On 15 April 2009, the Law Society published an updated practice note on mortgage fraud. As a result of the economic downturn, new ways of committing mortgage fraud have emerged and the 2009 note has been updated to refer to these new methodologies, which include:
- Equity release fraud – this occurs when a home owner agrees to sell his property to a third party and then rent it back with an option to purchase the property when his financial position improves. However, the third party could then commit mortgage fraud by taking out a mortgage for an inflated value of the property and then, when no repayments are made, the bank will repossess the property and evict the tenant;
- Application hijack – this involves criminals fraudulently claiming to be the representative of a real applicant (usually posing as the applicant’s solicitor). The mortgage funds are then paid to the criminal;
- After the event mortgaging – sometimes a criminal may acquire a property using his own funds and then remortgage the property without making any repayments;
- Claiming deceased estates – this occurs when a criminal identifies deceased estates from the notices section of the local paper that can be exploited, for example, an estate with no known heirs. The criminal establishes a false identity as a long lost heir and obtains a mortgage over the equity in the property. Alternatively, if probate has been delayed, the criminal could pose as the deceased person and then obtain mortgage finance; and
Court Orders for Sale – in this example, a criminal will look for unoccupied and boarded up properties, apply to the County Court for judgment against the owner for a non-existent debt, obtain an Order for Sale and then sell the property to himself or to an associate for an over inflated price. Once the property has been purchased the criminal then obtains a mortgage at the inflated value and no repayments are made. |