Some consumers find stretching the truth tempting on mortgage applications but risk the consequences

mortgage fraudCredit agency Experian reports that 49 in every 10,000 mortgage applications has proved to be fraudulent. This is a 77% increase on the same period in 2010. [21 Dec 2011] 

According to Experian’s research, the majority of fraudulent mortgage applications stems from applicants misrepresenting their financial circumstances in order to obtain properties beyond their means.

 
In previous years when applicants were able to self-certify their income, unscrupulous mortgage brokers could use this as a means of making money from clients who were unlikely to receive property loans directly from lenders. The brokers acting as intermediaries often encouraged their clients to falsely declare higher incomes.

Self-certification mortgages no longer offered by reputable lenders

Due to steps taken by the Financial Services Authority (FSA) to improve responsible lending, self-certification mortgages are no longer offered by reputable lenders. Consumers will find it difficult to source any well-known lender that will offer a self-certification mortgage. However, there are online mortgage brokers that claim that they can secure mortgages for clients whose circumstances would indicate lower eligibility for borrowing.

Consumers should think carefully before entering into an agreement with a mortgage broker who claims that they can obtain a self-certified mortgage with a few embellishments on the part of the applicant. Making false statements on a mortgage application is a criminal offence.

 
Penalties for obtaining a mortgage by deception

According to the Crown Prosecution Service, the current maximum sentence for mortgage fraud is 10 years imprisonment. Sentences handed down are based on the type, the loan amount and the number of properties involved. A typical instance of smaller scale mortgage fraud involved a defendant who had been employed as an estate agent. He misrepresented his earnings to a lender. Upon discovery, the lender took legal action and the defendant received a 12 month custodial sentence with three months suspended. Although this may appear to be relatively lenient, a criminal conviction carries far reaching consequences particularly in terms of finding employment and securing a bank account.

Advice for dealing with mortgage brokers

If you’re a first time buyer or someone who feels that they need the assistance of a mortgage broker, you may wish to seek advice. You should shop around and look for companies that are regulated by the FSA. If you don’t understand any legal documents that you are presented with do not sign them until you can take advice from a solicitor or other legal professional.

You can contact your local Citizen’s Advice to learn more about mortgage applications. www.citizen’sadvice.org.uk

Please note that Action Fraud cannot be responsible for the content of third party websites 

If you are aware of fraudulent activities in relation to a mortgage brokering service, report it to Action Fraud.