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Call for second valuations to fight fraud

Ponzi Scam Fraud Gavel Law 480

The head of fraud at one of the world’s largest accountancy networks says 80 per cent of mortgage fraud could be eradicated by including a second valuation.

A recent report by Experian discovered that fraudulent mortgage applications submitted to lenders increased 22 per cent between April and June.

The introduction of a second valuation from a second valuer to help combat this rise is a proposal which has met with strong support from industry figures.

BDO’s head of fraud and financial crime Simon Bevan has made the proposal in response to an increase in lending over the past year, particularly in buy-to-let.

He says: “Most of the fraud is around buy-to-let and that seems to be because there is a shortage of rental property and it’s the buy-to-let area that they are lending on. Some 80 per cent of fraud is in the buy-to-let market and it is the same fraud we see in commercial lending fraud. It involves a corrupt valuer and a corrupt solicitor and someone in the property market.

“You could eradicate 80 per cent of mortgage fraud if you had two valuations, from two different valuers. They would have to collude together so you would take your risk profile down massively. The banks won’t do that as they are trying to keep their product charges as low as possible.”

John Charcol’s senior technical director Ray Boulger, says that 10 or 15 years ago, the broker could choose the valuer which opened the door for an increased risk of fraud.

He says: “If we instruct a valuer now with a lender we send the instructor to the lender or the panel manager, so we would have no control over which valuer was used.

“Because of the controls lenders have now put in, the scope for fraud is actually quite limited unless someone has found a way round the system. If you have collusion with someone working for the lender and someone working for the valuer, then that’s different.”

London Surveyors’ director Simon White, agrees that two valuations would eradicate mortgage fraud.

He says: “It’s common in the US where lenders can’t believe we rely on valuations from one person.”

But he argues that the chances of it happening here are low.

He adds: “The tendency of the past two years has been for fees to go down and down so there’s no room whatsoever for more cost to be introduced into the industry.”

Goldsmith Williams solicitors’ partner Eddie Goldsmith, says: “If fraudulent valuations are an issue with lenders, then having a second independent valuer go out is going to assist that enormously. The question is, who’s going to pay for it? Lenders and banks are going to be very uncomfortable doing this and the first one to increase the upfront costs for a mortgage is going to be extremely brave.”


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