News / General

MORTGAGE FRAUD

By SLAS Spokesperson

There has been agreat deal of emphasis recently on changing business practices in relation to house purchase and relative mortgage transactions along with much reference to new business opportunities, consumer interest and competition.  The recent past has seen the authorsation of legal service providers with no qualified lawyer ownership, the refusal of massive lending institutions to instruct borrowers's solicitors and pressurisation of solicitors to use elctronic registration procedures. Behind the scenes and passing almost without mention we have a huge and increasing instance of mortgage fraud.  According to a report in The Independent mortgage fraud almost quadrupled in the first half of 2010, with self certification (another great idea from the mortgage industry) cited as one of the main causes.  One individual incident during 2009 resulted in a fraud worth £200 million and the annual turnover has been reported in the region 0f £600 million.  One would have thought that this was the most obvious and urgent example of consumer detriment and one that merited prioritisation over the increase of business opportunities for large investment companies.  Two elements of the new normality seem particularly favourable to the further growth of mortgage fraud.  The use of electronic registration of transfer of title where the transfer is not supervised by any human sentience, while it has built in safeguards designed at the frontiers of electronic technology, is always going to be subject to the technology of the good guys keeping ahead of the bad guys, the latter of whom are motivated by the acquisition of money and the avoidance of gaol. Then the prospect of the centralisation of legal representation in mortgage transactions, courtesy of LBG, seems likely to break down the personal relationship between the house buyer/mortgage borrower and his solicitor (as witness the re-mortgage industry) whereas any student of anti-money laundering procedures knows that the first and most important defence against fraud is to "know your client" Characteristics of honesty and reliability and proper client relationships as much or even more than technical legal ability have always been the necessary hallmarks of law agents since the notaries of the middle ages and the tabularii of ancient Rome down to the responsible persons of the modern money laundering legislation and the tendency in recent practice to devalue the traditional function of the law agent appears to go hand in hand with increasing fraud and the decreasing reliability of the registers. Almost as obviously as self certified mortgage qualification, the combination of  the removal of the law agent's knowledge of the borrower and the facility of electronic registration of mortgages is a recipe for massive mortgage fraud. That was Friday's rant.

Secretary

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