Mortgage fraud has been increasing globally harming homeowners, businesses and the economy. New ways to detect and prevent mortgage fraud have been developed to discover and prevent criminals before the fact; rather than after the damage has been done. The article An Insight into the World of Mortgage Fraud in the US and UK by Beverly Houlbrook talks about mortgage fraud and how it is becoming more evident “as economies enter recessionary periods and house prices tumbles” (34). It states how the global mortgage markets are providing “more opportunities for professional, innovative fraudsters to exploit and profit from loopholes and system weaknesses” (34).
Houlbrook goes on to discuss the different types of mortgage fraud ranging from soft fraud to professional mortgage fraud. Fraud for housing (a soft fraud) is when an applicant is acting alone to acquire property. In terms of volume it is the most common type of mortgage fraud based on income and employment misrepresentation on their mortgage application. Fraud for profit (a professional mortgage fraud) is when numerous borrower identities, lending institutions, “fictitious properties and overvalued professionals are involved” (34). The losses created by fraud from profit may be substantial and could lead to national and international headlines. It can also support the lifestyles of criminals by “hiding money laundering activities, arms dealing and drug trafficking” (34). Two types of fraud that is common in the US and UK is identity or house theft and occupancy fraud (buy-to-let (BLT) mortgages). House theft occurs when property is bought or financed “without the knowledge of the property owner” (35). Occupancy fraud occurs when “BLT landlords attempt to disguise buy-to-let mortgages as residential loan applications in order to benefit from more beneficial interest rates” (35).
Next, the article discusses the different products that were available now than in recent times, global trends, and the shifting balance of power between marketing and risk functions. During a comparison of markets between the US and UK a key difference in housing prices was illustrated. Housing prices in the US decreased by fifty percent and the housing prices in the UK was not really affected because there is an undersupply of housing.
A case study was done on Thamesmead (SE28); a major UK mortgage fraud. In 2007, eleven arrests were made in connection to the fraud in south-east-London. The fraud “revolved around 84 new build flats/apartments that were brought off-plan and resold at over-inflated prices” (39). A bulk of the “loans were taken out using false identities and/or mortgage mules” (39)....