Banks Wary of Mortgage Fraud Risks; FINANCE

The Birmingham Post (England), January 28, 2009 | Go to article overview

Banks Wary of Mortgage Fraud Risks; FINANCE


Byline: TOM SCOTNEY Legal & Finance Editor

The true scale of UK mortgage fraud Is coming to light as banks start to clamp down because of the credit crunch, a Birmingham fraud expert has said.

The news comes after five property fraudsters were found guilty of an pounds 80milllon Ponzl scheme - one of the biggest property scams In British history.

Mark Kenkre, a fraud and asset recovery work specialist at Midlands law firm Challlnors, said the global financial position had focused banks' minds on assessing the security on Investments, a step Increasingly exposing mortgage fraud.

"Historically, lenders have been able to avoid large exposure to mortgage fraud as ordinarily they could rely on the continued upward trend of the market to recoup their Investment If they were duped In any way," Mr Kenkre said.

"However, as we are constantly reminded, the market Is much different and lenders only too aware they are those greatest exposed to fraudulent activities and have been quick to protect their positions."

He said a number of different kinds of mortgage fraud were being exposed, adding: "Atypical property fraud would Involve an overvaluation of a property by a surveyor who would arrange for the property to be sold to an accomplice. The accomplice would submit a mortgage application providing false Information about Income, credit ratings and references to obtain the Inflated mortgage only to swiftly default. The seller of the property who set up the deal with the surveyor vanishes with

the cash, leaving the lender an asset worth substantially less than It was valued."

This year, the Brittanla building society launched a specialist loss recovery unit to bring claims against solicitors and surveyors to seek to obtain compensation for negligent advice on property deals.

Other lenders followed suit, Mr Kenkre said, pointing out: "Many lenders have put similar teams In place In an effort to expose the true extent of their losses and begin the process of recovery against those that have failed to provide advice to protect the lender."

He said the level of mortgage fraud had left many creditors of property companies exposed to the effects of organised crime, because they often only became aware of their exposed positions as their debtors became Insolvent.

Challlnors team Is Increasingly being Instructed to Investigate the fraudulent activities of companies whose conduct has been highlighted by Its creditors who are chasing debts quicker due to the global climate: "Lenders are now left to rue those decisions to lend more than people could afford to repay as they are Increasingly being left with properties falling In value," said Mr Kenkre, "But If the correct controls are put In place, then businesses can reduce the possibility of being targeted by fraudsters. …

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