Looking for your forever home can be a very exciting time. You’ve worked hard and saved even harder, but maybe your credit score is looking rougher than you would ideally like. What will be the impacts of tweaking your personal information such as annual income? Will it hurt? Maybe you’re in between jobs but expecting a job offer any day, might as well state you are employed full time…right?
First party mortgage application fraud is one of the most common forms of fraud filed to the Cifas databases on a daily basis. The fraud is committed by the applicant as they attempt to obtain a mortgage that they know the lender will not sanction or to obtain a mortgage on improved terms. This could be done on their own or in collusion with a 3rd party such as a broker, accountant or employer. Inflated or false income may be supported by altered or fraudulent payslips and P60s to evidence the income.
There are several key trends Cifas members have begun to uncover as applicants try to purchase their dream home or buy a property which they really intend to rent out.
A common method our members see is that some applicant’s income may be ‘staged’. This is when regular payments are made into an applicant’s account for a period of time which will cover the employment period checked by the lender to confirm employment and affordability. The income is then evidenced on genuine bank statements. The ‘income’ payments stop upon completion. Secondary ‘staged’ income is where the first employment is genuine but the applicant claims to have a second income which is used to boost the overall income.
It is also very common for individuals to misrepresent the terms of their employment contract and state they are on a permanent contract rather than a fixed term contact.
Of the 2,000+ participants polled for our recently released report in collaboration with WPI Economics: Tackling first party fraud, there were some concerning figures emerging in regards to whether participants have, or know someone who has, committed first party fraud. The report provided insight and figures that supported the increase that we are experiencing in mortgage fraud so far this year.
The UK saw fraudulent applications on mortgages go up 5% so far in 2019 despite mortgage rates plummeting since January. Those who may not have engaged in this type of fraud previously may now be taking part, or heavily considering it to fraudulently obtain a benefit.
Throughout the report you can see that mortgage application fraud was in the top three most reasonable types of first party fraud by age groups 35-44, 45-54, 55-64, to 65+. I think it is safe to say that once people get to the age where a mortgage is something more heavily considered the answer starts to shift that mortgage fraud is more reasonable, compared to the younger demographic who may have yet to go through the home buying experience.
The report found nearly half, 45%, of those recorded for application fraud (which can be application fraud for a mortgage, account, policy, service or insurance claim) were aged between 31-40 years old. This was a massive 16% increase compared to the last 6 months of 2018. This number coincidentally matched up with the report revealing that those aged 35-44 were more likely to think that exaggerating on their income for their mortgage application was reasonable.
There are many different ways someone can commit mortgage or property fraud, but with the significant linkage between the rise in mortgage fraud and application frauds, it is safe to say the two are very much hand in hand.
Misleading a mortgage lender by providing false information or misrepresenting the truth is fraud and will be treated as such by the lender. In some cases this can escalate to the loss of your bank account, or even effect potential job opportunities. What seems like a minor adjustment at the time could leave you in a world of financial heartache.
Prevention is key in the fight against first party fraud. Honest customers should not be punished through higher premiums or more friction in their customer journey as a result of banks and building societies trying to deal with increasing mortgage fraud.
How we can begin tackling first party fraud? Check out our previous blog post where Cifas’ Head of Fraud Intelligence breaks down the findings and offers a potential framework to tackle the issue with collaboration from industry, government and law enforcement.
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