The results of the latest Experian fraud index shows that attempted mortgage fraud increased in the third quarter of 2011.

During the three months ending September 2011 49 mortgage applications in every 10,000 were found to be fraudulent. This is an increase of 77% on the same quarter in 2010 and a 53% increase on quarter two 2011.

Information from Experian’s ‘National Hunter’ and ‘Insurance Hunter’ fraud prevention systems, which analyse applications against previous ones to highlight inconsistencies, also found that 30 in every current account applications were fraudulent as well as 21 in every automotive finance applications.

At 13 fraudulent applications in 10,000, credit card fraud is up 10% on the quarter and 7% on the year and is at the highest level since quarter two 2010.

Insurance fraud fell in the third quarter to 11 fraudulent application in every 10,000, an 8% drop, but it is still 28% higher than the same time last year.

Loan fraud, at only six fraudulent applications for every 10,000 is still the ‘least targeted credit facility of the financial products’ seen by Experian.

The director of identity and fraud at Experian UK & Ireland, Nick Mothershaw, said “More than 90 per cent of mortgage fraud tends to originate from genuine individuals misrepresenting their financial situations attempting to buy property that would ordinarily be out of reach. Current accounts continue to be frequently targeted, which combined with the growth in savings account fraud, points towards an increasing trend for deposit accounts to be targeted for money laundering purposes or to then be used as a springboard to more lucrative credit products.”

For those found out engaging in mortgage fraud, which can include brokers and advisers as well as those looking for a mortgage and telling a few ‘fibs’, it can lead to criminal charges and to a CIFAS note on their credit report.

Mortgage fraud by individuals who lie about their income for example is an attempt to lead the lender into parting with money on a riskier basis than the lender is led to believe exists. This could potentially cause the lender and its shareholders losses. The higher risk should have attracted a higher interest rate or more possibly a decline to lend.

From the Law Society:

Mortgage fraud occurs where individuals defraud a financial institution or private lender through the mortgage process.

The definition of fraud in the Fraud Act 2006 covers fraud by false representation and by failure to disclose information where there is a legal duty to disclose. False representations can be made explicitly or implicitly and may occur even where you know only that the representation might be misleading or untrue.

The value of a mortgage obtained through fraud is the proceeds of crime. Under the Proceeds of Crime Act 2002, you risk committing a money laundering offence if you acquire, use, have possession of, enter into an arrangement with respect to, or transfer this criminal property.

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