Mortgage Fraud - or not?

ab7167

Had lunch with a friend yesterday, we were chatting about her impending house sale / purchase. She then said that she and her OH were about £11k short of cash for the 85% LTV mortgage they have just had their full offer through for. Then "but it's OK, the financial advisor told us to apply for an unsecured loan now we've got the offer and the BS will never know. And not to tell the solicitor as he will have to tell the BS". I nearly choked on my chips and told her that was a seriously bad idea, and asked her if she didn't think that it might be the tiniest bit fraudulent to do this - apparently the advisor said he does it all the time, but even if the BS did find out, she'd just borrow the £11k from her Dad and all would be well.

Is this her financial bod advising they commit fraud or am I being overly concerned? I did ask her what she thought would happen if the BS pulled her offer after exchange and she didn't understand what I was saying...

Should I push her not to do this and just borrow from Dad in the first place?

Thrugelmir

ab7167 wrote: »

I did ask her what she thought would happen if the BS pulled her offer after exchange and she didn't understand what I was saying...

Spot checks are not uncommon. More so on high LTV situations.

kingstreet

She'll be fine, unless her case is one of the 12% or so which is pulled out for audit towards the end of the process. She'll be re-checked and asked for all the documentation you can imagine. I would never suggest a client apply for credit of any kind until well after the completion of a house purchase transaction.

ab7167

The advisor did tell her they might do another credit check. But he seems to have utterly failed to explain how serious it could be if the offer was pulled at the last minute. I know it would be bad if they did, but how bad could it get?

holly_hobby

The mortgage application and status/affordability checks were based on her financial situation at the time of submission.

If the mge lender does not require the solicitor to confirm that no further borrowings have been effected between application and completion, than the question won't be asked of her.

If the mge app does not ask if the applicants financial commitments are due to change between application and completion - then obviously the applicants aren't going to answer a question that hasn't been asked of them. BUT, lenders can "pull a case" for a 2nd credit/status check for audit purposes ... and if they do .. watch out.

So, if the above is the case, then technically I would say fraud (obtaining money by deception) has not strictly taken place.

Of course, if the appropriate questions have been asked, and your friend has replied to the negative - than that most certainly is fraud/deliberate concealment - and may be subject to quite serious ramifications.

Aside from that, has your friend really taken in to account the outlay in repaying not only their mortgage but a personal loan too ?

To be clear, I do not condone for one minute what the adviser has suggested to your friend - but unfortunately this kind of thing does happen, and advisers such as this do still exist. (not really having your friends interest at heart, and only concerned in the first hit (mge bus), and not in for the long haul providing subsequent mge and lifetime finacial planning advice).

This is really a matter for your friends conscience, and whilst you want to be a good friend and warn her of the pit falls, I doubt now that she has her heart set on the property, she would heed any advice of caution you may give her.

Hope this helps

Holly

ab7167

I'm sure when I got my last mortgage about 18 months ago I signed something that said I wold declare any material changes in circumstances, I would consider an 11k loan a material change, but perhaps everyone would not. And possibly all lenders do not state this, i borrowed from nationwide who do. Interestingly, they were fine with me being on Mat Leave... You are dead right, she and hubby have their heart set on this one, it has taken them ages to sell and I think they would be devastated to lose it. I have told her what I think, and I think they are at least considering borrowing from parents (both sets pretty well off) instead of taking the loan. But it is her decision and I really hope it goes OK for them. I just didn't want to not say anything...

holly_hobby

You're obviously a good and caring friend ....

As I say if the question is asked, then they need to provide the correct information to accurately address the matter - otherwise well I don't need to spell it out.

If the q isn't asked at any point ... well "what the eye doesn't see ... "

kingstreet

Loan from bank or building society, or loan from parents. The same duty of disclosure exists and she must tell the lender if she is borrowing part, or all, of the deposit.

ab7167

I did point out the solicitor would likely want to know the source of the £11k for money laundering regs.. I'm only basing this on my experiences, but I had to produce bank statements showing regular monthly savings when I handed a cheque for £26k to my solicitor. That might be just my solicitor though! It is a gorgeous house, I've seen photos. She said she would talk to the advisor and her husband again...

ab7167

kingstreet wrote: »

Loan from bank or building society, or loan from parents. The same duty of disclosure exists and she must tell the lender if she is borrowing part, or all, of the deposit.

It would be a gift from the parents. She's quite proud and wanted to do it on their own, but that may not be possible.

kingstreet

This may come across as a bit pedantic, but could you find out who the adviser actually is and find out their status. It's a bit unfair to use the term "IFA" to describe this person if they are, in fact, tied advisers for one lender or restricted to a small panel. Thanks.