Ef­fects of greed-driven mort­gage fraud may linger for years

Yorkshire Post - Property - - PROPERTY - Aziz Rah­man

WHEN the credit crunch ar­rived, banks that had bent over back­wards to lend money started to take a closer look at who they had given mort­gages to. They had been given to in­di­vid­u­als who weren’t safe bets and to oth­ers who were us­ing mort­gage ap­pli­ca­tions to ex­e­cute fraud on a huge scale.

In the rush to lend, and make a hand­some profit on the loan, many fi­nan­cial in­sti­tu­tions failed to do their home­work. The con­se­quences are now clear: house re­pos­ses­sions, fraud pros­e­cu­tions and thou­sands strug­gling to pay their mort­gages while thou­sands more find it near im­pos­si­ble to se­cure a mort­gage.

One large-scale fraud is a per­fect ex­am­ple of how greed led fi­nan­cial in­sti­tu­tions to lose all com­mon sense. Sum­mer 2011 saw two men, one who was a sur­veyor, con­victed for a £50m mort­gage fraud and sen­tenced to 13 years and seven years. The scheme in­volved buy­ing build­ings, cre­at­ing false records of them be­ing bought and sold at ever-in­creas­ing prices, pro­duc­ing fake doc­u­ments show­ing high rents be­ing paid for them and then pre­par­ing bo­gus val­u­a­tion re­ports. Six so­lic­i­tors were charged in re­la­tion to the scheme. Three were ac­quit­ted and the jury was un­able to reach ver­dicts re­gard­ing the other three.

Such fraud can only suc­ceed with the co-op­er­a­tion of prop­erty pro­fes­sion­als so that val­ues of prop­er­ties can be in­flated and lenders duped into lend­ing peo­ple far more than a prop­erty is worth.

Mort­gage fraud can in­volve sim­ply ly­ing on an ap­pli­ca­tion form or the use of hid­den in­cen­tives, such as cash back or a gifted de­posit, to clinch a sale. The Coun­cil of Mort­gage Lenders has rules on the use of such in­cen­tives but the sys­tem is still open to ma­nip­u­la­tion. Houses can be bought from own­ers (who are of­ten strug­gling for cash) at knock­down prices and leased back to them by buy­ers who then use the prop­erty as se­cu­rity to ob­tain large mort­gages that are never re­paid. The per­pe­tra­tor flees with the ill-got­ten mort­gage money and the per­son who sold the house (and still lives in it) is left with their fate in the hands of an an­gry lender who has been cheated out of a for­tune.

Prop­erty pro­fes­sion­als are ex­pected to be be­yond re­proach in the way they carry out their work. The vast ma­jor­ity of pro­fes­sion­als work un­der this ex­pec­ta­tion with­out any prob­lem. But if they find them­selves know­ingly or un­know­ingly en­tan­gled in mort­gage fraud, its com­plex­ity makes it ex­ceed­ingly hard for them to es­cape any of the blame, whether they are guilty or in­no­cent. The pack­ag­ing up and sell­ing on of bad loans for the dis­as­trous sub-prime mort­gage mar­ket pre­cip­i­tated a bank­ing col­lapse that was due solely to greed-in­duced fraud and left a trail of guilty peo­ple.

As so­lic­i­tors we reg­u­larly rep­re­sent clients ac­cused of mort­gage fraud. At present, we are rep­re­sent­ing peo­ple who, it is al­leged, are in­volved in what has been de­scribed as the largest prop­erty fraud the UK has seen in a decade.

But whether the fraud is on a small or large scale, the same prin­ci­ples have to be es­tab­lished in an in­ves­ti­ga­tion. Were the pro­fes­sion­als in­volved in the deal all act­ing hon­estly and above board? What checks did they make be­fore be­com­ing in­volved? What sim­i­lar work have they car­ried out over the years that had not car­ried the slight­est hint of wrong­do­ing? The com­plex­ity of many fraud cases means that very of­ten the truth is far from clear. And with ma­jor league mort­gage fraud­sters and the lit­tle man who can’t now pay his mort­gage both now feel­ing the full force of the law, th­ese are test­ing times for many in the prop­erty world.

The le­gal im­pli­ca­tions may not be fully ap­par­ent for some time. The greed-driven fraud went on for a long time and its af­ter ef­fects may linger for many years.

Aziz Rah­man is founder of Rah­man Ravelli So­lic­i­tors, Hal­i­fax and Lon­don-based spe­cial­ists in fraud and busi­ness crime. www.rah­man­rav­elli. co.uk

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.