Landlord mortgage fraud jumps 40% in a year

Landlords secretly letting out their former homes without telling their mortgage lender the property is a buy-to-let are fraudsters, alleges a new report.

Accidental landlords often move out and let a tenant take over their home – but lenders are tracking down property owners who try and save a few pounds on mortgage payments and accusing them of fraud.

Many landlords either forget or do not realise the mortgage lender needs to know if a home is switched to a buy to let.

In some cases, lenders charge a fee or increase the mortgage interest rate when the owner moves out.

CIFAS, the UK’s official fraud prevention agency, reckons the number of landlords not telling their lenders when they move in tenants has risen by 41% in the past 12 months

A report from the organisation also revealed mortgage fraud increased 5% in 2012 after a drop in 2011.

Most mortgage frauds involved the borrower trying to hide adverse credit history, like a default, county court judgment or bankruptcy.

“This exposes the mortgage lender to greater financial risk, and presents another challenge to organisations in terms of their need and responsibility to educate customers in what constitutes fraud,” said the report.

“While this finding flies in the face of the reported decrease in average household debt, it may have been that some considered that 2012 was the year to get on the housing ladder, or that it was time to move home.

“In a year where total mortgage lending was marginally up from levels recorded in 2011, but where house prices in some areas of the country were still beyond the reach of many potential buyers, this increase probably indicated the desire of many to try to take advantage of an opportunity rather than a reflection of a greater number of people with adverse credit information against them.”

Another aspect of mortgage fraud concerning lenders is who stands as a guarantor – as in more than 1,000 cases last year, the named guarantor had not agreed to take responsibility if loan repayments were missed.

The CIFAS report also noted that mortgage identity fraud had dropped by 13%.

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