How to Deal with Mortgage Fraud Property Scams
Mortgage fraud has become a significant issue over the past few years in the UK, posing significant risks to financial institutions, innocent individuals, and the property market. Mortgage fraud can involve a range of deceptive practices aimed at unlawfully securing mortgage loans or manipulating property values. This criminal activity not only affects lenders but can also have devastating consequences for borrowers, potentially leading to severe financial losses and legal consequences.
Effectively addressing mortgage fraud will help address two main issues: the protection of the financial integrity of the property market and the safeguarding of individuals from unjust legal and financial consequences.
For those wrongly accused of mortgage fraud, a well-prepared defence can lead to charges being dropped or penalties significantly reduced. On a broader scale, successful mortgage fraud prevention and detection can instill confidence in the UK mortgage system, promoting fair and transparent practices across the property sector.
If you are concerned about mortgage fraud or have been accused of mortgage fraud by a lender, our expert mortgage fraud solicitors are here to help. Call us for a Free Consultation on 0207 459 4037 today.
What is Mortgage Fraud?
Mortgage fraud involves deceitful practices to manipulate mortgage loans or property values. This can include falsifying financial information, such as overstating income, understating debts, or inflating property appraisals.
For example, an individual might exaggerate their income on a mortgage application to qualify for a larger loan from a lender, or a group might collude to artificially inflate a property’s value through a series of sham sales.
These acts distort the true financial picture, misleading lenders and potentially causing significant losses. Understanding these specific tactics is crucial in recognising and preventing mortgage fraud in the property market.
Who Commits Mortgage Fraud
Mortgage fraud can be committed by several participants and the nature of fraud has become more sophisticated over the years with the advancement of technology. In our experience, it can involve:
- Borrowers: They might provide false information on loan applications such as overstating income or hiding existing debts.
- Real Estate Agents/Valuers: These professionals could overvalue properties to secure higher loan amounts from lenders.
- Lenders: In rare cases, mortgage fraud might approve loans with inadequate checks or be part of larger fraudulent schemes.
- Solicitors: Lawyers could facilitate fraudulent transactions, such as by falsifying documents.
- Organised Crime Groups: These entities might orchestrate complex frauds, involving multiple properties and collusive transactions.
Mortgage Fraud Investigations
In the UK, mortgage fraud investigations are comprehensive, involving several key players and steps from several different organisations including:
- Initial Suspicion or Report: Often, mortgage fraud investigations will start with a report from a financial institution, bank, solicitor, or individual who notices discrepancies.
- Financial Conduct Authority (FCA) Involvement: The FCA assesses the integrity of financial markets and investigates suspicious mortgage activities. The FCA will review application details, financial histories, and the consistency of information provided across transactions.
- Serious Fraud Office (SFO) Role: For large-scale or complex cases, the SFO may also get involved. They use advanced forensic techniques to analyse financial transactions and trace the flow of money.
- Local Police and Law Enforcement: Smaller-scale frauds or those with local implications often see local law enforcement involvement, focusing on gathering local intelligence and evidence.
- Role of Banks and Financial Institutions: These institutions conduct internal reviews when they suspect fraud, employing financial analysts and fraud experts to scrutinise transactions and client profiles.
- Legal Proceedings: If evidence of mortgage fraud is found, legal proceedings may commence and/or criminal prosecution, which involves detailed examination of documents, witness testimonies, and expert opinions.
Each step in these investigations is crucial to uncovering the truth, ensuring justice, and protecting the rights of potentially innocent parties involved. The process is meticulous, aiming to peel back layers of deceit to reveal the core of the mortgage fraud.
What are the Common Types of Mortgage Fraud
In the UK, mortgage fraud manifests in various forms, each with distinct characteristics including:
- Income Fraud: Involves overstating income to secure a higher loan amount than justified.
- Employment Fraud: Falsifying employment details or fabricating an employer to mislead lenders.
- Identity Theft: Using someone else’s identity to apply for a mortgage.
- Property Flipping: Inflating the value of a property through rapid resale, often involving collusive appraisals.
- Ponzi Schemes: Selling properties at inflated prices to unbeknown investors based on a false risk-return estimate.
- Double Sale: This involves selling the same property to multiple buyers, usually by providing falsified documents.
- Occupancy Fraud: Misrepresenting the intended use of the property, like claiming a buy-to-let as a primary residence for favourable terms.
- Air Loans: This is a fictitious loan where there is no collateral; typically, the property does not exist, and all parties involved in the transaction are fabricated.
- ‘Straw Buyers’ Scheme: Using a third party to conceal the identity of the actual borrower, often someone with a poor credit history.
- Flipping: Involves purchasing a property, artificially inflating its value through false appraisals, and then quickly reselling it at a significantly higher price.
Understanding these common types of mortgage fraud is vital for recognition and prevention, helping safeguard against being unwittingly involved in such schemes.
Is Mortgage Fraud a Criminal Offence?
Under the UK’s Fraud Act 2006, mortgage fraud is a criminal offence:
- Fraud by False Representation: where false information is provided to secure a mortgage
- Failure to Disclose: not disclosing information in a mortgage application
- Abuse of Position: where someone abuses their position of trust to facilitate mortgage fraud.
Penalties under these sections can be severe. Fines are often substantial, and imprisonment can range from a few months to a maximum of 10 years, depending on the severity and impact of the fraud.
If you have been accused of mortgage fraud, it is important that you obtain specialist advice from our mortgage fraud solicitors. You can call us for a Free Consultation on 0207 459 4037 today.
What are Your Legal Rights in Mortgage Fraud Cases?
If you are implicated in mortgage fraud, you have specific legal rights:
- Right to Legal Representation: You have the right to consult and be represented by a solicitor.
- Right to Remain Silent: You are not obliged to answer questions without a solicitor.
- Presumption of Innocence: You are presumed innocent until proven guilty.
- Fair Trial: You are entitled to a fair and public hearing by an independent and impartial tribunal.
It’s crucial to exercise these legal rights, especially seeking legal representation, to navigate the complexities of mortgage fraud allegations effectively. Understanding and asserting these rights can significantly impact the outcome of your case.
What are the Penalties or Consequences if Found Guilty of Mortgage Fraud?
The penalties for mortgage fraud can vary depending on the fraud’s severity, the financial damage caused, and the perpetrator’s role but are all severe. It can include:
- Imprisonment: Convicted individuals of mortgage fraud can face prison sentences, which can range from a few months to up to 10 years for more severe cases.
- Financial Penalties: Courts can impose heavy fines, often proportional to the fraud’s scale and financial impact.
- Reputational Damage: Professionals found guilty of mortgage fraud face significant reputational harm, potentially leading to career-ending consequences such as a strike-off for example where an accountant or lawyer has been involved in the mortgage fraud.
- Asset Forfeiture: In some cases, assets acquired through fraudulent means may be seized.
It is best to obtain specialist legal advice from our mortgage fraud solicitors to discuss your options and the next steps.
Are There Any Aggravating Factors in Mortgage Fraud Cases?
Aggravating factors in mortgage fraud cases can significantly increase penalties. These include:
- Scale of Fraud: Larger-scale operations typically result in harsher sentences.
- Level of Planning and Sophistication: Demonstrated premeditation or intricate fraudulent schemes are viewed more severely.
- Impact on Victims: Greater harm to victims, especially vulnerable individuals, can lead to stricter penalties.
- Repeat Offenses: Previous convictions for similar crimes can result in escalated sentencing.
Understanding these factors is crucial as they can dramatically influence the legal consequences in mortgage fraud cases.
What are the Possible Defences to Mortgage Fraud Disputes?
Defending against mortgage fraud allegations typically involves several potential strategies:
- Lack of Intent: Demonstrating the absence of intent to commit fraud is a key defence. This can involve proving that any misinformation was due to error or misunderstanding, not deliberate deceit.
- Mistake of Fact: Arguing that the accused misunderstood certain facts or circumstances related to the mortgage process.
- Duress or Coercion: Showing that the accused was forced or coerced into participating in fraudulent activities.
- Inadequate Evidence: Challenging the prosecution’s evidence as insufficient to prove guilt beyond a reasonable doubt.
Each case is unique, and the choice of defence depends on the specific circumstances and evidence involved. If you wish to discuss any concern relating to mortgage fraud, please call us today for a Free Consultation. Our mortgage fraud solicitors can significantly improve your prospects of successfully defending a claim of mortgage fraud.
Case Example of Mortgage Fraud
Dhillon v Barclays Bank PLC [2019] EWHC 475 (Ch)
Ms. Dhillon, the victim of mortgage fraud by her husband, sought to have a legal charge, secured by Barclays Bank PLC, removed from HM Land Registry. Her husband fraudulently impersonated his wife by exercising her right to buy the property (which she had been renting) from the council and then subsequently transferring the property to a company called Crayford Estates Limited (again impersonating his wife in the transfer). The husband then secured loans against the property from Barclays Bank.
Issue: The primary issue was whether Ms. Dhillon, a clear victim of fraud by her husband, was entitled to have Barclays’ legal charge removed from the HM Land Registry on the basis that her signatures were forged.
Despite proving the mortgage fraud against her husband, the High Court ruled against removing the bank’s charge. The Court found ‘exceptional circumstances’ under Paragraph 3, Schedule 4 of the Land Registration Act, deeming it unfair to grant Ms. Dhillon an unencumbered property, as this would place her in a better position than before the mortgage fraud (when she could not have afforded the property in any event).
How to Safeguard Against Mortgage Fraud
To protect against mortgage fraud, it’s essential to implement comprehensive due diligence and verification processes. This includes thorough background checks, validating financial information, and ensuring the legitimacy of all parties involved in a mortgage transaction. Regular training for staff on recognising fraud indicators is crucial.
Free Consultation with Mortgage Fraud Solicitors
Mortgage fraud poses significant risks, but with informed strategies and vigilance, it can be mitigated.
If you suspect mortgage fraud or need assistance navigating complex property transactions, seeking professional legal advice from our mortgage fraud solicitors is crucial.
Our lawyers can provide flexible funding options and fixed fees depending on your circumstances and the case. Please call us for a Free Consultation if you have concerns about mortgage fraud.
