A ban slapped on two Glasgow brokers by the City watchdog last week for submitting applications with misleading and incorrect information was just the latest evidence of the return of mortgage fraud.
Douglas and Derek Jones, directors of Bearsden brokers Which Mortgage, were barred by the Financial Conduct Authority for sending lenders applications from borrowers that included false payslips.
Douglas Jones was alleged to have been alerted by a lender to one client’s payslip containing false information, only to discover that other clients were doing the same. Rather than report the deception the regulator said Jones had printed blank template payslips from the internet and entered the same financial information contained in the original payslip provided by the client.
He then replaced some, but not all, of the fake payslips with the newly completed internet payslips in an attempt to disguise the fraudulent records. Which Mortgage is now under new management which had no involvement in the misconduct.
The ban was imposed just days after two people were jailed south of the Border for taking out nearly £4 million worth of fraudulent mortgages in 2007 and 2008.
Meanwhile Experian, the credit agency, recently reported a 10 per cent increase in the number of fraud cases where mortgage applicants lied about their pay or employment status or falsified their credit records to improve their chances of being accepted for a loan.
UK courts dealt with £36m worth of mortgage fraud cases in 2008 alone, according to KPMG, with banks clamping down on the practice as the credit crunch unfolded. Some even claimed that mortgage fraud was occurring on such a scale as to be responsible for the housing market collapse. But the reasons driving mortgage fraud now are quite different to those behind the boom in dodgy loan applications during the housing market boom. Where then it was often brokers and borrowers taking advantage of lax lending practices and the availability of self-certification mortgages, now it’s largely a response to lenders being less generous.
“Given how criteria has tightened over the years, there is the temptation for borrowers and advisers to play the system in order for cases to be accepted, said Robin Purdie, director of Mov8 Financial. “Lenders now require much more by way of supporting documents, and self-certification is now a thing of the past.”
Lending restrictions have begun to ease over the past 12 months, but it remains an uphill battle for anyone without a large deposit and a clean credit record to get the thumbs-up from mortgage lenders.
“Lenders must show that they have taken into account an individual’s affordability before extending new credit,” said Neil Munroe, external affairs director for Equifax. “Having several credit cards with high limits and missing repayments could give the impression an applicant is financially over-committed which could result in them being unable to obtain new credit.”
Credit records are based on information about a person’s borrowing and repayments history – taken from products including mobile phone bills and credit cards – plus factors such as income and employment.
Mistakes can easily tarnish your record without you knowing about it, however. If it’s not up to date, for instance, or there is evidence of loan applications you believe may be fraudulent, your chances of getting your mortgage will duly suffer. Similarly, multiple applications for credit will leave a mark on your record whether or not you were successful.
It’s easy to check your credit record, however. The main agencies – Equifax, Experian and CallCredit – will email or post you a copy of your credit report for a fee of £2.
And while some lenders are rejecting a high proportion of applicants, Purdie believes that borrowers with decent deposits and clean credit records will usually be accepted.
“If borrowers are in employed positions and can prove their incomes with pay slips, P60s and bank statements then there should not be a problem, provided they have clean credit, have a deposit and are not drastically overdrawn,” he said.
Six handy tips
1. Keep your credit record in mind when taking out credit cards or loans. Applications may show up as a mark against your record even if they don’t succeed, while problems staying within credit limits and repaying on time will also harm it. For mortgages, ensure your enquiries are marked as quotation searches rather than applications.
2. If you do get into debt difficulties don’t hesitate before seeking free debt advice from a charity such as Citizens’ Advice Scotland. Also let your lender and/or card provider know if you think you’re going to fall behind on repayments. They may accept a repayment plan.
3. Get on the electoral register. Mortgage lenders use this to verify personal details.
4. Check your credit report for mistakes and tell the credit rating agency of anything that should be altered or updated.
5. Cover your tracks if you spot any missed payments. A ‘notice of correction’ can be added to your credit record to explain the background to any payments that you missed in the past.
6. If you don’t have any track record of card repayments your record may be too low on history for lenders to judge your creditworthiness. If you don’t have a credit card or any credit, then apply for one with a small limit.