Mortgage application fraud on the rise

| July 14, 2009 | 0 Comments

Mortgage application fraud is increasing in response to today’s tight lending criteria.

The Council of Mortgage Lenders (CML) has reported a rise in the number of application forms containing false information, with income levels the commonest area for falsehood.

Applicants are also failing to disclose all existing financial commitments, such as credit card debt and personal loans.

According to the CML, recent signs that house prices have bottomed out are putting pressure on potential purchasers, some of whom are prepared to alter the facts to secure a loan.

The body, which represents the banks and building societies responsible for around 98% of all residential mortgage lending in the UK, doesn’t keep figures on mortgage fraud but has received anecdotal evidence of the trend from members.

Spokeswoman, Sarah Robson, comments: “Would-be borrowers who are cut out are trying to circumnavigate this. But lenders are vigilant to it, so they are picking it up.”

In addition to demanding substantial deposits, lenders have reduced the proportion of a borrower’s income that they are prepared to advance.

The average loan to income multiple for first-time buyers fell to 2.97 in May, down from 3.39 two years ago.

Homemovers have a similar story to tell with the average loan to income multiple down to 2.79, compared with 3.18 in the summer of 2007.

Those presenting untruthful application forms are likely to be caught out by the credit checks run by all lenders and therefore risk creating a problem with regard to future loan applications.

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