The vast majority of mortgage fraud perpetrated against lenders is committed by the borrower themselves, over 90% according to Experian.
Scheme abuse, where borrowers conceal their plans for a property once purchased to get a mortgage deal they would not have otherwise been offered, is a difficult type of fraud to detect.
The borrower’s true intentions are only revealed after the lender has issued funds, or some months or years later if the primary use of the property is altered without consent.
Bolstering fraud defences with Hometrack’s property data
The Financial Conduct Authority expects lenders to take a tough stance in the fight against fraud. In the aftermath of the financial crisis, financial institutions were warned to ‘stay vigilant’ and have the ‘strongest possible systems and controls to aid prevention’.
It’s a warning the regulator expects firms to still heed today.
Property listings data, accessed via a property data API, can be used to build another layer of defence against fraud by allowing lenders to see how their asset is being used post completion.
Property data can help to flag when a home held by a residential mortgage lender as security is advertised for rent, sounding the alarm that the borrower is planning to breach the terms of their agreement.
Detecting fraud digitally
A borrower who wants to buy an investment property but cannot raise a large enough deposit to secure a buy-to-let deal, or who wants to circumvent buy-to-let criteria or rates, may pretend they plan to live there to be accepted for a residential mortgage.
It might not seem like fraud to the applicant – a white lie to get a better mortgage.
In reality, these actions expose lenders to risks they may not be geared up to take and sit lurking on the back book undetected until the mortgage defaults.
By having access to a complete set of property listings data, lenders can uncover a threat of fraud by running a digital check that takes seconds eradicating the need to manually check up on borrowers’ activity later down the line, or when payments have been missed.
Property investor fraud
Buy-to-let lenders can also harness the power of listings data to keep tabs of how a landlord is letting out the asset.
Given the cost and criteria differences between a vanilla buy-to-let loan and a HMO mortgage, unscrupulous landlords may be tempted to conceal their investment plans post completion.
To secure more favourable mortgage terms the investor may say they plan to let the detached home to one family in its entirety, but in reality they plan to split the property into multiple lets.
The terms under which the property is let will be clearly listed on any new letting, allowing those plugged into the property data to spot a breach of mortgage terms before it happens and review the activity within their mortgage book on an ongoing basis.
Mortgage fraud is a billion pound threat to lenders.
UK property data can help you to stay one step ahead of mortgage scheme abuse.
