An investigation by the Observer newspaper has uncovered that documents to gain fraudulent access to mortgage loans can be purchased over the Internet. It took scant minutes and a mere £35 for the reporter to attain the required paperwork. Just as the FSA is asking (demanding) lenders start relying more on such paperwork, a huge number of websites have sprung up offering high quality documents that can be used to commit mortgage fraud. These documents even go to the extent of supplying tax calculations to tie in tax paid with notional salary received.

Dominic Green of ‘Replicadoc.co.uk’ defended his business to the reporters claiming they were for novelty purposes. A very novelty defence in itself, especially as he claims they could be used to ‘replace’ or take the place of paperwork they don’t have.  A word-processor and spread sheet will do that for you. Use of these documents to gain a mortgage is fraud punishable by up to ten years inside, even possession for use in fraud carries a five year term.

The Met is planning a crackdown on these sites.

The lenders could put this practice into the history books very easily. All they need to do is write directly themselves to the banks for statements, to the Inland Revenue for tax documents and to the employer for salary details or to the accountant for company accounts. No permission from the client to do this, no mortgage. Should the documentation not tie up, no mortgage.

Many of today’s mortgage problems stem from lenders’ trying to ‘fast-track’ applications. This is usually done by relying on Credit Referencing Agencies such as Experian and Equifax to give the ‘clearance’ by showing previous borrowing integrity. But many of these records are flawed and only show part of the borrower’s history. And there is no comeback on them for incorrect records. They have also relied too much on brokers’ evidence for loan affordability or that the money is being used correctly.

One more thing that should be removed is any automatic protection from repossession should the loan be defaulted on. That would lead to swift redress, but only if the lender can produce the proof that they followed tight lending requirements. It should also be a requirement that borrowers take out a basic level of insurance or forego much protection from repossession.

The lenders are handing out other peoples’ money so should take back firm control over the process. Otherwise the government and police may have to get far more involved at the taxpayers’ expense.

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