interestingly, nearly half of those caught committing application fraud (45%) were aged between 31-40 years old, a 16% increase compared to the last six months of 2018. They were closely followed by those aged between 41-50 years old who saw a 6% increase.
Coincidentally, the research carried out by Cifas and WPI Economics revealed that people in the 35-44 age category were more likely to think that exaggerating their income on their mortgage application was ‘reasonable’ than any other age group.
In terms of regional breakdowns, the West Midlands saw the highest increase in fraudulent mortgage applications at 43%, whereas cases in the North East rose by a third.
Cifas is urging people to stop, think and consider the serious consequences of making false claims in mortgage applications. Taking out a mortgage based on a false income could result in homeowners being unable to repay the debt later on. Other consequences could include blacklisting against future product purchases, or possibly being reported to the police for investigation – potentially leading to a criminal conviction and a prison sentence.
Mike Haley, Chief Executive Officer of Cifas, said “It’s easy to assume that making exaggerations to improve the chances of your mortgage being approved is harmless, but the reality is that this is fraud and the consequences can be very serious.”
“Mortgage providers carry out rigorous checks, and so exaggerating your income or withholding any change of circumstances could result in it being harder to obtain financial products in the future such as mortgages and loans. In more serious cases, this kind of fraud could result in a hefty fine or a prison sentence, or the possibility of losing your home.”
James O’Sullivan, Policy Manager for the Building Societies Association, said “A mortgage is a significant financial commitment and it is essential that applicants are honest about their personal circumstances. There are many risks inherent in being less than honest, not least that the borrower finds themselves unable to pay because a realistic affordability assessment was not possible or that, when caught, offenders struggle to get future credit. It is far from being a victimless crime and is something that lenders take rigorous action on.”
Martin Cheek, MD at anti-money laundering firm SmartSearch said “According to the latest figures from Cifas, mortgage fraud by production of a false document has increased by 14% in the first 6 months of 2019 compared to the previous 6 months, while fraud by submitting altered documents has risen by 32%. Mortgage applications may not traditionally be the area you’d associate with fraud; this significant increase shows that it is a vulnerable sector of the market. And while lenders and brokers will never stop people trying to commit fraud, they can stop them succeeding by ensuring their KYC processes are fit for purpose.”
“All mortgage fraud – whether that is to exaggerate income to get a better deal, or for more sinister reasons such as money laundering – has been perpetrated on the back of forged documents, but there has never been a fraudulent case linked to electronic verification. That is because electronic identification offers the most efficient and reliable way to check if someone is who they say they are and their documents are real. Banks and other lenders should be looking to switch to electronic verification now, not only because it will help put a stop to mortgage fraud, but because in January the 5th anti-money laundering directive comes into force and stipulates that electronic verification should be used by regulated sectors wherever possible.”
Cases recorded for mortgage products:
| Case Type | Change between first six months 2019 vs last six months 2018 |
| Application Fraud | 6% |
| Facility takeover | -25% |
| Identity Fraud | -26% |
| Misuse of Facility | 5% |
| Total | 5% |
Age of subjects recorded for application fraud:
| Age | Change first six months 2019 vs last six months 2018 | Proportion January to July 2019 |
| <21 | -43% | 1% |
| 21-30 | -11% | 19% |
| 31-40 | 16% | 45% |
| 41-50 | 6% | 27% |
| 51-60* | 30% | 8% |
| 61+ | -50% | 0.4% |
*Although this age group had the highest increase, the volumes are small
Region breakdown of application fraud on personal mortgages:
| region | Change |
| West Midlands | 43% |
| North East | 33% |
| Yorkshire and the Humber | 11% |
| South East | 7% |
| South West | 4% |
| London | 1% |
| Wales | 0% |
| North West | -2% |
| East | -7% |
| Scotland | -15% |
| East Midlands | -31% |
The Cifas report ‘Tackling First Party Fraud’ in conjunction with WPI Economics was published in July 2019 and available here
