Please note: Leeds Building Society only accepts mortgage applications from intermediaries where they are providing an advised sales service, with the exception of Buy to Let & Holiday Let applications. It is the responsibility of the intermediary to ensure that all applicable law including, without limitation, the Financial Conduct Authority rules on advised mortgage sales are complied with including, without limitation, the provision of adequate explanations.

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Fraud isn’t always outrageous: how to spot the signs of mortgage fraud

With a financial scam committed on average every 15 seconds in the first six months of 2016 it’s safe to say that financial crime is as prevalent as ever. However, while this type of crime typically conjures up pictures of organised criminals stealing PIN numbers and hacking into databases, there’s one type of scam that could be a lot closer to home than you might think.


According to Experian, the proportion of detected mortgage fraud cases is around 84 cases per 10,000 applications, and is estimated to cost the industry £1 billion a year2. Furthermore, with house prices on the rise and an increasing number of homebuyers struggling with affordability, the lines between bending the truth and outright fraud are becoming ever more blurred as buyers look to secure their dream home - no matter what the cost.


As part of International Fraud Awareness Week (13th – 19th November), we spoke to Stephen Senior, Head of Financial Crime Prevention at Leeds Building Society, to learn what brokers can do to spot the signs of mortgage fraud.


Be aware of areas of high-risk


They say that knowledge is power, and being able to recognise common instances in which clients might try to bend the truth is vital when it comes to spotting a potential fraud. “Disguising a buy to let property as a residential one and vice versa to get an affordability advantage is relatively common,” says Stephen, “as is staging income in order to get a better mortgage deal. Brokers should be aware of areas of the market such as buy to let, interest only and lending into retirement where it is possible for clients to bend the rules to their advantage and be on their guard in case something doesn’t seem quite right.”


Delve further


Brokers want to secure their clients a good deal in a reasonable amount of time, but they shouldn’t be afraid of delving a bit further if something doesn’t seem quite right. “There are questions that mortgage brokers must ask, but that doesn't mean they shouldn’t probe their clients further if there are red flags. If there’s a payment on a bank statement that looks amiss, or something in a client’s employment history that isn’t adding up, question why, even if you’re not obliged to by regulation. Don’t just ask the questions you have to ask,” says Stephen.


Take an extra five minutes


With house offers on the line, clients can be keen for their mortgage application to be processed quickly, but taking an extra five minutes to run through an application to ensure everything looks OK could save a lot more time, not to mention headaches, for you and your client, in the long run. “One of the biggest things I would advise brokers to do is to step back and take an extra five minutes to see if there are any areas which might cause concern,” Stephen says. “Often, things can be flagged once an application is with a lender’s fraud team which could have been sorted out a lot earlier on in the process. This isn’t so much a problem with a fraudulent application, but could cause some real problems for a genuine applicant where something completely innocent in their application doesn’t look right. Taking an extra five minutes to iron out any warning areas in an application before it’s with the lender could save brokers a lot more time and help their clients get their application accepted in the long run.”


Do the plausibility test


There’s a reason the old adage ‘if it seems too good to be true it probably is’ has stood the test of time. Often one of the biggest warning signs of a scam is if something seems implausible. “Brokers should always have the plausibility test at the back of their minds when a client is applying for a mortgage with them. Whatever it is ask – does this seem right to me? Or does it seem implausible? If it’s the latter then the client has to be challenged. It may be that they are downsizing to a property in a less desirable area and their application is legitimate, but you won’t be sure until you delve further,” says Stephen.


For more information about Leeds Building Society or to speak to one of our team about general enquiries or specific cases call 03450 50 5555. We may monitor and/or record your telephone conversations with the Society to ensure consistent service levels (including colleague training).

1 https://www.financialfraudaction.org.uk/news/2016/09/20/financial-fraud-incidents-up-53-per-cent-in-first-half-of-2016/
2http://www.experian.co.uk/assets/identity-and-fraud/pkfexperian-fraud-indicator-report.pdf