Mortgage fraud cases soar to a 22-year high

Mortgage fraud has nearly quadrupled in the first six months of 2010, KPMG's "fraud barometer" has found, with incidents of deception involving home loans reaching a 22-year high.

The accountancy firm's figures show there were 21 cases of mortgage fraud in the first half of 2010 with a value of £96m, compared to just 18 worth £24m during the same period last year. In fact, the figure for the whole of 2009 was just £77m.

And the company has warned that the picture is set to deteriorate over the coming months as the aftermath of the house-price boom, followed by the credit crunch, results in more incidents being unearthed.

The Financial Services Authority is aware of the problem, and cited the potential for fraudulent applications as one of the reasons for its decision to ban "self-certification" home loans, where applicants don't have to prove their income to obtain a mortgage.

KPMG said that its figures showed mortgage fraud now accounted for more than half of all the frauds committed against the financial sector in the first part of 2010.

One of the biggest cases was worth £50m, involving two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty. In another incident, an estate agent was jailed for six years after attempting to pull off a £2m mortgage fraud by stealing the identities of two homeowners.

Hitesh Patel, a partner at KPMG Forensic said: "The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate.

"This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud. Banks will be hoping that they have uncovered most of their fraudulent loans. But the trend remains upwards and it could be some time before we see the peak."

Overall, the firm's Fraud Barometer, which collates serious cases of fraud concerning sums in excess of £100,000 in the UK courts, found 166 cases of such fraud in the first half of this year. That is the highest number of cases in a six-month period in the 22-year history of the barometer.

The firm said that the cases had a total value of £608.5m.

That is actually down 4.3 per cent on the same six-month period in 2009 when the figure was £636.5m. However, the 2009 figures were inflated by one spectacularly large case worth £200m on its own. In the most recent period, the biggest case was worth £66m. KPMG said that, even without the one-off "outlier" fraud, the average value per case has risen.

Managers in companies were also found to have inflicted far greater fraud damage than their employees. Though there were more employee cases than management ones (47 compared to 32), management frauds had a greater value, at £135m compared with £45m.

Manager frauds averaged £4m per case compared to £1m per case involving employees. "Managers are clearly able to carry out larger frauds due to the positions of greater authority and the trust they are afforded," the firm said.

Professional criminals perpetrated the most fraud during the period – 56 cases were reported at a value of £391m, over half the total amount included in the Barometer.

"Boiler-room" scams also continue to be popular among criminals, particularly with those operating from outside the UK. Such frauds usually involve "brokers" attempting to persuade investors to part with money for shares that are worthless and impossible to sell on, often at inflated prices. The Barometer recorded five cases of boiler-room fraud, totalling £84m.

Government was targeted in 38 cases worth £178m which included tax scams involving benefits, VAT, or carousel fraud. London and the South-east, unsurprisingly, were the biggest hotspots for fraudsters, accounting for half the total number of cases (88) and 81 per cent of the value (£493m).

"Companies who took fraud risk management seriously before the downturn should now be emerging stronger because of it," Mr Patel said. "The discipline that they have subjected their businesses to should help them gain a competitive advantage."

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

    Ashdown Group: Development Manager - Rickmansworth - £55k +15% bonus

    £50000 - £63000 per annum + excellent benefits : Ashdown Group: IT Manager / D...

    Recruitment Genius: Security Officer

    £16500 per annum: Recruitment Genius: Applicants must hold a valid SIA Door Su...

    Ashdown Group: Business Analyst - City, London

    £50000 per annum: Ashdown Group: Business Analyst - Financial Services - The C...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss