Property Trader masterminded £3m mortgage fraud

[FlashmanChop]

Could not find this anywhere else, apologies for the Daily Mail link...

http://www.dailymail.co.uk/news/article-2765397/Pr...

[BlackLabel]

I've lost count of the number of times I've heard about people lying about their incomes on self-cert mortgages during the credit boom. I've even heard, 1st hand, people boasting about doing it. Many got away with it though because of the massive rises in property prices at that time.

However, it makes me wonder what the true scale of this kind of fraud actually was. And more importantly why nothing was done about it at the time - lenders could not have been that naive could they? And were brokers just turning a blind eye to it all?

[Eclassy]

£38,000 PA for a sales assistant! Gimme that job now!

[Digga]

Well, Duncan Bannatyne admits to pretty much the same in his biography; conning his bank into believing his mum and here friends were paid-up granny farm residents, so he could get a loan to build a second.

[Piersman2]

You need to understand how mortgage companies were selling off their mortgages to investors to understand why a mortgage company really didn't care who they lent money to.

Mortgage companies were bundling up mortgages to sell to investors. The mix of 'risk' within the bundles started as being quite good, but rapidly deteriorated as mortgage companies looked for ever more mortgages so they could bundle them up and sell on.

Over time the criteria to grant a mortgage was ever lowered to allow the stream of incoming mortgages to continue, so they could continue to sell them on.

The mortgage lenders didn't care, they were passing them on as quick as they could get them. The inverstors didn't care as they were insured. The insurers didn't care as they though they were insuring good risk mortgages.

Of course, once the st hit the fan and people started defaulting on payments the investors start invoking their insurance, the insurance oompanies ran out of money and the whole thing collapsed. Except for the mortgage companies... they'd shifted on most of their crap!

[Derek Smith]

A couple more or less across the road from where I lived were into long firm fraud with mortgages - whatever that means. CID used my front bedroom as an obs point for a month or so. The couple remortgaged their big house - about £750K nowadays - about half a dozen times one day with more planned for the second day and some on the internet. Their planned total was around a couple of dozen with perhaps 40% each time.

Talking to the obs team and asking them why the mortgage companies didn't exercise 'due diligence' they said that they didn't care. All they needed was the document and they could pass the risk on to someone else.

They said that they were not sure who were the real criminals.

[TTwiggy]

I was on a jury for a lengthy mortgage fraud trial a couple of years ago. We had 4 defendants to try from a total of around a dozen (there had been previous trials plus more to come). My abiding feeling was that whatever the people on trial may or may not have done, it was the mortgage companies who should really be in the dock - and the judge said as much in his summing up.

[Rude-boy]

TTwiggy said:

My abiding feeling was that whatever the people on trial may or may not have done, it was the mortgage companies who should really be in the dock - and the judge said as much in his summing up.

My abiding feeling about the whole of this mess up is that everyone involved to one degree or another was in the wrong but no one ever held a gun to any borrower(s) head and said "Take out the mortgage with us or we will kill your first born."

I have heard all the arguments, I had letters almost daily offering me ever more money on credit, yet I was able to resist hocking myself up to the eyeballs or lying through my teeth to get more money on credit than I 'should' have been able to.

Yet it is the nasty money lenders to blame because they encouraged the borrowers.

Personal responsibility comes before corporate.

Edit - And don't even start me on the PPI mess we are now dealing with. I have lost one friend who claimed back quite a bit of money through that. Someone who I damn well know knew exactly what they were doing when they signed up and also knew what they were doing when they ceased with it.

Edited by Rude-boy on Tuesday 23 September 14:46

[greygoose]

Eclassy said:

£38,000 PA for a sales assistant! Gimme that job now!

That stuck out to me too, no wonder Tesco are in such trouble they have thousands of sales assistants!

[TTwiggy]

Rude-boy said:

TTwiggy said:

My abiding feeling was that whatever the people on trial may or may not have done, it was the mortgage companies who should really be in the dock - and the judge said as much in his summing up.

My abiding feeling about the whole of this mess up is that everyone involved to one degree or another was in the wrong but no one ever held a gun to any borrower(s) head and said "Take out the mortgage with us or we will kill your first born."

I have heard all the arguments, I had letters almost daily offering me ever more money on credit, yet I was able to resist hocking myself up to the eyeballs or lying through my teeth to get more money on credit than I 'should' have been able to.

Yet it is the nasty money lenders to blame because they encouraged the borrowers.

Personal responsibility comes before corporate.

Edit - And don't even start me on the PPI mess we are now dealing with. I have lost one friend who claimed back quite a bit of money through that. Someone who I damn well know knew exactly what they were doing when they signed up and also knew what they were doing when they ceased with it.

Edited by Rude-boy on Tuesday 23 September 14:46

I don't have the time to go into detail about the case I was on. Suffice to say that sharp practices were being carried out by lenders, borrowers and the lawyers doing the conveyancing.

It wasn't a simple case of people claiming to earn more than they did, it was proper mortgage fraud, using pretend applicants, in order to make a profit. My point was that the lack of any type of due diligence from the lenders, plus their business model of lending any amount, to anybody, and then bundling it all up and selling it on, was as criminal as the activities that landed the defendants in the dock.

And the judge said as much.

[toohuge]

There is also a lack of incentive for the mortgage providers to perform their due diligence.

If you look at this from a big picture point of view:

The mortgage company lends money against an asset, usually under their agreed value.

The mortgage company may receive 20% cash as a deposit against said asset.

The mortgage company receives the monthly payments to service their debt, plus interest, so money all round.

If the owners fail to service the loan, the mortgage company takes ownership of their asset at a discounted rate and makes a tidy profit on the other end when selling at market value.


The problem here is not isolated to the buyers that fudged their income, rather a system of greedy individuals that all participated in this to allow this to happen.

[TTwiggy]

toohuge said:

If the owners fail to service the loan, the mortgage company takes ownership of their asset at a discounted rate and makes a tidy profit on the other end when selling at market value.

Unless part of the scam involves dodgy surveyors passing off a £150k property as a £500k property, and nobody from the lender bothering to even do a drive by.

[Rude-boy]

toohuge said:

The problem here is not isolated to the buyers that fudged their income, rather a system of greedy individuals that all participated in this to allow this to happen.

Now the holistic blame game is one I can understand. Bent Solicitors should also be nailed to the wall, although it does piss me off that it appears there were far more bent 'Conveyancing Lawyers' involved than solicitors, yet they all get called solicitors for shorthand (pet hate).

It's the 'pity poor borrower' cries I hear from some angles and how it was all the nasty money making bank's fault for offering to lend them so much money.

Perhaps it is because I am not the sort that thinks that you get anything for free in this life, there is always some hook or payback, that I find it hate to castigate businesses for doing what they are in existence to do!

[Eric Mc]

Rude-boy said:

Personal responsibility comes before corporate.

Edited by Rude-boy on Tuesday 23 September 14:46

Really?

Are corporations less subject to morals and ethics than individuals?

Aren't corporations run by individuals in any case?

I look on that comment as truly gob-smacking.

And it possibly explains why we ended up in the dire mess we did.

[Mrr T]

Piersman2 said:

You need to understand how mortgage companies were selling off their mortgages to investors to understand why a mortgage company really didn't care who they lent money to.

Mortgage companies were bundling up mortgages to sell to investors. The mix of 'risk' within the bundles started as being quite good, but rapidly deteriorated as mortgage companies looked for ever more mortgages so they could bundle them up and sell on.

Over time the criteria to grant a mortgage was ever lowered to allow the stream of incoming mortgages to continue, so they could continue to sell them on.

The mortgage lenders didn't care, they were passing them on as quick as they could get them. The inverstors didn't care as they were insured. The insurers didn't care as they though they were insuring good risk mortgages.

Of course, once the st hit the fan and people started defaulting on payments the investors start invoking their insurance, the insurance oompanies ran out of money and the whole thing collapsed. Except for the mortgage companies... they'd shifted on most of their crap!

That's sounds like a good story. The problem is the facts do not fit.

The statistics on mortgage arrears and retrocessions are here:

https://www.gov.uk/government/statistical-data-set...

While its true retrocession rose after the banking crisis. In most years after 2007 its was lower than .035% of outstanding mortgagees except for a peak in 2009 at 0.43%

[greygoose]

Eric Mc said:

Rude-boy said:

Personal responsibility comes before corporate.

Edited by Rude-boy on Tuesday 23 September 14:46

Really?

Are corporations less subject to morals and ethics than individuals?

Aren't corporations run by individuals in any case?

I look on that comment as truly gob-smacking.

And it possibly explains why we ended up in the dire mess we did.

Indeed, banks are supposed to be the experts in the transaction, if an applicant obviously cannot afford the costs of a loan they should refuse to lend to them.

[Rude-boy]

Eric Mc said:

Rude-boy said:

Personal responsibility comes before corporate.

Really?

Are corporations less subject to morals and ethics than individuals?

Aren't corporations run by individuals in any case?

I look on that comment as truly gob-smacking.

And it possibly explains why we ended up in the dire mess we did.

Yes, I think you misunderstand me.

The bit in bold is the important bit and where your internal alarm should have sounded as you were typing.

Individual (personal) Responsibility comes before Corporate Responsibility because it is the decisions of Individuals that promote the actions of Corporations.

Now to follow through the logic there was a failing in the Individual Responsibility of the person(s) in the Corporations when they said "Stuff if they can't pay, we'll lend anyway." It was a failure in terms of Corporate Responsibility that no one high enough up the food chain to stop it tried to do so. Ultimately though the final nail in the coffin was the failure in the Personal Responsibility of the borrowers to go "Hang on a minute, how can I service, let alone pay off, a debt where the monthly interest only payments would leave me with £4.50 and a bag of crisps each month to live on."

The above is the Mr and Mrs Jones, just borrowing more than they can afford.

Then you have your 'bent IFA, bent lawyer, bent client' situations where it appears to me to be a total all round case of Individuals not acting responsibly. They were individuals exploiting a corporate failure brought about by a personal failure...

It's a topic that has been done to death and I suspect that almost all who have debated it have their own fixed idea of where they see the blame lying. It is just my view that the whole sorry mess is actually like 99% of aircraft accidents. Not one single failure would have lead to the end result, it was a combination on numerous failures that added up to a whole that resulted in the crash. Some of those failures were those of individuals, some on a corporate level, yet those on a corporate level were only possible as a result of policy decisions taken by individuals...

[Eric Mc]

Or, to condense your mini-essay, idiots assisted by greedy professionals.

[Rovinghawk]

greygoose said:

Indeed, banks are supposed to be the experts in the transaction, if an applicant obviously cannot afford the costs of a loan they should refuse to lend to them.

It could equally be argued that the borrowers know their own position better, & therefore if they can't afford the costs of the loan then they shouldn't borrow.

[Rude-boy]

greygoose said:

Indeed, banks are supposed to be the experts in the transaction, if an applicant obviously cannot afford the costs of a loan they should refuse to lend to them.

The word 'No' springs to mind.

The banks have the information that the borrower provides for them to go on. If it fits inside their parameters then they will lend. The borrower, who applied for the money, is told how much it is going to cost them to service this debt. Surely it is up to the borrower to decide if they can live on what is left of their income after payment of the monthly sum?

I know people who live on less than £250 per month after their mortgage and their council tax has been paid and save the rest. I also know people who spend ten times that on 'toys and fun' each month yet both have the same level of 'disposable' after payment of the mortgage and council tax. Each individual is different and so it is ultimately the borrower who is best placed to make the call on if they can afford the loan or not.