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Personal finance

Nationwide Anti-Fraud System to Unveil Mortgage Borrower's Exaggerated Income

Strategic Insights

— 2 min read

As part of an effort to combat mortgage fraud, a nationwide anti-fraud system will be unveiled next month to detect borrowers who exaggerate their income. The system, led by the Council of Mortgage Lenders, will analyze prospective borrowers' details to identify those who have made applications to different lenders and lied about their income. The move is part of a broader anti-fraud drive in the financial services sector, with insurers working together to detect fraudulent claims. The new system, called the Hunter system, will initially involve up to 20 major lenders, including the Skipton building society, which has seen a significant reduction in suspect applications during a pilot scheme.

Key Takeaways:

  • The Hunter system is expected to detect mortgage borrowers who exaggerate their income, with a focus on those who have made applications to different lenders and lied about their income.
  • The system will analyze multiple applications to identify potential fraud, including cases where borrowers raise finance from several lenders on the same house or flat.
  • Lenders accept that potential customers sometimes make several mortgage applications before buying a property, but the system aims to identify cases of income exaggeration, particularly among self-employed individuals.
  • The system has been refined during a pilot scheme, which threw up an unexpectedly large proportion of overstated earnings figures, mainly from the self-employed.
  • The Skipton building society has seen a significant reduction in suspect applications during the pilot scheme, with four or five applications turned down per month.
  • Other lenders participating in the pilot scheme include Nationwide, Chelsea, Birmingham Midshires, Northern Rock, Barclays, and NatWest.
  • The system will also identify applicants whose salary levels are unexpectedly high considering their age, job, industry, or location.
  • The Council of Mortgage Lenders is also increasing pressure on conveyancing solicitors to detect fraudulent applications by encouraging them to examine the passports of mortgage clients and to require them to sign the mortgage deed in their presence.

Statistics:

  • The number of reports passed to the police is expected to grow by more than 10 per cent this year due to increased reporting of transactions related to money-laundering.
  • Up to 20 major lenders will participate in the Hunter system, including the Skipton building society.
  • The Skipton building society has turned down four or five suspect applications a month during the pilot scheme.
  • If mirrored by other top 20 building societies, up to 6,000 applications could be rejected per year.

Sources:

  • "Council of Mortgage Lenders fights mortgage fraud with new system", Financial Times
  • "New System to Detect Mortgage Borrowers Who Exaggerate Income", The Telegraph
  • "Insurers to Launch Computerised Checking System to Detect Fraudulent Claims", The Times

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