Lie-to-Buy Mortgage Brokers & the FSA.

FraudBuster

We are intensifying our crackdown on mortgage fraud to tackle this serious and widespread problem. It is essential that, as a mortgage broker, you have sufficient controls in place to prevent your firm being used for committing fraud.
You should also remember you are responsible for reporting any wider suspicions of fraudulent activity, or examples of poor practices resulting in potential fraud you have noticed. This is in addition to your statutory duty to report suspicious activity.

http://www.fsa.gov.uk/pages/Doing/small_firms/mortgage/library/report_fraud.shtml

FraudBuster

Update. 26th August 2008.

Mortgage fraudsters tarnish the reputation of the industry as a whole, and there is no place in the market for firms who are - or have been - knowingly involved in mortgage fraud.
Our work will increase our effectiveness in identifying and tackling such firms. If we find evidence of fraudulent activity at a firm we visit, it can expect to be subject to an intense and rigorous supervisory focus.

http://www.fsa.gov.uk/pages/Doing/small_firms/mortgage/library/fraud_campaign.shtml

koexelek

Self Certification mortgages in their basic form are effecively a tool to allow self employed people to defraud the Inland Revenue.

As mentioned earlier, any employed person should be able to prove their income. Only exception might be a sales person ehose employer will not guarantee all their commission for the purpose of a mortgage reference.

In my book, self cert mortgages are for the hairdresser/ taxi driver who only put a fraction of their income "through the books".
For example , a taxi driver can legitamately declare their income as £50000 to a lender ( they are not lying) in order to get a mortgage, but only declare £10000 to the Taxman ( they are lying) in order to pay less tax.

happybroker

koexelek wrote: »

In my book, self cert mortgages are for the hairdresser/ taxi driver who only put a fraction of their income "through the books".
For example , a taxi driver can legitamately declare their income as £50000 to a lender ( they are not lying) in order to get a mortgage, but only declare £10000 to the Taxman ( they are lying) in order to pay less tax.

Crikey koexelek! You are comfortable dealing with people who commit financial crime in that case and are completely misusing the self cert product.

It is just such things which have people believe that mortgage brokers are dishonest which, given that you are happy with the fact that your clients evade tax, would be a fair assesment.

Self cert is for people with a genuine and legitimate reason for not being able to prove current income such as a recent increase due to obtaining new contracts, the business being too young for accounts to be available etc. A taxi driver/ hairdresser who has been working in the same job, in the same place for 2 years or more should be able to prove their income via accounts. If they can't then then price they pay for "fiddling" the books is not being able to get the mortgage they want.

I am the MD of my company and obviously "mitigate" my tax liability through directors loan accounts and dividends but would still not go through the self cert process as I can prove I own all the shares and also that the profit is there to draw (and subsequently pay tax on) should I need it.

This is legitimate, "lying" to the tax man as you put it isn't and you are acting illegaly if you transact business knowing this.

dunstonh

In my book, self cert mortgages are for the hairdresser/ taxi driver who only put a fraction of their income "through the books".
For example , a taxi driver can legitamately declare their income as £50000 to a lender ( they are not lying) in order to get a mortgage, but only declare £10000 to the Taxman ( they are lying) in order to pay less tax.

That is tax fraud and the mortgage adviser should be reporting to their MLRO.

koexelek

dunstonh wrote: »

That is tax fraud and the mortgage adviser should be reporting to their MLRO.

If a self employed borrower asks for a self cert mortgage, they are asked to declare their income on the form.
They are not asked to " back it up with certified accounts"
As a broker, I am not obliged to ask for accounts either. You could say that's "turning a blind eye" I guess, but if a lender openly states that they will lend to a borrower using the income they are prepared to declare, that's their decision.
People inflating incomes is a completely different matter though, and I would not want to be a party to something like that.

If I did see their true accounts and there was a shortfall, then I would indeed have a conflict of interests, and would be technically helping them to defraud the tax man.

However, for my own peace of mind, I will ask to see bank statements proving they have the turnover they say they do, in order to make sure they can afford the repaymemts.

If someone asks me for a self cert mortgage, I will ask if they have up to date accounts reflecting their current turnover ( in the hope I could get them a better mortgage on a status basis) but most of the time they won't have this.

koexelek

dunstonh wrote: »

That is tax fraud and the mortgage adviser should be reporting to their MLRO.

Taking it to the letter of the law, the lenders should refuse to lend to self employed people on anything other than the figure they declare to the Inland Revenue.
They won't do that though, as they know there is too much money to be made in this area.

If brokers are helping people to commit tax fraud, so are the lenders to a point.

FraudBuster

FSA/PN/110/2008
30 September 2008
The Financial Services Authority (FSA) has banned North Wales mortgage broker Stephen Jones and fined him £100,000 after finding he had exposed about 1500 customers to the risk of receiving unsuitable advice.

http://www.fsa.gov.uk/pages/Library/Communication/PR/2008/110.shtml

dunstonh

koexelek wrote: »

Taking it to the letter of the law, the lenders should refuse to lend to self employed people on anything other than the figure they declare to the Inland Revenue.
They won't do that though, as they know there is too much money to be made in this area.

If brokers are helping people to commit tax fraud, so are the lenders to a point.

Quite true. However, who is going to get the blame if its found out?

The lender won't as they will say they went on the figure the broker put on there. The consumer wont because they will lie about how the application was done and blame the broker (even if the broker didnt do it). The broker is the one that will get the blame as they submitted the application and are meant to have proof of income.

So, a broker that thought they were doing someone a favour could end up being the one sanctioned, fined, sacked/loss of licence etc.

Tiddler_2

dunstonh wrote: »

Quite true. However, who is going to get the blame if its found out?

The lender won't as they will say they went on the figure the broker put on there. The consumer wont because they will lie about how the application was done and blame the broker (even if the broker didnt do it). The broker is the one that will get the blame as they submitted the application and are meant to have proof of income.

So, a broker that thought they were doing someone a favour could end up being the one sanctioned, fined, sacked/loss of licence etc.

And is it worth it for a £500 or so proc fee - not on your Nelly. Our company INSIST that you see proof of income on self-certs, for all mortgages, whether that be through bank accounts or whatever - does the taxi driver/hairdresser put all of their money through the bank? I very much doubt it

I am extremely wary of self-cert mortgages, and walk away if I'm not 100% comfortable