Tuesday, 10 August 2010

Prevention of Property Fraud

With the dramatic recent rise in mortgage fraud and property fraud cases in the UK , there is increasing need for members of the public to be better informed about what to look out for and how to avoid falling foul of a property fraud scam.

Property fraud scams can be carried out in a multitude of forms and involve a number of participants; some who don't even know they're being taken advantage of.

Participating in a scheme that requires you to provide false or misleading information to a mortgage lender is mortgage fraud and therefore a criminal offence.
There are two prominent kinds of mortgage fraud today: one involves a property fraud scam - and the other frauds are designed to squeeze money out of transactions involved when a property is exchanged between buyers - 'fraud for profit'.

An example of a Mortgage Fraud is where a Straw Buyer is used. This happens when someone is offered money to lend their identity, and are considered phoney loan applicants. They are often offered several thousand pounds for the use of their name and good credit information. Some straw buyers may not know that their name was used on a mortgage application.

Property Flipping ( not be confused with flipping conducted by MP’s ) seems to have been used to perpetrate mortgage fraud during the boom years of the property market. This involves a dishonest seller who artificially inflates the value of a property. This involves fraudulent valuations, false loan documentation and exaggerated incomes in order to secure mortgages.

New-build properties, like property flipping have been especially exposed to mortgage fraud with complete blocks of apartments being given phoney valuations so that larger mortgages can be sourced. These types of property may be bought using a false name or a shell company as the buyer. The fraudster will often fail to make mortgage payments and then disappear with the excess mortgage advance. When the mortgage company repossesses the property, they find that it is worth substantially less than expected. As a result there is currently a lack of appetite on the parts of lenders for new build properties.

Conveyancing solicitors have a duty to be on the look-out for any suspicious behaviour surrounding property sales. A conveyancing solicitor who becomes innocently involved in property fraud could be guilty of a criminal offence on the basis that he should have been aware that a fraud was being committed.

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