Safeguarding against the unexpected
25 November 2008
With property offering lucrative returns for fraudsters, lenders are looking for ways to mitigate their lending risk.
In the past, obtaining a loan to buy a home required extensive paperwork. As technology evolved to make the process more efficient, homebuyers now enjoy a more streamlined experience. However, technology has increased the risks of fraud and identity theft.
Skyrocketing property prices have made the business of mortgage fraud very attractive. In fact, identity theft and related frauds are the fastest growing crimes in the UK. Recent figures released by the Government estimated UK taxpayers lost £1.3 billion to fraud costs.
Even the most diligent lenders and solicitors can fall victim to a slick fraudster. Documents such as pay slips, passports and utility bills are easily re-produced and can be purchased online for as little as £35. Home computers may have brought more convenience for users but also provide tools to commit fraud more easily.
Mortgage fraud manifests itself in several ways. Some criminals choose to alter documents to obtain a mortgage higher than would normally be acceptable. This is fairly simple but effective. Larger frauds tend to include various parties in collusion to benefit from the illegal mortgage proceeds.
Knowing your client is of paramount importance to lenders. But, as criminals become more sophisticated, this may not be enough to safeguard against fraud. It may not always be obvious that someone is not who they say they are and even with a thorough check of the documents, a lender could be fooled by a sophisticated fraudster. By the time a false identity is uncovered, the thief is enjoying the proceeds of a fraudulent mortgage and the lender is facing a significant financial loss.
Lenders looking to recoup their loss may consider pursue the completing solicitor. In most cases, the solicitor has also been fooled by the same con man. If a solicitor has failed in his duty, pursuing a claim could take years. For lenders looking to safeguard themselves against thieves and fraudsters, there is a solution.
Title insurance covers the risks of fraud and forgery and complements the service provided by solicitors. The policy provides cover for a lender and any successor to its title in the mortgage. If the lender incurs a loss due to fraud or forgery, the claim will be paid within weeks or months once the lender’s loss can be quantified, rather than having to wait for the resolution of lengthy and expensive litigation through the courts that may take years to resolve.
Stewart Title Limited assumes responsibility for dealing with any claims made under the policy and the financial losses to the lender which result from the defects covered under the policy. Stewart Title offers a comprehensive range of policies to insure title and provide cover for lenders.
Title indemnity insurance can be used for both residential and commercial properties and requires a minimum of title investigation before cover is available and allows a lender to complete a re-mortgage in a matter of days rather than weeks.
Even the most careful lender following the most stringent guidelines and policies can fall victim to a fraudster. The UK’s booming commercial and residential mortgage markets present an unprecedented opportunity for financial fraud. Title insurance helps mitigate the risks of issuing mortgages and provides cover against such fraud.
For more information, contact Stewart Title on 01392 680680.