Heading off mortgage fraud


April 7, 2015

David Gilman is partner in charge of Blacks Connect


For all its ups and downs, there is much to be said for working in the mortgage and housing markets and I suspect many of you reading this article will be extremely satisfied and proud of the service you provide and, let’s face it, the good that can come from your work.

After all, putting a roof over someone’s head and helping them buy or refinance their home in order to fulfil ambitions and dreams should give you a warm feeling inside.

Our side of this work can of course have its challenges and obstacles to overcome – we are, after all, talking about the law – but there is also a huge level of satisfaction to be gained from securing completion for a client, especially as this tends to be the start of a new chapter in many people’s lives.

That’s all the positive part of the job we do however given the nature of the mortgage and housing market, and the often large sums of money involved in transactions, there is always going to be a negative to deal with.

This comes in the form of mortgage fraud – which can be found in many guises – but can cause significant distress for anyone involved, and I certainly bring advisers and conveyancing firms within that category. Not forgetting, in many instances, the poor borrower who might have been the unwitting victim of such action.

The good news, in terms of mortgage fraud, is that we are now much more vigilant across the whole piece when it comes to detecting potential fraud and heading it off at the pass.

Lenders, in particular, have conspicuously ramped up the systems and processes they use over the past five years in particular and, for the most part, there has been considerable investment in fraud protection and detection.

Lenders also now talk to each other and share considerable amounts of information about attempts at fraud, because the chances are that the fraudster(s) will not stop if they are rejected by one lender. Instead they will move on and on, until they find some sort of success.

For conveyancing and solicitor firms, there is always a considerable challenge with any transaction however in recent times this has come increasingly in the form of fake law firms who have been ‘set up’ with the sole purpose of securing the funds.

According to recent figures from the Solicitors Regulation Authority reports of fake law firms have increased by 125% in the past two years alone, and this type of fraudulent activity looks to be ‘flavour of the month’ for the fraudsters at present.

These fakers purporting to be credible law firms are using all kinds of tactics to pass themselves off as the real thing, for example, using a similar name to a solicitor registered on the Law Society’s Find a Solicitor search engine.

To the client they appear to be genuine but obviously this is not the case – these fraudsters communicate only via email and this mistake can end up costing the client hundreds of thousands of pounds. It might seem like you would smell a rat at some stage however, let me assure you, this type of fraud can be successful and we should all be vigilant because of it.  

This is why it certainly pays to have the adviser fully involved in the conveyancing advice process because there is much more chance of there being a track record of dealings with a recommended firm, and the adviser is not leaving the client to their own devices where fraudsters could target them.

Better we think to have an active adviser at the core of a transaction rather than allowing the client to ‘sort it out for themselves’ where great damage could occur.

So, while we are all part of an industry that seeks to support and help our clients, we can also ensure they don’t meander off down an unsuitable or, frankly dangerous, path.

Yes, there are much more focused systems in place to weed out potential fraud but it still happens and therefore it makes sense for everyone to be on their guard and to carry out their homework and due diligence to make sure it doesn’t happen to your client. 

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