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A Clamp Down on Mortgage Fraud

The National Fraud Strategic Authority (NFSA) has compiled a report called Fighting Mortgage Fraud Together following consultations with several associations in the mortgage business, including the Association of Mortgage Intermediaries and the Council of Mortgage Lenders.

One of the findings is the difficulty in spotting over valued properties, whether the reason is fraud, error or negligence. These properties are harder to detect in a booming market, as rapidly rising prices disguise over valued properties. The report also found that high loans, relative to the value of a property, sometimes of more than 100%, have been exploited by fraudsters as a means of maximising their criminal profit without putting themselves at risk. The economic downturn has revealed the true extent of mortgage crime. The report highlights four main areas where improvements could be made.

Re-writing mortgage agreements to plug loopholes which criminals have exploited in the past. Putting in place controls and safeguards within firms to facilitate the uncovering and stopping of mortgage fraud. Ensuring that key professional sectors work together with integrity. Making perpetrators think twice before committing crimes by increasing the rates of detection and prosecution.

Sandra Quinn, the interim CE of the NFSA, says that through all sectors of the mortgage business working together, the NFSA has created a structured framework for people to uncover the causes of fraud within the mortgage industry. Mortgage companies must then develop their own solutions to eradicate the opportunities open to fraudsters to manipulate the buying process for their own illegal gains.

She adds that many of the faults in the buying process were created because of consumer need or market demand. The challenge facing the mortgage business is to ensure that once the market improves, these demands and needs are serviced in a way that is effective, without allowing criminals to defraud honest customers.

You may have read this article as a first time buyer and wondered what you should do to avoid mortgage sharks, who appear to be lurking around every corner. Be reassured as the mortgage industry is 99% honest with a few bad apples at the bottom of the barrel, which happens in every industry. The main action you should take to safeguard yourself is to know something about mortgages before committing yourself.

There are two broad types of mortgage. 1. Interest only, where you are only paying back interest to the company you have your mortgage with (this can make repayments cheaper but the amount of actual debt you owe doesn't go down).

2. Repayment mortgage, whereby you pay a small amount of the total debt off each month. At the end of the term you owe nothing to your mortgage company. If you decide to opt for the interest only mortgage, which could work out with you having lower monthly payments, you will still have to pay the lump sum of the mortgage off at the end of the 25-year period. So a savings account or investment is the wise option, a way of ensuring you have the cash when the mortgage ends.. It is an important consideration, as are all the product (sometimes called arrangement) fees and the cost of a solicitor. You need to consider how you will pay for these when you start looking into your first mortgage.

Before everything else, you'll need to start saving. Because the days of the 100% mortgage are behind us for the time being, saving as much as you can towards a deposit may be more worthwhile as it will provide you with as much choice as possible when coming to take out a mortgage deal.

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