Tracking Fraud, Liars Loans and the Housing Market Darkside

[littledavesab]

Who watches the watchdog? FSA hikes bonuses by 40%. Despite their failure to spot the biggest bubble in the history of the UK housing market and the loose lending and fraud that went with it, the FSA were nicely rewarded last year.

 

I have heard a tale of staff being hired on temp contracts @ £4000 salary per month for 6-12 month period

 

Who is in a position to complain about the FSA bonuses? not the bankrupt banks, not the (moraly) bankrupt politicians and the rest of the financial industry - insurance companies want to keep their heads down

 

Although the Building Societies are complaining at the cost of funding the investors compensation scheme !

[jerpy]

From loose lending to no lending.

Irony is some people are actually celebrating when they check their deals. SVR's have come down, spoke to someone the other day that had 6.00% odd mortgage with Abbey, it's due to run out of it's fixed term. Their current S.V.R is 4.24%! You can imagine his relief.

[littledavesab]

THE FSA

 

http://www.guardian.co.uk/business/2009/ma...-mortgage-fraud

 

12 MAY 2009

 

Controversial "self-certification" mortgages – dubbed "liar loans" – may be banned after the Financial Services Authority revealed today that almost half of all Britain's new home loans at the height of the property boom were being granted without checks on earnings.

 

Jon Pain, the regulator's retail markets managing director, admitted that the FSA may have made a mistake in giving into the mortgage industry, which fought its proposals to tighten up the rules on self-certification loans.

 

 

 

http://www.fsa.gov.uk/pages/Library/Commun...9/0701_jp.shtml

 

 

Speech by Jon Pain, Managing Director, Retail Markets, FSA

Association of Finance Brokers,

1 July 2009

Good evening, it is a pleasure to be here at your annual dinner. I am particularly pleased to see so many of you engaging with your trade body and here this evening, because I know that trading conditions in the consumer credit market are pretty tough. The fact that you are here – and the work that the AFB is doing – shows clearly to me the desire your industry has in strengthening its reputation and putting forward the case for good, responsible second-charge lending.

 

Tonight I will say a few words about our mortgage market review and, while I do that, cover part of the story on the future regulation of secured lending. I say only part, because you will appreciate that the FSA is not the one that makes the decisions on how secured lending is regulated. I will also update you on our views of payment protection insurance and our approach to conduct risk.

 

But first it would be odd if I didn’t comment on the hurricane of a financial crisis we have just been through – the most significant post war crisis – how we have responded, and what this will mean for the future of regulation in the UK. I leave aside for now the European debate in which we are heavily engaged, as that’s a debate in itself.

 

Much of our early effort was focused on restoring confidence in the financial system, rocked to its foundations by what, in retrospect, were serious mistakes by financial institutions, governments, central banks and regulators, including the FSA.

 

We have subsequently played a leading role in helping shape the debate (through the Turner Review) on how the regulatory framework should be strengthened, and in some areas rebuilt, to avoid the likelihood of this financial crisis ever reoccurring. But though confidence is vital to the banking system, as a whole we needed to do more.

 

We have also needed to take a number of specific actions. Firstly, working with the Tripartite, we have strengthened both specific institutions and the financial system as a whole, through bank recapitalisation and asset-protection schemes. And critical to the effective operation of the markets has been the additional central bank and Treasury funding schemes. Addressing the capital position is essential, but as you’ll appreciate, ensuring that adequate funding is available in the market is equally important.

 

Back to top

 

Secondly, where market-based solutions were not available – and again working with the Tripartite – we have sought solutions to ensure retail and wholesale depositors are protected, as in the case of Bradford & Bingley, Dunfermline Building Society and London Scottish Bank. More recently we have, alongside Treasury, developed an alternative capital instrument for the mutual building society sector – which in the case of West Bromwich Building Society allowed for the conversion of sub-debt capital into core capital, providing much needed core capital to the firm. I believe this is a strategically important solution, as it provides potential new core capital for the sector as a whole, helping to support and sustain a vibrant mutual sector going forward.

 

An essential element of these interventions has been a far more comprehensive stress-testing regime of the firms we regulate, to test the capital adequacy under extreme scenarios. Ongoing and in-depth stress testing is at the heart of our regulatory approach. This is a clear example of the radical change in our approach to a more intrusive style of supervision, supported by a more robust and visible deterrence regime.

 

But ultimately, good regulation requires good people, so we have dramatically increased the number and quality of our supervisory staff and significantly increased the intensity of our supervision. We have:

 

increased the total number of supervisory staff by 33% (from 526 to 703);

 

expanded our Prudential Risk division, which provides specialist expertise on prudential risks and has particular expertise in assessing complex models used in all risk categories;

 

set up a specialist conduct risk division of 80 people to focus attention at the ‘coal face’ and literally test whether what senior management say is happening on the front line is true through, for example, mystery shopping, call monitoring and file reviews;

and

introduced a new comprehensive T&C regime for new and existing staff, which involves more testing and a robust assessment of our front-line supervisors.

 

And this more intrusive approach is already supported by a more credible deterrence regime. In 2008/09 we:

 

imposed financial penalties of £27.3m up from £4.4m the year before;

 

prohibited a record number of 58 individuals from industry for unacceptable conduct; and

secured two convictions and a custodial sentence in our first criminal prosecution for insider trading.

We will continue to pursue this approach as part of our commitment to restore confidence in financial markets, to protect consumers and reduce financial crime.

 

So firms should expect and indeed welcome a more intrusive style of regulation, especially well-run companies. One further example has been our recent discussions on remuneration. In the past, remuneration policies have all too often not been integrated with risk management and risk appetite for firms. We have already commenced on a radically changed approach and will be making further changes in this area later in the year, which I encourage you to look out for. I believe it is important to learn lessons now from possible weaknesses in remuneration policy and practice, before things get better and memories fade. It’s clear society at large expects a step change in this area.

 

Back to top

 

Mortgage market review

Let me now turn to comment on the issues closer to home for this audience – our plans for the Mortgage Market Review. It would be easy to say this looks like we are fighting yesterday’s battle and whilst I accept it is futile to attempt to rewrite history, we’re doing this because it is clear that developments in the housing and mortgage markets played a significant role in the origins of what has been the worst global financial crisis for at least 70 years.

 

Rapid growth of mortgage credit drove a house-price boom that turned to bust. New sources of funding were created that rapidly dried up when confidence disappeared. And confidence was undermined by lending to uncreditworthy customers, with a build-up of riskier practices, such as subprime lending, self-certified mortgages and new segments of the mortgage market, such as buy-to-let.

 

Our comprehensive Mortgage Market Review will look at the whole market, from lenders through to consumers’ perspectives. We will take the time to fully understand what worked well for consumers and what didn’t, and explore all of the available options for putting things right – setting out our views and proposals in a Discussion Paper to be published in the autumn.

 

The aims of our review are to have a mortgage market that is sustainable for all participants (consumers, intermediaries, lenders and investors) and to have a flexible market that works for consumers. As part of the review we will look at a number of issues:

 

responsible lending and funding issues;

distribution and advice;

extending the approved persons’ regime;

excessive charging and price regulation;

disclosure and changing consumer behavior; and

arrears and repossessions.

So far, our consideration of issues has also highlighted the relevance of looking beyond the first-charge market. I will explain why.

 

To achieve a sustainable market that works better for consumers we are going to need more responsible lending, with proper consideration of overall affordability and a reduction in the risk of the mortgage being inappropriate for the consumer.

 

We know the reason some consumers fall into arrears is because of the overall level of debt secured against their home, including second charges. In order to truly keep sight of affordability, responsible lending and overall indebtedness, we are asking whether we need to consider extending our regulation to these markets.

 

Some countries whose mortgage markets appear to have more successfully navigated the financial crisis have lending thresholds in place, limiting the amount a person can borrow through explicit caps on LTV or LTI. Some have suggested they could work well here.

 

Whilst we have an open mind on lending caps, I do believe personally that comprehensive and effective affordability measures have a key role to play. By that I mean measures that do more than look superficially at income and expenditure. And we know that for any lending thresholds to be an effective consumer protection measure, they need to have full consideration of the whole borrowing commitment to ensure there is no doubt as to whether a mortgage is sustainable in the long term.

 

But these measures, such as lending thresholds, affordability assessments and other measures to ensure responsible lending, can easily be circumvented if consumers have unrestrained access to alternative secured-credit borrowing.

 

So, as part of the review, we will consider whether FSA regulation should be extended to cover second charges. Because ensuring consumers are suitability protected – not over leveraged – might be better achieved if we had mortgage regulation covering first and second-charge mortgages on a consumer’s home.

 

I did note with particular interest the white paper the AFB published last year, looking at options for future regulation, which began a member consultation that came out in favour of second-charge lending by the FSA. It is not often we have firms asking to be regulated by us!

 

But I should make it clear that the decision on whether we will be able to regulate second charges is down to the government, who set the scope of our regulation.

 

So where does that leave us? The government has said it will keep the regulatory framework under review and is keeping in mind the forthcoming European directive, which is unlikely to distinguish between first and second-charge lending. We expect the imminent Discussion Paper from the government on financial services will give more detail on its thinking.

 

In the meantime, we continue to work with and support the work of the Office of Fair Trading (OFT), not least because there is much we can work on together in addressing responsible lending, affordability and the overlap of our responsibilities and interests in the mortgage market.

 

In summary, I can see clear benefits from the FSA seizing the opportunity to fundamentally review the mortgage market, so that when things pick up, we help shape an environment in which consumers can enjoy the benefits of a vibrant market without being exposed to unnecessary risks, with a stronger, more sustainable industry, with better controls of the risks involved in all mortgage lending.

 

Back to top

 

Payment protection insurance

I would now like to offer the FSA’s perspective and approach to problems in the payment protection insurance (PPI) market. I know many of you are active in this market. As you are well aware, we have taken a keen interest in PPI since we began regulating the conduct of general insurance business in January 2005.

 

I can hear some of the audience yawning already, so it’s evident this issue has taken too long to resolve, but frankly it’s also abundantly clear that many providers and distributors knew long ago the issues that need to be resolved, but did little about it.

 

Let me say at the outset, we recognise that PPI can play an important and legitimate role for consumers, especially during these difficult times. But our regulatory focus has been and remains on how this product has been sold and whether consumers have been fairly treated when purchasing it.

 

The primary aims of our work are:

 

to push firms to improve their sales standards;

to limit consumer detriment from inappropriate sales and ensure consumer detriment is redressed; and

to ensure that consumers are well informed and able to make better purchasing decisions.

In doing this, we have set out five outcomes we expect firms to deliver. They are:

 

that firms should ensure their consumers are told that PPI is optional, where this is the case;

that consumers are given clear information about the product and what it will cost;

that consumers are given the assistance they need to be clear about what they are eligible for under the policy and what the main exclusions are;

where advice is given, the consumer must be recommended a policy that meets their needs; and

consumers must be offered a fair refund if they cancel their policy.

It is clear that this hasn’t always been the case. We have published 20 enforcement cases addressing PPI failings and requiring redress for consumers who suffered detriment. This includes one of our largest ever fines – £7m against Alliance & Leicester (A&L) last October.

 

The poor sales practices we have identified increase the risk of unacceptable outcomes for consumers purchasing PPI policies. We have found instances where a customer may be ineligible to make a claim on a policy they purchased and where they were not provided with adequate information to help them understand that, in single premium sales, they would be paying interest on their extra borrowing. Firms must do considerably better in order to ensure that consumers are not poorly treated.

 

It’s clear that the more complex single premium PPI sold with unsecured personal loansmarket sector was where most risk for consumer detriment arose. We indicated and endorsed the move by the market to withdraw that particular product. Let me stress again that we welcome a well sold, monthly variant that is inherently less complex PPI product.

 

And others have taken an interest too. We support the Competition Commission’s inquiry and the package of remedies it set out earlier this year, where it concluded that businesses that offer PPI alongside credit face little or no competition when selling PPI to their credit customers. We believe that they will deliver a positive improvement for consumers by offering a fairer and more competitive PPI market.

 

Our regulatory approach complements the work of the Commission. Our goal has always been to ensure that the combination of our work on sales conduct and the commission’s work on competition would lead to lasting improvements in consumer outcomes in PPI markets.

 

We will continue to work closely with the commission and with the OFT to ensure that our respective regulatory intervention and oversight is effective, proportionate and coherent.

 

Meanwhile, we will work with the industry to address any the remaining past selling issues and issue guidance on more effective complaint resolution shortly.

 

Close

So, in summary there is much still to do to ensure that consumers get the right outcomes when they are sold PPI. We will continue to take action where necessary and we encourage all firms to meet the standards we have set out.

 

And on the future regulation of your main line of business, the government is clearly thinking about whether to extend the scope of FSA’s regulation of mortgages. We are also considering this as part of our work on the mortgage market review, and you should expect action soon.

 

Finally, I recognise that many in society feel let down by the regulatory system and the regulator. At the FSA we have tried to be open and honest about the past shortcomings of the regulatory system. We have set out to lay the foundations of a more effective and better regime for the future. I believe we have made significant progress in extremely difficult conditions in pursuit of these goals. I also hope we have begun the process of rebuilding confidence in the system and the regulator by demonstrating we are an organisation that can learn and that we have the ability to change radically. It was that very clear commitment to change which encouraged me to join the FSA some nine months ago – I firmly believe the FSA will rise to the increasing challenges demanded by all.

 

But you all have a role to play in learning and acting upon lessons this crisis has burnt in all our memories. The impact has been very real and tangible on many in society and the real economy, and if we collectively don’t heed to the siren call for change, we will be failing the expectations of society.

 

Thank you.

[No6]

I think I missed this.

 

Nine arrested in £40m mortgage fraud inquiry

 

Wednesday 11 March 2009

 

Nine people were being questioned yesterday by police investigating a multimillion pound buy-to-let mortgage fraud against one of Britain's best-known high street lenders. Detectives arrested the nine yesterday on suspicion of a £40m fraud against the Bradford and Bingley bank in a case which sources say is the tip of the iceberg in a mortgage market riddled with toxic debt.

 

Specialist detectives in the City of London are receiving reports of similar mortgage frauds against banks and building societies daily, following the collapse of the property market.

 

=======================

 

Detective Superintendent Bob Wishart, of City of London police, said: "We know that fraud has the potential to impact on local communities and we are determined not only to work with colleagues across the UK to investigate such frauds, but to liaise with other agencies to mitigate that impact on innocent people affected by the criminal greed of others.

 

"We have worked closely with the local police in Sussex and with the owners of the properties involved to minimise the impact of our investigation on local communities and on tenants."

 

The raids come at a time of growing fears over the vast scale of mortgage frauds being uncovered as the recession bites. Senior police officers are so concerned that forces across the country have been sent a secret intelligence report on the issue. It suggests that organised criminals have exploited the mortgage market with ease to launder criminal profits.

 

http://www.guardian.co.uk/money/2009/mar/1...bradfordbingley

 

Bradford & Bingley, Britain's largest buy-to-let lender, plunged to a £26.7m loss in the first half of the year after it suffered a steep rise in mortgage arrears and fraud.

 

========================

 

Mortgage fraud increased dramatically over the period and an £18m provision was needed to cover liabilities, pushing the lender's credit impairment charges for the six months up to £74.6m from £5.3m in the same period last year.

 

The company said the jump in fraud was in line with industry trends and the lender was not being targeted any more than its rivals.

 

Kent said most of the scams uncovered in the last six months related to the activities of mortgage professionals and had come to light as a result of falling house prices. He said about half of the cases under investigation involved estate agents, surveyors and other professionals, sometimes in league with buyers, artificially inflating the price of homes and thus agents' fees. The alleged culprits were being pursued by the police and the regulator.

 

http://www.guardian.co.uk/business/2008/au...y.housingmarket

[No6]

A little old, but worth posting.

 

Mortgage fraud 'booming in the UK'

 

Thursday, 27 Nov 2008 14:04

 

Mortgage fraud in the UK is booming as police fail to take it seriously or pursue criminals, the head of a new agency to fight the crime has revealed.

 

The National Fraud Strategic Authority (NFSA) has been established to co-ordinate the fight against mortgage fraud – with measures in place to capture the true value of new-build properties, to verify the true income of borrowers, and for lenders to report suspicious mortgage brokers.

 

However, Sandra Quinn, NFSA interim chief executive, explained to myfinances.co.uk the UK is boom town for mortgage fraud.

 

Ms Quinn explained much of the problem has stemmed from the UK not treating fraud as a serious crime.

 

"Fraud is not a priority in the UK. It is often not reported. That is what we have got to change.

 

"Some lenders report cases to the police, but for law enforcers it is not a priority and police say they will not pursue the criminals.

 

http://www.myfinances.co.uk/news/mortgages...036;1251634.htm

 

30 July 2008

 

Fraud wasn’t just in the system, it was the system

 

Mortgage fraud looks something like the new black on this side of the Atlantic too. So far, this year, the FSA has banned 17 brokers, with another 24 in the pipeline. Last year, there were just six bans; the year before, only two. These cases, we are told, are just the tip of the iceberg. A recent police report, which skillfully managed to link this year’s black with last year’s to strike fear into the heart of Middle England, not only hinted that mortgage fraud was funding terrorism, but dared to estimate an annual cost… £700m a year.

 

So, here’s the thing. If mortgage fraud has been costing £700m a year, why – when I’m told by friends in the industry that brokers have been negligently under-regulated for at least a decade, and when self-certification loans were known as liar loans as far back as 2006 and were an affront to common sense much earlier than that – why were only two brokers banned in 2006? Why, in America, did the US banks report just 16,000 suspected cases of mortgage fraud in 2006, compared to 53,000 in 2007? Why were the lenders and the brokers pushing the liar loans in the first place? Can we really blame 'Toto', the Kentucky mother-and-son gang, or the other 406 US fraudsters for the collapse of the mortgage industry?

 

The elephant in the room is that – while mortgage fraud comes in many forms, from over-optimistic purchasers ordering fake pay stubs online to organised gangs systematically building, over-valuing, pushing new-builds – the common factor is the lender. And while property prices were rising, and before they realised just how seriously they’d overcooked the books, the lenders were pretty happy to lend on a nod and a wink, at high interest rates to those with low income or poor credit histories, and via brokers they must have known were in the volume game.

 

The fraud wasn’t just in the system, it was the system.

 

http://www.citywire.co.uk/personal/-/comme....aspx?ID=309642

[drbubb]

THE FSA

 

http://www.guardian.co.uk/business/2009/ma...-mortgage-fraud

12 MAY 2009

Controversial "self-certification" mortgages – dubbed "liar loans" – may be banned after the Financial Services Authority revealed today that almost half of all Britain's new home loans at the height of the property boom were being granted without checks on earnings.

 

Jon Pain, the regulator's retail markets managing director, admitted that the FSA may have made a mistake in giving into the mortgage industry, which fought its proposals to tighten up the rules on self-certification loans.

 

Door open. Horse bolted.

Shall we close it now?

I think the FSA FAILED, and its management should be replaced, along with that of the banks

 

Any FSA Fool, could and should have seen the problem.

All they need to do was to tune into this website, and myriad others

 

Fire the fools, and let them be happy they can keep their pension

(but invest them in Gilts, so they can feel "gilty" for their miss.)

[id5]

...

Fire the fools, and let them be happy they can keep their pension

(but invest them in Gilts, so they can feel "gilty" for their miss.)

I do like the idea of ALL civil service inc MP's, councillors, council workers, etc pensions to be held solely in gilts. That should help to polarise all of them into doing the best for the country

[jerpy]

Door open. Horse bolted.

Shall we close it now?

I think the FSA FAILED, and its management should be replaced, along with that of the banks

 

Any FSA Fool, could and should have seen the problem.

All they need to do was to tune into this website, and myriad others

 

Fire the fools, and let them be happy they can keep their pension

(but invest them in Gilts, so they can feel "gilty" for their miss.)

 

Horse bolted theme, this was really in relation to bonus payments but even Sophie had him squirming!

 

SOPHIE RAWORTH:

 

It's still very difficult for consumers, for customers though, isn't it?

 

HECTOR SANTS:

 

Very, very difficult. And of course the other of our key tasks is to make sure that consumers are treated fairly during these very difficult times when undoubtedly a number of them are under acute pressures.

 

SOPHIE RAWORTH:

 

Are you looking after consumers enough when it comes to mortgage arrears? You've been criticised for, what are the words, "leisurely approach" to you know people who've been charged £60 a month because they can't actually keep up with their mortgage repayments.

 

HECTOR SANTS:

 

Well, look, in a crisis like this, you can arguably never do enough. There are always consumers out there who are suffering pressures and they rightly expect the regulator to look after their interests.

 

We are doing our very, very best. We have more enforcement cases in the pipeline on that particular point and you can expect to see tougher action from us in the future.

 

We also, which I think is more important, have a fundamental review of the mortgage market under way, which will be coming out in the autumn.

 

SOPHIE RAWORTH:

 

But I mean a "leisurely approach", that's what they're saying. That's not what the customers and consumers need at this time, is it?

 

HECTOR SANTS:

 

Well we don't see it as a leisurely approach. That was obviously a comment from politicians. As I say, in difficult times there are always going to be issues. And of course enforcement process necessarily is and can at times I think be a frustratingly slow process from the perception of the consumers because enforcement processes have to be of a quasi-legalistic nature that take into account the importance of treating everybody fairly.

 

But there are more enforcement cases in the pipeline and people should be under no illusion. We take this matter extremely seriously and we understand the importance of addressing these issues as quickly as we can.

 

 

http://news.bbc.co.uk/1/hi/programmes/andr...how/8192105.stm

[No6]

This is about a month old, but it would seem that now the banks have tightened up on loose lending, the desire to commit fraud continues.

 

Lenders report rise in mortgage application fraud

 

Monday, 13 July 2009

 

Lenders are reporting a rise in mortgage application fraud as consumers try to get around their tight lending criteria, a trade body said today.

 

The Council of Mortgage Lenders said its members had seen an increase in the number of people entering false details on application forms, particularly inflating the level of their income.

 

The problem has been exacerbated by a rush of buyers hoping to take advantage of recent house price falls to get on to or trade up the property ladder.

 

The increased demand for mortgages, at a time when funding remains in short supply, has left lenders increasingly favouring borrowers with large deposits or high credit scores.

 

Sarah Robson, a spokeswoman for the CML, said: "We don't keep figures on mortgage fraud but from anecdotal evidence we do know that it has increased.

 

"That is to be expected as lenders' criteria has tightened and would-be borrowers who are cut out are trying to circumnavigate this. But lenders are vigilant to it, so they are picking it up."

 

One of the ways in which lenders have tightened their criteria is by reducing the proportion of a borrower's income that they are prepared to advance.

 

http://www.independent.co.uk/money/mortgag...ud-1744407.html

[No6]

July 13, 2009

 

Mortgage lenders report fraud on the rise

 

The Council of Mortgage Lenders (CML) told The Times that its members had reported the increase in the face of scarce loans and stricter lending rules.

 

Sue Anderson, of the CML, said: “This is to do with fewer mortgage products, tighter criteria and an increase in demand. Lenders have become a lot more vigilant.”

 

Abbey, one of Britain’s biggest mortgage lenders, said: “There has been an increase in fraud across the board as a result of borrowers finding themselves in more difficult financial circumstances. There are particularly more instances of borrowers giving wrong salary details.”

Related Links

 

Examples of mortgage-application fraud include the failure to declare a credit card balance or car loan that would affect the assessment of applicant’s ability to afford the loan.

 

http://business.timesonline.co.uk/tol/busi...icle6695319.ece

[No6]

BBC had another programme yesterday which mainly focussed on mortgage fraud (on listen again for the next 6 days).

 

The Fraud Capital of Britain

 

Thamesmead was one of the most exciting new towns to be built in the 1960s, intended as a vibrant, riverside community of 60,000 people in south east London. Forty years on, the area is perhaps best known as a notorious hub of fraud, dubbed 'Little Lagos' because of its association with west African criminal gangs.

 

http://www.bbc.co.uk/programmes/b00lyfr8

 

August 19, 2007

 

Home loans fraud hits UK

 

BRITISH lenders are set to lose millions of pounds on fraudulent mortgages, many of them sub-prime, in the first sign that the home-loan crisis in America could be echoed in the UK.

 

Four mortgage firms could see an estimated £40m wiped out after lending to bogus borrowers on off-plan apartments in Thamesmead, south London, built by Persimmon, the listed property company.

 

The firms involved are believed to be Alliance & Leicester, one of the country’s top ten lenders; GMAC-RFC, part of the American giant; Platform, the sub-prime arm of Britannia building society; and Rooftop, part of Bear Stearns, which has already been hit hard by the failure of two of its hedge funds.

 

The Metropolitan Police is investigating the fraud and has made 11 arrests, but the lenders do not expect to get all their money back.

 

Alliance & Leicester (A&L) has since reined in its lending on all new-build developments across Britain amid fears that the fraud could be the tip of the iceberg.

 

http://business.timesonline.co.uk/tol/busi...icle2283035.ece

[No6]

Mortgage fraud bill proposed by Santa Clara County prosecutors close to becoming law

 

Santa Clara County prosecutors are hoping they will soon have a new tool that allows them to put crooked mortgage brokers out of business more efficiently.

 

Prosecutors are awaiting a signature from Gov. Arnold Schwarzenegger on a bill that will make it easier to obtain financial documents of mortgage brokers and lenders to determine if fraud has been committed. The legislation, SB 239, sailed through the Legislature with unanimous votes in both houses and could be approved by the governor in the next few weeks.

 

====================

 

"We're not going to be putting a demand on prison beds," Fitzsimmons said. "Defendants usually don't get prison. They get county jail time unless there are multiple counts or they are a repeat offender."

 

If the bill reaches the governor's desk by Friday as expected, he will have 12 days to make a decision.

 

Other states that have recently adopted dedicated felony mortgage fraud statutes with similar wording include Georgia, Arizona, Nevada, North Carolina and Florida.

 

In one of the larger mortgage broker scams prosecuted by the Santa Clara County District Attorney's Office, a San Jose couple received hefty prison sentences in May for running a scheme that involved lying to five banks about borrowers' ability to repay $8 million in subprime loans and lying to borrowers about the terms of the loans.

 

Prosecutors accused Esperanza Valverde and Herman Covarrubias, who operated Summit Mortgage One of Milpitas, of obtaining loans for 22 clients by supplying lenders with false tax returns, W-2 statements, pay stubs and employment verification letters. They both received prison sentences of about 20 years.

 

"Mortgage fraud is one of the linchpins in the demise of the California real estate market and the related crises in the financial sectors," Santa Clara County District Attorney Dolores Carr said in a statement. "It is critical that something is done to assist law enforcement in handling the flood of mortgage fraud offenses that we continue to receive."

 

In typical cases of mortgage fraud, crooked brokers falsify loan documents by inflating a client's income by as much as 250 percent, manufacture bogus bank statements that show tens of thousands of dollars for deposits, and falsify employer information, Fitzsimmons said.

 

"Frequently we come across cases in which mortgage brokers have borrowers sign blank applications and fill them in later as they see fit in order to grease the skids and facilitate getting their commissions and fees," Fitzsimmons said. "It's only a year or two when mortgages adjust and everything hits the fan when a borrower comes to us."

 

http://www.mercurynews.com/valley/ci_13210057

[No6]

19 August 2009

 

The Financial Services Authority (FSA) has banned a London mortgage broker, Grace Nmadibechi Ada Ukala, and fined her £70,000 for knowingly submitting false and misleading mortgage applications.

 

-------------------------

 

Margaret Cole, FSA director of enforcement, said:

 

"This fine, which would have been £100,000 had Ukala not settled early, is aimed at deterring approved persons from getting involved in mortgage fraud. Her earnings, as stated in the mortgage applications, were considerably higher than the income she declared to HMRC. By knowingly submitting false and misleading mortgage applications, Ukala acted in a totally unacceptable fashion.

 

"Our work on mortgage fraud continues as a priority in our campaign against financial crime. We have banned more than 60 mortgage brokers over the last three years and we will continue to ban such people to reinforce the message that knowingly giving false and misleading information is dishonest and poses a serious risk to prospective lenders. We will continue to ban individuals who demonstrate a lack of integrity."

 

http://www.fsa.gov.uk/pages/Library/Commun.../2009/109.shtml

[No6]

3 August 2009

 

The Financial Services Authority (FSA) has banned Cornwall mortgage broker Stephen Sanders for submitting at least three mortgage applications on behalf of customers which he knew contained false and misleading income information.

 

For the first customer mortgage application, the income as stated in the mortgage application, was substantively higher that that declared by the customer to HMRC. In the second mortgage application the income stated in a mortgage application included some of the income of the customer’s parents which was falsely described as his own. And in the third case there were discrepancies in the application about the income sources of the two customers who were making a joint application.

 

http://www.fsa.gov.uk/pages/Library/Commun.../2009/106.shtml

[No6]

04 August 2009

 

The Financial Services Authority (FSA) has banned Newcastle Home Loans (NHL), a mortgage broker based in Newcastle, from carrying out regulated mortgage activities.

 

The FSA worked closely with Northumbria Police and the Solicitors Regulation Authority (SRA) in this investigation which involved a significant number of individuals across a range of financial, property and legal businesses in the Newcastle area.

 

The ban of NHL was the final part of the FSA’s action in relation to NHL and connected individuals. Earlier this year the FSA fined NHL £170,000 for submitting false information in mortgage applications and for allowing David Purdie to act as its chief executive without FSA approval. NHL failed to pay this fine. The FSA has also banned NHL’s directors Linda Patterson and Grace Darling Purdie, and fined Mrs Purdie £85,000. Other individuals involved have also been banned - David Purdie, the shadow CEO, and mortgage introducers Michael Foster and Kenneth Robinson.

 

NHL was used by its principals and by the mortgage introducers knowingly to submit mortgage applications to a lender which contained false information. This resulted in the lender unsuspectingly advancing sums which, in some cases, were considerably higher than the purchase price of the property.

 

Margaret Cole, FSA director of enforcement, said:

 

“The failures at NHL were serious, deliberate and occurred as a matter of routine. Its principals acted in a totally unacceptable fashion and their actions and the actions of those connected to the firm posed a serious risk to the lender and to market confidence generally.

 

http://www.fsa.gov.uk/pages/Library/Commun.../2009/107.shtml

[No6]

Here we go, put two and two together and join the dots.

 

Huge increase in mortgage fraud, report police

 

With Bradford & Bingley and Chelsea Building Society recently hit by criminal gangs, police estimate that mortgage fraud is now 'one of the biggest areas of investigation'

 

----------------------------

 

Detective chief superintendent Steve Head, the chief of the City of London's economic crime directorate, said mortgage fraud "was happening all over the country" and "has jumped from nothing 18 months ago to being one of the biggest areas of investigation".

 

Head said he expected the number of investigations to rise, though lenders were being slow to report cases to his unit, which has taken the lead in tackling financial crime since 2003.

 

"While the amounts of money we are dealing with are significant, I don't think we are seeing the full picture. It is a fraction of the amount of fraud that has taken place. It is the mortgage lenders that are hit by the crime and they usually see it first. It would be good if the lenders were coming forward more than they are at the moment." Most of his work centres on potentially fraudulent mortgage applications or professional negligence on property valuations driven by a booming property market.

 

http://www.guardian.co.uk/business/2009/au...-fraud-increase

 

Mortgage fraud: how lenders have been caught out

 

Buy-to-let has been particularly susceptible. With the collusion of lawyers and valuers, prices were inflated to borrow large amounts from banks and operate what BDO fraud partner Simon Bevan called a "pyramid scheme".

 

"As long as prices were rising, the fraud could remain hidden," he said.

 

http://www.telegraph.co.uk/finance/newsbys...caught-out.html

 

Ironic that the copper's name investigating it is Steve Head. He says that there was virtually no mortgage fraud 18 months ago, he must have had his head in the sand then, because it has been going on big time since at least 2000.

 

Put the mortgage fraud with the report below.

 

Last week, however, that all seemed years away as evidence grew that mortgage lenders were slowly opening the vaults again. Gross mortgage lending totalled an estimated £16bn in July, a 26% rise on the previous month, though 36% down on the previous year. The number of mortgage approvals, now 47,500, is 20,000 higher than the depths of the crash last November, though, again, still 50,000 shy of peak figures.

 

So is that it? Will normal service be resumed? "I would love to think we are past the housing crash but realistically I don't think the recovery will be strong," says Shelter's housing policy expert, Caroline Davey. "Unemployment is going up, repossessions are still high. At some point interest rates, which are currently acting as a protective measure, will go up. Those in mortgage arrears are rising and are already high. Look at social housing waiting lists. They are rising. In the private rented sector, people are experiencing real difficulties. Even in a macro-economic context, it's too optimistic to the call the end of the crash."

 

Fears of a second leg to the housing slump should not be underestimated, she says. There are 270,400 mortgage loans in arrears of three months or more, equivalent to 2.43% of all home loans and up 117,700 on the previous year, according to the Council of Mortgage Lenders. Repossessions are being kept to a minimum as the government presses banks to avoid them, as a quid pro quo for the £1.2tn taxpayer bailout. Nevertheless, they are still rising and further increases in unemployment could spark forced sales, dampening any recovery.

 

http://www.guardian.co.uk/business/2009/au...arket-recession

What's the betting that many of these were self-cert fraud borrowers?

[No6]

FSA finally doing its job?

 

Mortgage affordability test plan

 

Borrowers face a mortgage affordability test from lenders amid plans by the Financial Services Authority (FSA) to step up the regulation of home loans.

 

Self-certification mortgages will be banned under the proposals with lenders required to verify borrowers' incomes.

 

FSA chief executive Hector Sants said that some people who were able to get home loans in the boom would no longer be able to under the proposed rules.

 

The industry will have until 30 January 2010 to comment on the plans.

 

=======================

 

Ban plan

 

The most striking proposal is the ban on self-certification mortgages - the type with which customers do not have to prove their income.

 

When the FSA first took over the regulation of mortgage selling in October 2004, it proposed that borrowers who were not self-employed should not be allowed to self-certify their incomes. The mortgage industry lobbied against that idea and the FSA relented.

 

http://news.bbc.co.uk/1/hi/business/8313853.stm

[No6]

Save this one for history.

 

From:

[GTG]

Save this one for history.

 

From:

 

Reminds me of the Glass-Steagal act in the US inacted after the 1929 bubble but repealed by "I did not have sex with that woman", under pressure by the financial services industry and the rest of the "hangers on" who stood to benefit from it.

 

I find it odd that the UK government have not changed the name of the regulatory authority as has been the practice in the past when the authority has been seriously lacking -(read pension/endowment miss-selling). A cosmetic change to convince investors that all is well again, the predessors of the FSA that I know of:- SIB (securities and investment board) and the PFA (Personal Finance Authority).

[No6]

Reminds me of the Glass-Steagal act in the US inacted after the 1929 bubble but repealed by "I did not have sex with that woman", under pressure by the financial services industry and the rest of the "hangers on" who stood to benefit from it.

 

I find it odd that the UK government have not changed the name of the regulatory authority as has been the practice in the past when the authority has been seriously lacking -(read pension/endowment miss-selling). A cosmetic change to convince investors that all is well again, the predessors of the FSA that I know of:- SIB (securities and investment board) and the PFA (Personal Finance Authority).

 

He forgot to say that he didn't see it coming.

 

 

[GTG]

He forgot to say that he didn't see it coming.

was that in Monika's testimony?

[No6]

Available for the next 7 days.

 

Michael Buerk interviews people who have made life-altering decisions and talks them through the whole process, from the original dilemma to living with the consequences.

 

Michael talks to former banking executive Paul Moore about his choice to blow the whistle on HBOS.

 

http://www.bbc.co.uk/programmes/b00nk2c2

[littledavesab]

FSA website can tell you all about naughty mortgage brokers

 

http://www.fsa.gov.uk/pages/search/index.s...an+mortgate#966

 

= those mortgage brokers fined and banned for bad practice !!

 

 

+ What about GMAC !!

 

http://uk.news.yahoo.com/22/20091029/tbs-uk-fsa-03c9bed.html

[No6]

High-risk mortgage lending rapped

 

Some specialist mortgage lenders have been so reckless that 30% to 60% of their borrowers are now in arrears, the main City regulator has said.

 

===================

 

"Increasingly, I also have the feeling that regulators see lenders and intermediaries as the sweetshop owners - or worse, the drug-dealers at the school gates - of the mortgage market, enticing innocent consumers in and then getting them hooked, for their own evil profit-driven purposes," said the CML chairman Matthew Wyles.

 

Risky strategies

 

Last month, the FSA launched a consultation on its plans for stiffer regulation of mortgage lending.

 

Its key proposals were that so-called self-certification mortgages should be banned altogether, and that all mortgage applicants should face much tougher scrutiny of their ability to repay their home loans.

 

Mr Pain said some banks and building societies had lent recklessly, which was now reflected in high arrears levels.

 

But he said the worst offenders were the specialist "non-banks" who had taken 20% of the mortgage market by 2008.

 

http://news.bbc.co.uk/1/hi/business/8359159.stm

[No6]

Seems more appropriate in this section.

 

Apprentice contestant Christopher Farrell admits fraud

 

A former contestant on BBC's The Apprentice altered mortgage applications to boost his monthly earnings, a court has heard.

 

Mortgage broker Christopher Farrell, 29, inflated clients' incomes to help them secure home loans - and earn himself commission.

 

He pleaded guilty at Plymouth Magistrates' Court to fraud and will be sentenced on 28 January.

 

===================

 

Mr Gittins explained to the court that Farrell, who earned a salary of £1,600 a month, would make commission if he reached sales targets.

 

But, keen to earn more money to support his wife and young family, Farrell started inflating the incomes of clients to ensure their mortgage applications were successful - thereby reaching the sales target.

 

Farrell, who admitted four charges of fraud, would either alter P60 forms or payslips to show his clients in a more favourable light to a mortgage lender or create fake documents, magistrates were told.

 

In one instance, he made an application for a client with a £40,000 salary which showed he earned £120,000 a year.

 

http://www.bbc.co.uk/news/uk-england-devon-12060100