Introducer Today

Blogs

Legal eagles caught in mortgage fraud swoops

Thursday 4th February 2010

You know we are living in interesting times when you read that over 100 law firms were investigated for mortgage fraud in 2009.

The mortgage intermediary industry is hardly blameless in this department either. The FSA reportedly banned yet another fraudulent London broker yesterday - I’d like to think it’s a numbers game rather than the effect the capital has on your ethics – but there was a perverse pleasure in reporting the fact 22 solicitors firms were shut down for property fraud by regulator, the Solicitors Regulation Authority (SRA) in 2009.

[Click here to read the news story]

To be honest, I was mildly shocked. The fact that the SRA followed up the announcement by warning solicitors to walk away and refuse to act if a deal smells bad was even odder. Isn’t that a bit, well, self-evident for a profession that purports to uphold the law? At least the FSA hasn’t issued warnings to brokers yet suggesting that if they feel an urge to lie about their income to get an inflated mortgage perhaps they should think again.

But the SRA confirmed that the last recession brought a similar “tsunami” of mortgage fraud reports from whistleblowers dobbing in corrupt solicitors.

While more often caused by “incompetence” than dishonesty, of the law firms shut down for fraud all but one were one or two partner firms and very few were specialist conveyancers.

The SRA also laid some blame at the mortgage broking industry’s door. It said brokers often played a part in these deals by, again, arranging inflated mortgages and charging excessive fees to do so or via a business link to the seller.

This time, the regulator is trying to “nip the problem in the bud” it said, to pre-empt the huge consumer compensation pay outs the industry had to find when mortgage fraud figures went through the roof in the early 1990s.

The regulator has also compiled a list of property fraud warning signs, which I thought made for interesting reading.

Property fraud warning signs
· Back-to-back transactions where a property is bought and then sold quickly, apparently at a higher price. The lender advances money based on the higher price
· Misrepresentation or changes to the purchase price including sellers or developers providing incentives, allowances or discounts unless these are clearly and fully disclosed to the lender
· A representation to you that a deposit or part of the purchase price is paid direct
· "Gifted deposit" or "deposit paid" by the seller amounting to a reduction in the price paid by the buyer but distorting the value disclosed to the lender
· Unusual or suspicious instructions such as transactions controlled or funded by a third party; a client using an alias; sales and purchases between associates; parties using the same legal adviser; a request that net proceeds be sent to a third party
· Properties sold between related offshore or corporate companies that are commonly controlled by the same individuals, particularly where the properties are mortgaged at an inflated value

For more, see http://www.sra.org.uk/solicitors/code-of-conduct/guidance/warningcards/Property-fraud.page

Recessions are more likely to bring tests to the old moral fibre than times of plenty. And the legal profession, which is suffering like plenty of other sectors isn’t exempt.

The truth is crime does pay - and handsomely sometimes it seems. But as a broker, to be caught out just because you didn’t see it coming would be really unrewarding in every sense.

Have your say on this story using the comment section below

 Send to a Friend

---

View Comments          4 comments

Report Abuse

Post Comments

Please login to post comments:

Username:     

Password:     

      New User Sign Up

Post Comments without login

Your Name:     

Your Email:      
(not published)

Comments: Posting guidelines

*Type verification image:
 

---

Related News Stories:

House sales plummet over 13%, claims latest report
Friday 10th September 2010

Goldman Sachs clobbered with £17.5m fine
Friday 10th September 2010

HSBC launches 90% LTV loans for first-time buyers
Friday 10th September 2010

Most people are 'clueless' over tax
Friday 10th September 2010

UK housing market is dysfunctional, says leading agent
Thursday 9th September 2010

---

Most Read News Stories:

Regulator to ban self-cert mortgages
Tuesday 13th October 2009

Tesco to launch mortgages before current accounts
Monday 23rd November 2009

Order to suspend HIPs is signed
Monday 17th May 2010

Mortgage advisor pleads guilty to charges
Wednesday 29th October 2008

Case result major blow for claims management firms
Monday 26th October 2009

---

 Print     Discuss in Forum     RSS Feed   

---

Share this article:

  Digg it      Del.icio.us      Reddit      Newsvine      Nowpublic   

---

News Categories:

Adverse Credit

Buy-to-Let

Diversification

Equity Released

Flexible & Offset

Industry

Islamic

Life Insurance

Non-Conforming

Other Products

Packaging Market

Personal Loans

Secured Mortgage

Self-Build

Self-Cert

Sub-Prime

---

Feedback:

If you have any questions or suggestions about this article or our news section, please don't hesitate to contact us.

---