The Looming Mortgage Fraud Fallout

[Patrat]

From today's FT:

Experts warn of further home loan fraud losses

Mortgage lenders may face further losses from fraud committed by criminal gangs who targeted the home loans market at the height of the boom, experts warned yesterday.

Last week Chelsea Building Society became the second lender to be hit by mortgage fraud, taking a £41m charge, which pushed the mutual into a first-half loss of £26m. The Chelsea said fraudulent buy-to-let loans were made between 2006 and 2008 on hundreds of properties, including many new-build homes in northern cities such as Manchester and Leeds.

Bradford & Bingley, the nationalised buy-to-let lender, also said this month it had set aside an extra £100m for potential losses from mortgage fraud.

Since the start of last year, B&B has set aside £270.8m relating to losses from "hundreds of cases" of potentially fraudulent mortgage applications or professional negligence on property valuations.

Simon Bevan, national lead partner in charge of the fraud services unit at BDO Stoy Haywood, estimated that mortgage fraud cases had risen from £13.4m in 2008 to £197m in the first half of 2009 - a figure which is still just "the tip of the iceberg", he said.

Mr Bevan believes that domestic mortgage fraud could top £1bn by the end of the recession and commercial property mortgage fraud could be £5bn.

While banks can access the Government/BOE bailout facilities, building societies who can't are going to be hit much harder as the decade's rampant mortgage fraud becomes apparent. The Nationwide seems to have hit its limit in taking over failing building societies so either the Government will have to step in directly, as it did with the Dunfermline, or we will start to see outright failures.

[Timm]

The lenders were victims not of crooks, but of their own policy.

As they accepted applications from crooks, liars and fraudsters, and their own policy encouraged such applications, I don't think my accusation is at any legal risk.

[geezer466]

Why are we not seeing high profile prosecutions of these fraudsters that is the big question.

The complexity of these transactions means surveyors and legals must have been involved in it!!

They go after the little old lady that lifts a joint of meat of the shelf in Tesco but to let these crooks get away with theft on this scale is horrendous.

[Francisco Pizarro]

They go after the little old lady that lifts a joint of meat of the shelf in Tesco but to let these crooks get away with theft on this scale is horrendous.

Which one is the easiest and safest to prosecute?

[eric pebble]

The lenders were victims not of crooks, but of their own policy.

As they accepted applications from crooks, liars and fraudsters, and their own policy encouraged such applications, I don't think my accusation is at any legal risk.

Spot on Timm.

And I liked this bit:

"Since the start of last year, B&B has set aside £270.8m relating to losses from "hundreds of cases" of potentially fraudulent mortgage applications or professional negligence on property valuations.

Simon Bevan, national lead partner in charge of the fraud services unit at BDO Stoy Haywood, estimated that mortgage fraud cases had risen from £13.4m in 2008 to £197m in the first half of 2009 - a figure which is still just "the tip of the iceberg", he said."

Yeah mate!! The tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip [x10,000,000] of the iceberg, actually.

[Nationalist]

B&B have defrauded me! I haven't been given anything for my shares when they were forcibly transfered to Santander with a sweetner from the taxpayer. I want at least £1 per share - they were trading at £5 per share a few weeks previously. (Of course I only actually paid 2p a share, but that's because I bought at the last possible second in anticipation of some compo.)

[abharrisson]

Spot on Timm.

And I liked this bit:

"Since the start of last year, B&B has set aside £270.8m relating to losses from "hundreds of cases" of potentially fraudulent mortgage applications or professional negligence on property valuations.

Simon Bevan, national lead partner in charge of the fraud services unit at BDO Stoy Haywood, estimated that mortgage fraud cases had risen from £13.4m in 2008 to £197m in the first half of 2009 - a figure which is still just "the tip of the iceberg", he said."

Yeah mate!! The tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip [x10,000,000] of the iceberg, actually.

By setting aside that sum as a loss they are pretty much admitting that they'll never be able to successfully sue the legal firms or the valuers.... and then calim via their insurance policies... and if they cannopt successfully sue, and the fsa semmingly cannot successfully prosecute either... is it really fraud... I think it is but if they can't prove it ?

[DiggerUK]

So, the spin machine starts to crank up a notch or two, or 5bn.

"We weren't stupid, we weren't greedy, we weren't reckless, we wuz robbed", sez Fred.

"It wasn't me who left the back door open", said Adam in a press release.

Now I know we all regard those in the city as crooks, but 5bn, come on, and the rest.

[RufflesTheGuineaPig]

Mortgage lenders may face further losses from fraud committed by criminal gangs who targeted the home loans market at the height of the boom, experts warned yesterday.

Or "martgage advisors" as they are more commonly known.

[Alibear]

The lenders were victims not of crooks, but of their own policy.

As they accepted applications from crooks, liars and fraudsters, and their own policy encouraged such applications, I don't think my accusation is at any legal risk.

Spot on.

Greed, quick profit and pass the risk on.

GMAC had a great online system that had automated valuations, and issue of a mortgage offer in minutes.

Of couse you could only use their "panel" of solicitors, but they were all desparate for deals to go through and complete as fast as possible.

GMAC then sold the risk on to B&B and others.

http://www.banking-business-review.com/new...o_from_gmac_rfc

Oh what mad bad days!!

[eric pebble]

Spot on.

Greed, quick profit and pass the risk on.

GMAC had a great online system that had automated valuations, and issue of a mortgage offer in minutes.

Of couse you could only use their "panel" of solicitors, but they were all desparate for deals to go through and complete as fast as possible.

GMAC then sold the risk on to B&B and others.

http://www.banking-business-review.com/new...o_from_gmac_rfc

Oh what mad bad days!!

But -- isn't it still going on? Without LIAR LOANS, how can ANY ftb "afford" a property?

[Alibear]

But -- isn't it still going on? Without LIAR LOANS, how can ANY ftb "afford" a property?

Yes - but now its a better "quality" of self cert applicants.

[Pindar]

Aaaah, neo-liberal economics at its finest. The building societies and banks were practically under orders to lend to criminal gangs with no checks whatsoever. Laundering drugs money is big business for the City.

[Guest happy?]

From today's FT:

Experts warn of further home loan fraud losses

While banks can access the Government/BOE bailout facilities, building societies who can't are going to be hit much harder as the decade's rampant mortgage fraud becomes apparent. The Nationwide seems to have hit its limit in taking over failing building societies so either the Government will have to step in directly, as it did with the Dunfermline, or we will start to see outright failures.

There's not much here to support your idea that the building societies will be hit harder than the banks. The Nationwide has always been conservative about its lending policies (something the banks should have done), that they refused to take on the debts of the Dunfermline shows they had a little bit more nous than Lloyds - perhaps they're a little better at due diligence than some of the 'big players'.

The article refers to the B&B which of course was a bank, as was Northern Rock.

[winkie]

Spot on Timm.

And I liked this bit:

"Since the start of last year, B&B has set aside £270.8m relating to losses from "hundreds of cases" of potentially fraudulent mortgage applications or professional negligence on property valuations.

Simon Bevan, national lead partner in charge of the fraud services unit at BDO Stoy Haywood, estimated that mortgage fraud cases had risen from £13.4m in 2008 to £197m in the first half of 2009 - a figure which is still just "the tip of the iceberg", he said."

Yeah mate!! The tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip of the tip [x10,000,000] of the iceberg, actually.

B&B = Bed and breakfast.

[interestrateripoff]

It appears we are being prepped for it was the fraud that caused this mess.

Again this raises the question about how much this has influenced house prices.

[Pindar]

It appears we are being prepped for it was the fraud that caused this mess.

Again this raises the question about how much this has influenced house prices.

House prices started rising by 10% a year since the US and an assortment of hangers-on went in to Afghanistan to restore the opium supply. The cash had to find its way somewhere and property was it.

[The Conveyancer]

Why are we not seeing high profile prosecutions of these fraudsters that is the big question.

The complexity of these transactions means surveyors and legals must have been involved in it!!

They go after the little old lady that lifts a joint of meat of the shelf in Tesco but to let these crooks get away with theft on this scale is horrendous.

The direction you need to be looking in is that of the brokers. There may have been some smaller amounts of fraud with solicitors and surveyors but a large percentage of brokers were at it.

I could see the liar loans coming in but there was nothing I could do. I cant give financial advice, we arent regulated by the FSA. Any idiot could tell that a hairdresser with six kids doesnt really earn enough to get a £200k interest only mortgage but it is not my job to investigate this. I guess I could have reported my suspicions to the bank but that would probably break client confidentiality and anyway the banks were fine with it.

[eric pebble]

The direction you need to be looking in is that of the brokers. There may have been some smaller amounts of fraud with solicitors and surveyors but a large percentage of brokers were at it.

I could see the liar loans coming in but there was nothing I could do. I cant give financial advice, we arent regulated by the FSA. Any idiot could tell that a hairdresser with six kids doesnt really earn enough to get a £200k interest only mortgage but it is not my job to investigate this. I guess I could have reported my suspicions to the bank but that would probably break client confidentiality and anyway the banks were fine with it.

And so -- here we are today.........

[eric pebble]

House prices started rising by 10% a year since the US and an assortment of hangers-on went in to Afghanistan to restore the opium supply. The cash had to find its way somewhere and property was it.

Blimey - that's an interesting theory....