Mortgage Intermediaries play a crucial role in the house-buying process, the critical adviser role is a bridge between the borrower and the lender. This role makes intermediaries a potential target for mortgage fraud.
To safeguard both yourself and your clients, you must remain vigilant and follow the best practices in fraud prevention.
Understand types of mortgage fraud
Mortgage fraud typically falls into two categories:
- Fraud for property: Often opportunistic, where applicants misrepresent their financial situation to secure a mortgage they wouldn’t otherwise qualify for.
- Fraud for Profit: More organised, involving multiple parties (sometimes including professionals) to extract money from lenders through inflated property values, false identities, or fictitious transactions.
Recognising these types helps intermediaries identify red flags early in the process.
Robust identity verification
Verifying a client’s identity is a legal and regulatory requirement. Intermediaries must:
- Use original documents that are current and appear authentic.
- Consider electronic verification tools, ensuring they are robust and draw from multiple reliable data sources.
- Be cautious of clients who resist providing documentation or whose documents raise inconsistencies.
Know your customer and source of funds
Mortgage intermediaries must conduct thorough due diligence on clients, including:
- Understanding the source of deposit funds, especially if they come from overseas or third parties.
- Identifying unusual patterns, such as large cash deposits or inconsistent employment history.
- Being alert to gifted deposits that lack proper documentation or explanation.
- These checks are vital not only for mortgage fraud prevention but also for compliance with anti-money laundering (AML) regulations.
Spotting application red flags
At the application stage, intermediaries should be alert to:
- Inconsistencies in income, employment, or address history.
- Multiple applications from the same client to different lenders.
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Pressure to expedite the process or bypass standard procedures.
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Use of false or cloned documents, such as payslips or bank statements.
Maintain strong internal controls
If you’re part of a firm it’s likely they will support you with controls and activity to spot and prevent mortgage fraud, you might have access to:
- Clear policies and procedures for fraud detection and reporting.
- Regular staff training on emerging fraud trends and regulatory updates.
- A culture of whistleblowing and accountability, where concerns can be raised without fear.
- Some firms have access to technology like a CRM system, with audit trails and alerts for suspicious activity.
