(LONDON) UK mortgage lenders probably lost £700 million (S$1.9 billion) last year to organised fraud that inflated real estate prices, according Britain’s Association of Chief Police Officers.
Mortgage fraud for profit ranges from overvaluation of newly constructed homes to deliberate ramping of commercial real estate prices, often involving mortgage brokers, appraisers and attorneys, the association said in an e-mailed statement yesterday.
Fraud for profit differs from fraud for property, where individuals inflate salaries or savings to qualify for loans.
Concerns about mortgage fraud are mounting among banks as the UK housing market cools, ending a decade of gains during which property values tripled. Mortgage approvals fell to a nine-year low in January, after lenders granted £370 billion of mortgages last year.
Mortgage fraud ‘remains a significant element of the UK’s annual fraud losses’, said Mike Bowron, commissioner of the police department of the City of London district in the UK capital. His comments accompanied a release on the report’s findings.
In one instance an individual made a profit of more than £10 million through fraud, the police association said. The release didn’t provide details of frauds committed.
Lenders should make more identity checks and seek to establish a central database to flag areas where fraud is more prevalent, police recommended in the report.
Criminal gangs use mortgage fraud as a way of laundering money and making ‘significant’ incomes, the report found, because of the ‘current low risk of detection and high profit opportunities’.
London, the UK’s most expensive property market, was the most active area for fraud, the report found, accounting for 46 per cent of cases.
‘Victims of mortgage fraud range from those who purchase a newly built property only to find that their home is worth considerably less than they paid for it through to those on low incomes who, through the actions of corrupt professionals, take on a debt they simply cannot afford,’ the association said in the report.
The report was based on evidence from 47 UK police forces, government departments, insurance companies, the Financial Services Authority, lending associations and 45 mortgage providers, who represent more than 75 per cent of the market.
Source: Bloomberg (Business Times 6 Mar 08)