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FSA fines two brokers £415k for mortgage fraud

The FSA has banned three individuals for mortgage fraud and fined two of them a total of £414,683 for knowingly submitting false and misleading information to secure mortgages for themselves and their customers.

The FSA has fined Mark Bates from Sheffield-based Pace Financial Management £264,683 for knowingly being involved in mortgage fraud whilst he was a partner at the firm. He has also been banned from working in regulated financial services.

The fine includes a disgorgement of the £74,683 profit he made by diverting commission to himself and a colleague which should have been paid to Pace.

Bates, in conjunction with an adviser at Pace, obtained a mortgage for himself using false payslips and P60s, submitted a mortgage application for a client using false income and employment information, and gave mortgage advice despite not being qualified.

The FSA’s investigation also revealed that Bates had recruited an adviser that he knew had been dismissed twice before for gross misconduct.

The regulator says this effectively allowed the firm to be used for financial crime.

On February 18, 2010 Bates was found guilty of three offences relating to conspiracy to defraud, money laundering and conspiracy to obtain a money transfer by deception and sentenced to four years imprisonment.

Alan Hill, also at Pace, has been fined £150,000 and banned from working in financial services for breaching FSA rules which state that a firm must conduct its business with integrity.

During the FSA’s investigation Hill admitted to faking documents then using these to apply for mortgages for at least six customers.

Hill was paid by a third party for forging documents that he knew would be used for mortgage fraud.

In March 2009 Hill pleaded guilty to nine offences of conspiracy to obtain a money transfer by deception, obtaining a money transfer by deception and making false instruments.

On February 18, 2010 Hill was convicted of five further offences to which he previously pleaded not guilty, all of which were related to financial crime. Hill was sentenced to five and a half years imprisonment.

In addition Waqarul Hassan Shah, a partner at Manchester-based firm K S Financial Services, has been banned from working in regulated financial services for knowingly submitting false income figures on a buy-to-let mortgage for himself, inflating his income six-fold from £11,700 to £65,000.

Shah was also found to have acted recklessly by submitting false and misleading details in a customer’s mortgage application.

The FSA also found that Shah failed to put in place adequate systems and controls to prevent false and misleading mortgage applications being submitted to lenders and to ensure customer files were checked.

The FSA would have fined Shah £40,000 had it not been for evidence that the penalty would have caused him serious financial hardship.

FSA managing director of enforcement and financial crime Margaret Cole says:“Bates, Hill and Shah all showed they were not fit to work in regulated financial services and presented a serious risk to customers and lenders alike with their reckless and unscrupulous actions.

“Mortgage fraud is a crime and we take any failings that put customers or lenders at risk very seriously. The prohibitions will help make the mortgage market a safer place and the fines will send a message to other intermediaries that they must adhere to our rules and act with integrity at all times, or face the consequences.”

A total of 96 mortgage brokers have been banned by the FSA to date.

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Comments

There are 10 comments at the moment, we would love to hear your opinion too.

  1. Not condoning their actions at all, but five and a half years for nicking some money? You get less for Death by Dangerous Driving. I can be compensated if someone nicks money off me, but I can’t be brought back to life if I’m mown down by some plank driving like an idiot! One of those sentences needs to change as that is not “justice”

    I do “like” the FSA’s boast they put on all of these that they have so far banned 96 mortgage brokers. Well done, you must be so proud. I’m sure we’ll never see another credit crunch or recession like this one now these guys are locked up, eh?

    Whilst I am delighted that idiots like this are out of the industry for good, it does smack a bit of “pulling up the weeds, while the forest burns around you”. How many people who were genuinely culpable in the cause of the macro-economic problems we are experiencing now have been banned? Heck, not promoting them to the board of the FSA would be a start!

  2. The old question ~ for how long were these guys doing all these naughty things before the FSA finally cottoned on?

  3. Rob, I totally disagree with you I think that the prison sentences right, as they will probably only serve 50% of you in you
    you areit anyway. Rogue mortgage brokers and indeed banks is what ought the British economy to its knees and there is going to be an awful lot of suffering because of it. The problem in financial services is many people that work in the industry do not take ethics seriously, as they just think it is about making as much money as possible. Mortgage fraud is wrong and in my book is just as bad as going down the road and mugging an old lady because when it is done on an industrial scale, as it has been it can bring the country to its knees.

  4. Peter, I am comparing the sentence to killing someone by dangerously driving a motor vehicle. One of those sentences is wrong. I believe it is the death by dangerous driving, by the way.
    Rogue Mortgage brokers did not bring the economy to its knees. Excessive credit on a wide scale (particularly in the US) and the packaging up of that debt in to phoney Triple A securities did that. The subsequent confusion that the complexity of the bonds caused led to credit being withdrawn. A few dodgy mortgages with fake payslips accounted for such a tiny, tiny percentage of the mortgage market that there is no way possible that it could have caused the credit crunch and following recession. I’m glad they are out of the market and that these practices are being stamped out, but the way the reports go, you would think that the FSA believes that catching a few rogues who were transacting tiny amounts of mortgages relatively speaking is solving the problem. It isn’t – the problem has been solved by the EC making sure that credit rating agencies are independent. This will stop the over-rating of RMBSs and should mean that a sub-prime mortgage when securitised will attract a fair price bearing in the mind the risk and so, originators won’t be making excessive profits and the ultimate mortgage book owner will understand the risk they are holding.

  5. Is it fraud if the lenders have created a world and system whereby, not only did they turn a blind eye to the ‘slight’ inflation of incomes, but actively encouraged it. Ans all because Net Profit never equals employed salary. The whole system is flawed, but it worked well with a few nudges and winks here and there. It was not the inflating of incomes that caused the global recession.

    I don’t see many old ladies asking to be mugged.

    That’s not to say that these guys that have been banned weren’t totally immoral and self-centred. However, a lot of good brokers have bent the rules to assist a client, with the ‘off the record’ blessing of the lender.

    Those IFAs whose main business is mortgages do not understand. It is not as simple as ‘he commits mortgage fraud therefore he is bad and must be banned’. The issues run far deeper, and sometimes it is better to leave things well alone.

    I’ll remain anon to protect my livelihood, but one day when I retire or win the lottery, I’ll happily tell all and sundry what really goes on in the real mortgage world

  6. The only sure way to stop people inflating their income to obtain a mortgage is to cross check every application with HMRC

  7. Two of these guys went to prison earlier this year. How the hell are the FSA intending to collect these fines anyway? And why are they now blowing their own trumpet? Should we be applauding the failure of the FSA for their previously?
    Fraud was committed by these guys for their own ends. How many mortgages went through on behalf of the applicants for self cert all over the country and indeed, the world? Fraud on a massive scale, I believe.

  8. Yes its fraud. Yes they should be banged up.

    But according to the Fraud Act so is claiming an adviser said an endowment was guaranteed to pay off your mortgage when you know full well he said nothing of the sort

    Which two organisations allow them to get away with that?

    Answers on a postcard to:

    Mark Hoban
    House of Commons
    London SW1

  9. It is interesting that everybody looks to blame everybody else when things go wrong. I can honestly say that I have never inflated somebody’s income or accepted dodgy information on behalf client to get a mortgage agreed. I am a general practitioner and cover all areas of financial services and therefore my business is not very reliant on mortgages. The fact is guys that mortgage fraud is fraud and it’s okay to blame the big players in the marketplace or put the responsibility on the lenders but if you’re in front the client and you deliberately overestimate someone’s income then you are committing fraud, end of!

    The problem is that we are now going to have a very strong regulator not only in this country but also in others, and who is to blame for that? The answer is all of us for accepting years of firms doing dodgy practices, I for one am glad these people have been locked up and kicked out of the industry. I hope that they are not the last, as it seems we have an awful lot of people still to go particularly when you read some of the responses on this site with all of the bleating that goes on about tighter regulations.

    Ask yourself why regulation is getting tighter – because we all allowed our industry to be tainted with bad practices and we didn’t shout loud enough about what was going on. If we knew, that there were firms out there with dodgy practices we should have been shouting about tighter regulation and reporting them. Just reading some of the responses on this site that always remain anonymous, I can see that their view is going to be that tighter regulation is always going to be out of the question. It is a bit like saying that a police force is not necessary because will never commit crime, well I for one think that we definitely need a financial regulator and one that does a proper job rather than one we have had for the last 10 years.

  10. I may be missing the point here, but isn’t the whole way that the lenders were doing business that actively encouraged and condoned self cert mortgages? how many brokers had visits from BDM’s telling them exactly how to present a flawed case to get through the lenders underwriting? Profits rule no matter what!
    As for the FSA and their sactimonious pratings I can say now what a bunch of self serving, crooked ********!.

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