Oliver Shaw, who heads up the City of London Police’s Economic Crime Directorate, was quoted in the Financial Times today as having said the scheme could see a sharp rise in mortgage fraud.
The Financial Times reported Shaw as saying: “Mortgage fraud is definitely on my radar.
“We’ve seen fewer mortgage frauds recently because banks have been more careful about who they’re lending to but when Help to Buy goes live fully, that’s a huge vulnerability. We’re trying to change everyone’s mindset before it gets to the problem it was in 2009.”
But Ray Boulger, senior technical manager at John Charcol, said he didn’t see the rationale for such a claim.
“If anything the introduction of Help to Buy will have the opposite effect on mortgage fraud,” he said.
“Underwriting criteria gets stricter as the loan to value of a mortgage increases. If anything it’s harder to commit fraud at 95% LTV.
“If the fraud is linked to the value of the property then this is only easy to get away with when you have a lot of equity in the property.
“The high LTV lending that will be offered under Help to Buy won’t increase mortgage fraud. I don’t understand his logic at all.”
Michael Coogan, former CML director general and strategic adviser at Loans Warehouse, agreed and said that an increase in fraud cases, except for those associated with an increase in market size, was unlikely.
He said: “There are currently a number of high LTV products on the market and we have not seen any indication of an increase in fraudulent activity.
“Lenders have robust systems in place to protect themselves against fraud and there are a number of checks and balances in place to ensure the customers integrity.
“Both the regulator and lenders are aware of what needs to be done to ensure fraud remains under control.”
The CML also said it does not expect an increase in mortgage fraud cases.
Bernard Clarke, communications manager at the Council of Mortgage Lenders, said: “We do not anticipate that Help to Buy will result in an increase in fraud cases.
“Fraud has declined over the last six to seven years and we expect lenders to remain vigilant.
“An upturn in the market will not result in more fraud.”
Shaw’s quote has caused an uproar in the industry and the furore has resulted in Shaw clarifying his comments.
He said: “A continued improvement in the economy and the government’s Help to Buy scheme is likely to see an increase in the number of mortgage applications being made this year and next.
“This could be seen by organised criminals as a reason to revisit the industry and attempt to commit mortgage fraud.”
But the City of London Police was not prepared to elaborate when asked further questions about the criminal masterminds targeting the industry.
An adamant Shaw added: “To ensure we don’t return to where we were in 2009, it’s very important that lenders maintain the high level of scrutiny they have introduced in recent years and for the City of London Police’s National Fraud Intelligence Bureau to monitor this sector - keeping lenders informed of any evidence that they are being targeted anew.”
DCS Shaw also said that the City of London Police would be working to increase its detectives understanding of mortgage fraud.
He said: “We will be up-skilling investigators, using experience gained from the previous spike in mortgage fraud, to make sure the police service is capable of dealing effectively with any future problems, should these occur.”
