Mortgage Fraud - What to look out for

Mortgage fraud is on the increase and fraudsters are becoming increasingly creative about the ways in which they commit mortgage fraud.  Conveyancing Solicitors must therefore be extra vigilant where they suspect mortgage fraud taking place and take all necessary steps and precautions.

For solicitors, the Law Society guidance is very clear where mortgage fraud is suspected. The solicitor must cease acting immediately. Failure to comply with Rule 2. 01 of the Solicitors Code of Conduct 2007 would mean the solicitor can be prosecuted for having aided and abetted a fraud.

A solicitor or conveyancer may also be guilty of conspiring to defraud by taking on a conveyancing matter where they suspect mortgage fraud is involved so great care must be taken when taking initial instructions. The right questions must be asked where anything of concern is involved to assess whether there is a risk of mortgage fraud taking place.

Types of fraud

Income Fraud

Where the borrower overstates their income, e.g. to secure a higher mortgage loan offer. A solicitor who knows their client does not have a job or knows they has serious mortgage arrears on another property should be on the look out for possible mortgage fraud.

Identity Fraud

This may happen where the borrower does not reveal his true identity, e.g. not using his full name. He may be trying not to reveal that he has another mortgage. It could also happen where the borrower is selling to a company at an inflated price which is controlled by him. Also, if buying in the name of two parties or more, the identity of each must be checked and instructions must be taken from each party.


Price Reduction

Where the price contained in the Transfer is more than the agreed price. This can come about is the seller says a reduction was made because of repairs that are needed to be made at the property or as the buyer has paid an amount to the seller already. Fraud therefore may occur where the full amount is not actually paid by the Buyer.

Fraudulent Valuation

Where it seems that the valuation given on the property is much higher than what it should be. Conveyancers and Solicitors are not expert on property valuations but they should be alerted to possible fraud if the value seems overstated compared to properties of a similar nature in the same area.

Roll-over fraud

This occurs where someone sells a property to an associate at inflated price. No mortgage repayments are made and when the lender is about to repossess it is sold to another associate for a higher figure and so on and so on.


This can happen where a conveyancer is instructed on the purchase of a property for, say £150, 000. The buyer says that the property is to be bought in his name but is being sold to another party at the price of £200, 000. The seller may also be a party to the fraud but on some cases, it is just an innocent party. The exchange of contracts happens simultaneously in each case with a quick completion – this is a common feature in transactions such as these. The lender is then left with a property with a value of £150, 000 only as security for the loan.


Money paid directly to the seller

Monies that are paid directly to the seller, e.g. a deposit, which may indicate mortgage fraud.

Solicitors and Conveyancers

A solicitor or conveyancer is under a duty to act in the best interests of his client and where he acts for both lender and borrower a duty is owed to both.

Where something suspicious or unusual arises, the client must give consent to its disclosure to the lender. Where consent is not given the best course of action would be to cease acting for both parties since the solicitor cannot continue acting for one party without the consent of the other.

Note if there was no valid retainer because of the crime/fraud exception then a solicitor can inform the lender without the consent of the client. If knowledge or suspicion is formed during the course of the retainer with the lender then the solicitor has a duty to inform the lender since it will affect their decision as to whether or not they make an offer.

It is important to understand that mortgage funds obtained due to fraudulent means will be the proceeds of crime, and action can be taken under the Proceeds of Crime Act 2002.