National Fraud Authority

Fight against mortgage fraud results in £130m estimated savings

The National Fraud Authority (NFA) in a progress report published today calls on all organisations in the mortgage community to continue to combat mortgage fraud and ensure that they are ready to prevent this crime from returning to previous levels which may come with an economic upturn.

With nearly £144 billion (2) in mortgages loaned in the last year, this presents an attractive target for criminals. The NFA estimates that the annual value of mortgage fraud is £1 billion (3), and without continued cooperation, that figure could increase.

"Working Together to Stop Mortgage Fraud", is the NFA's second update report on the progress the mortgage community is making to address the threat this crime poses to the UK.

The NFA mortgage fraud report notes that significant progress has been made by public and private organisations involved in combating mortgage fraud in the past twelve months, but urges stronger joint efforts by both sectors to more effectively respond to new fraud threats. The report also highlights key issues and shows how the mortgage community is responding.

One of the key issues highlighted in the report is the difficulty lenders and intermediaries sometimes have in identifying fake and falsified documents within the mortgage application process. HM Revenue and Customs ran a pilot scheme to assist lenders and this helped to prevent attempted commercial frauds with an estimated total value of over £111 million (4).

The mortgage community is fighting fraud more effectively by targeting corrupt mortgage intermediaries, solicitors, licensed conveyancers and surveyors engaged in fraudulent activity. Investigations by the Solicitors Regulatory Authority (SRA) into solicitor involvement in mortgage and other property fraud have saved lenders between £15-20 million (5).

Land Registry's increased investment in its anti-fraud activities, including new staff, training, systems and processes to combat the threat, has resulted in preventing fraud attempts against properties valued at an estimated £20 million (6).

Law enforcement agencies are also increasingly engaging in mortgage fraud investigation. The City of London Police, which is the National Lead Force for fraud, is currently working on 15 (7) investigations into organised mortgage fraud worth millions of pounds, up from four in 2008, with a number of arrests in several cases.

A recent successful investigation resulted in prison sentences for four members of a criminal gang that used a firm of solicitors to con high street banks out of almost £8 million. Other forces across England and Wales, such as Nottinghamshire and Northamptonshire police, have also launched high-profile cases into mortgage fraud.

In order to improve the response to mortgage fraud and drive forward the reforms necessary to ensure the mortgage market is secure when economic growth returns the NFA and the Metropolitan Police have brought together all the key partners in the mortgage community to establish the Mortgage Fraud Forum.

The aims of the forum include:

• Making it much harder for criminals to commit mortgage fraud
• Tackling top mortgage fraudsters
• Increasing awareness of mortgage fraud and the damage it causes
• Making mortgage fraud a less attractive proposition to criminals
• Developing and maintaining an up-to-date understanding of the mortgage fraud threat

NFA CEO Bernard Herdan said: "In the economic downturn, there has been a reduction in the availability of products that were targets of fraud such as sub-prime, buy-to-let and self-certified mortgages. The economic climate also has increased pressure on lenders to reduce costs, so there has been a greater emphasis on fraud prevention, detection and recovery of losses. The NFA urges mortgage lenders to maintain this robust approach in the anticipated economic upswing.

"Combating mortgage fraud is a key priority of the NFA in our strategy to make the UK a more hostile environment for fraudsters. We are pleased that since we launched the National Fraud Strategy in March 2009, understanding of the mortgage fraud threat has improved and across the mortgage community there is more agreement about the reforms that are needed to combat it. We can only beat mortgage fraudsters if all organisations involved in the mortgage market, both public and private, work together."

The Attorney General, Baroness Scotland QC, who superintends the NFA said: "Tackling fraud, including mortgage fraud, is a priority for both Government and industry.

"Good progress has been made since the last report but there is still more to do. If we continue to work together much can and will be achieved. Retaining confidence and credibility in the mortgage industry is essential both for the economy and for those seeking to sell and buy property."

Head of the SRA's Fraud and Confidential Intelligence Bureau, Steve Wilmott, said: "We welcome the NFA's progress report and are pleased with the excellent progress made by all agencies in tackling those who have become involved in mortgage fraud. The increased resources the SRA has put in place, coupled with close working with other agencies, including major lenders, the police and other regulators, has undoubtedly contributed to the success over the past year in targeting
those intent on defrauding the public.

"The millions of pounds already saved by members of the Mortgage Fraud Forum is evidence that multi-agency working and information sharing helps us to take prompt action and discourage others from becoming involved. We therefore support the NFA's call for both public and private organisations in the mortgage community to be vigilant about potential increases in fraud and to work with us to address the threat of this multi-million pound crime."

Commissioner of the City of London Police, Mike Bowron said: "In the last 18 months there has been a significant increase in the number of mortgage fraud investigations, some of which run into many millions of pounds and stretch across the UK. Importantly, we have also achieved a significant rise in the number of arrests, charges and convictions.

"I would like to thank all of the public and private sector organisations who continue to work with us to bring these fraudsters to justice. It is through these partnerships we are creating a more secure mortgage system and helping raise awareness of the threat this crime poses to both lenders and borrowers."

-Ends-

Download a copy of the 2010 Mortgage Report: Working together to stop mortgage fraud. (pdf, 768kb)

To request a copy of the report or an interview, please contact the NFA:
Scott Swinton 020 3356 1034. scott.swinton@attorneygeneral.gsi.gov.uk
Orna Joseph 020 3356 1035, orna.joseph@attorneygeneral.gsi.gov.uk

Notes to Editors
1) The estimated £130 million in savings figure is derived from adding the amounts cited in the release from estimates provided by CML and SRA.
2) Council of Mortgage Lenders (CML). CML also states that there are 11 million mortgages in the UK, with loans worth over £1.2 trillion
3) National Fraud Indicator, National Fraud Authority (NFA), January 2010
4) CML provided figure based on information from lenders
5) Solicitors Regulatory Authority (SRA) www.sra.org.uk/news/mortgage-fraud
6) Land Registry
7) City of London Police

• The NFA, established in 2008 is the Government's strategic lead organisation on counter-fraud activity in the UK. It works with a range of stakeholders across the private, public and third sector. The Authority manages 15 priority areas which include improving data sharing between public and private organisations, mass marketing fraud, share sale and mortgage fraud, ID fraud and improving victim support.

• The NFA has launched Action Fraud, The UK's first national fraud reporting centre that provides a single point of contact for fraud victims where they can both report a fraud and seek guidance and advice.

• Action Fraud takes victim's reports of fraud, and provides them with the most up-to-date advice and guidance on getting support. Action Fraud is being rolled out across the UK and will be fully operational in all regions by spring 2010. The National Fraud Intelligence Bureau (NFIB) will receive confirmed fraud reports from Action Fraud. This partnership ensures collaboration on the detection, disruption, investigation and prosecution of fraudsters.

• If business operators or individuals have been a victim of fraud in the last 12 months and want to report a fraud, they are encouraged to call Action Fraud on 0300 123 2040, Textphone 0300 123 2050 or visit www.actionfraud.org.uk to get advice and guidance on protecting yourself from fraud. Online reporting will be available in March 2010. The call centre is open Monday to Friday 8am to 8pm, Saturday 9am to 6pm and Sunday 10am to 4pm. For general enquiries contact info@actionfraud.org.uk.