Definition of mortgage fraud

What mortgage fraud is:

Mortgage fraud is the general term for obtaining a mortgage, or gaining some financial advantage in relation to a mortgage, by dishonesty or deception. In England and Wales it is not a single, separately named offence. Instead, conduct that is described as mortgage fraud is usually prosecuted under the Fraud Act 2006, and can also involve other offences such as money laundering, forgery, conspiracy to defraud, and identity theft.

How it fits the law:

The most relevant provision is fraud by false representation under section 2 of the Fraud Act 2006. A person commits this offence if they dishonestly make a false representation, knowing it is or might be untrue or misleading, intending to make a gain for themselves or another, or to cause loss to another or expose another to a risk of loss. There is no requirement that anyone actually loses money; making the dishonest representation with the required intent is enough.

Two other parts of the Act can also apply to mortgage cases. Fraud by failing to disclose information under section 3 covers situations where a person is under a legal duty to disclose information and dishonestly fails to do so. Fraud by abuse of position under section 4 can catch professionals, such as a solicitor or broker, who are expected to safeguard another person’s financial interests and dishonestly abuse that position.

Fraud under the Act is triable either way and, on conviction on indictment, carries a maximum of 10 years’ imprisonment, an unlimited fine, or both.

Common examples:

Mortgage fraud typically takes forms such as:

1. Overstating income or salary, or providing false payslips or accounts, to qualify for a larger loan than the borrower could genuinely obtain.
2. Failing to disclose relevant facts, such as an existing debt, a second job intention, or that the property will be let rather than lived in (for example taking a residential mortgage when the true intention is buy-to-let).
3. Overvaluing a property, often with the involvement of a corrupt or complicit valuer or surveyor.
4. Applying for a mortgage using someone else’s identity, or the identity of a deceased person, following identity theft.
5. Taking out multiple mortgages with different lenders on the same property by manipulating Land Registry data.
6. Changing title deeds without the owner’s knowledge to enable a fraudulent sale (title or conveyancing hijack fraud).
7. Hijacking a genuine conveyancing transaction, for example diverting completion funds.

Two broad categories are often distinguished. Opportunistic fraud is where an ordinary applicant lies or exaggerates on a mortgage application, for example inflating income. Organised fraud tends to involve criminal networks and often a corrupt professional insider such as an accountant, solicitor, broker or surveyor.

Who can be involved:

Liability is not limited to the borrower. Brokers, introducers, solicitors and conveyancers, valuers and accountants can all commit or facilitate mortgage fraud, and professionals face additional regulatory consequences. Solicitors, for example, are a known target for being used to lend respectability to fraudulent transactions, and the Law Society and the Solicitors Regulation Authority publish specific warnings and due diligence guidance on this.

Consequences:

Beyond the criminal penalties under the Fraud Act, consequences can include confiscation proceedings under the Proceeds of Crime Act to recover the benefit obtained, civil recovery action by lenders, being reported to fraud databases used by lenders, professional disciplinary action and loss of professional status, and the lender treating the mortgage as obtained by misrepresentation, which can affect the loan and the property.

Practical points if you are worried:

If you are concerned that you may have made an error rather than acted dishonestly, the key legal question is dishonesty and intent. An honest mistake on an application is different in law from a deliberate false representation, although lenders may still treat inaccurate information seriously.

If you suspect you have been the victim of mortgage fraud, for example someone taking a mortgage in your name or attempting to change your title, you can report it to Action Fraud, notify the lender, and consider registering for HM Land Registry’s Property Alert service and a restriction on the title to reduce the risk of fraudulent dealings.

If you are being investigated or interviewed in connection with a mortgage application, this is a serious criminal matter and it is sensible to take specialist criminal defence advice before answering questions.

If you can tell me the specific situation you are dealing with, for example whether you are a borrower, a professional, or a possible victim, I can give more focused guidance.