Brokers beware of the fraud spectrum
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History tells us that as an industry we never seem to learn from previous experiences. I need only to go back as far as the early 1990s when mortgage fraud was prevalent and all those lenders that were hit and hurt vowed this would not be repeated - how wrong could they be? All that has changed is the more sophisticated methods used by the fraudsters and the amounts.
Estimates are that all types of fraud are costing the UK over £30bn a year, with identity fraud one of the fastest-growing industries and mortgage fraud likely to cost the lending industry anywhere between £2bn-£5bn. Now the blame game is in full swing, intermediaries are too exposed for my liking, as we are not represented at the recently created Mortgage Fraud Forum.
By not being represented on this forum, intermediaries must now demonstrate their awareness, under-standing and knowledge of how fraudulent behaviour is all around them every day. Too often, I hear firms and individual intermediaries declaring that fraud does not or has not affected them or their businesses - dream on.
Intermediaries do see mortgage fraud primarily as a broker overstating income or linking up with a valuer who probably did not even look at the property. Some may say this is soft fraud. It is still fraud and lenders advise that they are nursing some sizeable losses.
That said, the major frauds are those involving the professional fraudsters who in the main are more sophisticated and ahead of the lenders’ systems.
Over the past six months, I have worked with the heads of risk from Lloyds Banking Group, Santander and other new entrants to the lending market such as Alan Cleary and his team at Exact and Precise Mortgages.
Even though I have been in this industry for nearly 50 years and have worked with Strathclyde and Metropolitan Police forces in the 1990s onmortgage fraud, I am staggered by some of the behaviour now coming to light but also by the stupidity and naivety of many lenders and so-called professional bodies. Intermediaries will shoulder a lot of the blame - that is the way of our world, so we can and must demonstrate a greater awareness of the problem.
Initially, we should know our clients much better than our files will dem-onstrate, so basic but so misunderstood. If the client comes nicely packaged with his own solicitor, valuer and accountant referred to you by a third party or a lead-generation company, then we should know who we are dealing with for obvious reasons.
Face-to-face meetings should be a priority, especially if the intermediary business does not have an anti-fraud system in place. Much more must now be done, as individual regis-tration will further reduce our numbers, partricularly when lenders and the regulator start pointing the finger in our direction.
John Malone is executive chairman of PMS
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