Should Mortgage Fraud be Legal or Illegal?

ILW

Think the IR are beginning to look at bit closer at people that buy a £500k house on a declared income of £15k. Good luck to them.

Heyman_2

Iraq

Where's the 'Billy Bragg' option?

silvercar

Hence the reference to the accountant whose job it is to make the bottom line as small as possible for the revenue & as large as possible for the mortgage company.

Doing that in a legal way would not be mortgage fraud.

One step further and you would expect mortgage lenders to take into account cash in hand income that doesn't appear on tax returns in any income stream.

tomterm8

Generali wrote: »

Should Mortgage Fraud be Legal or Illegal?

Yes, it should be, but there is an awkward asymmetry to the current law, because mortgage fraud by the customer is illegal, but control fraud by banks is often legal. Most banks in the US knew that a lot of mortgages were being written than shouldn’t have been written during the sub-prime boom. Because these mortgages were securitized, there was really no incentive for the mortgage writer to check whether customers were saying the truth, and in fact there is enough evidence to say some bank employees probably encouraged borrowers to lie and to borrow more than they can afford.

1984ReturnsForReal_2

silvercar wrote: »

Doing that in a legal way would not be mortgage fraud.

One step further and you would expect mortgage lenders to take into account cash in hand income that doesn't appear on tax returns in any income stream.

Here is the revenues point (& is has nothing to do with mortgage fraud).

If on a mortgage form you enter an after tax "income" greater than what you declare to the revenue that sum should be taxable.

Nothing to do with fraud all to do with revenue generation.

Loughton_Monkey

Mortgage Fraud Should be Illegal

Generali wrote: »

Should Mortgage Fraud be Legal or Illegal?

I think you will find that it is illegal. The degree to which authorities will take it to court is a different matter.

The Insurance industry will use 'fraud' much more frequently. A 'dodgy' claim can be avoided on the basis of lies on the proposal form. The attitude often taken is "You have committed fraud. Contract is null and void. Here's your premium back. We are not paying the claim. You are now uninsured." If the proposal was 'legal' but a claim is not, then the attitude can be "We are not paying. Sue us. If you do, then we will involve the police."

Of course the Mortgage Industry are a bit stuck here, because the whole deal cannot be 'unwound'. Someone who lied about income on a form - but who is paying interest as good as gold is not a problem for the lender. If they default, then there are sufficient 'remedies' of re-possession etc. - none of which would be assisted by having the defaulter up in court for a criminal offense.

What would be interesting, though, would be a borrower who 'admitted' false statements, but blaming the mortgage broker (or branch rep). I wonder if a court might declare the contract 'null and void'. Borrower may get 'minor' slap on the wrist for complicity, but he might gain freedom from a large debt.

Generali

Iraq

Loughton_Monkey wrote: »

I think you will find that it is illegal. The degree to which authorities will take it to court is a different matter.

The Insurance industry will use 'fraud' much more frequently. A 'dodgy' claim can be avoided on the basis of lies on the proposal form. The attitude often taken is "You have committed fraud. Contract is null and void. Here's your premium back. We are not paying the claim. You are now uninsured." If the proposal was 'legal' but a claim is not, then the attitude can be "We are not paying. Sue us. If you do, then we will involve the police."

Of course the Mortgage Industry are a bit stuck here, because the whole deal cannot be 'unwound'. Someone who lied about income on a form - but who is paying interest as good as gold is not a problem for the lender. If they default, then there are sufficient 'remedies' of re-possession etc. - none of which would be assisted by having the defaulter up in court for a criminal offense.

What would be interesting, though, would be a borrower who 'admitted' false statements, but blaming the mortgage broker (or branch rep). I wonder if a court might declare the contract 'null and void'. Borrower may get 'minor' slap on the wrist for complicity, but he might gain freedom from a large debt.

I understand that mortgage fraud is illegal. I have seen a couple of posts on this forum (including one I picked up on from CONRAD but also others I think) that appear to suggest that clamping down on fraud is causing big headaches in the mortgage market.

I guess there is a scenario where the tax authorities go on a fishing expedition through the self-cert mortgage applications and then ask, in applicable cases, are you defrauding the bank or the taxman?

Really2

Mortgage Fraud Should be Illegal

neverdespairgirl wrote: »

I'm not sure that's true, there are lots of very stupid questions out there.

What part of a turkey is it's "twizzler"?

michaels

Hmm - I don't see why it should be illegal. Surely it is the party who have failed to check the details (the lender) who have suffered (possibly notionally) a loss and thus it should be a civil matter?

Imagine a lender, after a mortgage had been redeemed, suddenly discovered the borrower had been letting the secured property contrary to the terms of the mortgage. I can see no reason for there to be any need for a criminal prosecution and if all payments had been made in accordance with the policy I doubt the lender would get that far in trying to pursue the notional loss they made from charging a rate lower than they might otherwise have done? NDG?

michaels

I believe it is the same part as a fish's finger?

Really2 wrote: »

What part of a turkey is it's "twizzler"?