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24 September 2014
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The Money Programme uncovers massive mortgage fraud

BBC TWO's The Money Programme has revealed a huge mortgage fraud with brokers from some of Britain's biggest estate agents and financial advice groups advising customers to break the law and lie about their incomes to get massively bigger mortgages.

And it shows how the illicit cash raised by this method has been pouring into the housing market, boosting prices and leaving many people risking financial ruin.

An undercover investigation for The Money Programme – Mortgage Madness (Wednesday 29 October, 7.30pm, BBC TWO) shows adviser Fraser Wright at Townends saying: "I've done it for myself and for my personal friends. Just remember what you put on the form and make sure the mortgage is always paid."

Mr Wright told the programme's undercover researcher he had claimed to have earnings of £100,000 a year on his own mortgage application.

"It's a walk in the park," he boasted. "They don't know."

Martin Ridge, a mortgage adviser recommended by Haart, told the undercover researcher to state their income as £56,000.

He said: "It is lying, but that's what you have to do."

Dr Desmond Fitzgerald, an expert in financial markets who advises financial institutions and regulators, said: "Over the past two years most forecasters, including myself, expected the housing market at best to stabilise and more likely to fall.

"Instead it's powered ahead. Now clearly if there is this extra flow from these fraudulent self-certified mortgages, that will push hundreds of millions of extra cash flow into the housing market.

"So you get this sort of self-feeding frenzy, a real bubble effect."

Undercover researchers from The Money Programme posing as first time buyers talked to advisers recommended by ten estate agents in Ealing, West London.

Nine encouraged them to take out self certified mortgages – where borrowers simply state their incomes and lenders promise not to check.

All nine advised the buyers they would have to lie about their true income to secure a larger mortgage, raising the amount which could be borrowed from around £150,000 to £220,000.

In Manchester three out of seven mortgage advisers in Didsbury recommended exaggerating the researchers' incomes.

Tony Shaw QC, a criminal lawyer specialising in serious fraud, told The Money Programme that borrowers could be in serious trouble if caught.

He said: "A person who fills out a form knowingly entering a false statement about his income or his occupation is at risk of going to prison. It is a serious offence."

For mortgage brokers who advise borrowers to lie, the penalties could be even more severe.

The Money Programme found that during the investigation brokers advised the undercover researchers to lie on applications for self-certified mortgages from, among others, The Bank of Scotland, The Mortgage Business and Birmingham Midshires.

All three are part of the Halifax Bank of Scotland Group – Britain's biggest mortgage lender.

The Money Programme visited three Birmingham Midshires high street branches in the West Midlands.

In all three the undercover researchers were offered self-certified mortgages far bigger than the official Birmingham Midshires three and one quarter times salary multiple allows.

The company has since suspended three mortgage consultants.

In the main Birmingham Midshires City Centre branch, HBOS adviser Gurjit Sandhu said he had helped a client who wanted to buy a £400,000 house.

Mr Sandhu said: "His income was just about the early £30,000s. It wasn't exceptionally good. He was having a mortgage at £340,000 and to borrow that I showed he had an income of £104,000."

Other brokers caught on camera advising the practice were recommended by Rolfe East, Townends, Kinleigh Folkard & Hayward, Bairstow Eves Countrywide, Haart, Barnard Marcus, JAC Strattons, Northfields, Roberston Smith and Kempson. All recommended the self-certification route.

Dr Fitzgerald said people not only faced criminal sanctions but also the prospect of financial ruin.

"If we have a six times multiple or more then you end up effectively paying 50% or 55% of your after-tax income in mortgage repayments and a lot of people would find that very difficult, if not impossible to manage," he said.

In the week before broadcast The Money Programme informed all those who had been secretly filmed about the programme and the allegations in it.

Many of the estate agents and financial advisers the programme approached have launched enquiries.

The Money Programme requested an interview with HBOS Chief Executive James Crosby but he declined to be interviewed.

Notes to Editors

Self-certified mortgages: Self-certified mortgages were first introduced some 15 years ago to cater for self-employed people with erratic or difficult to prove earnings who had problems obtaining a traditional mortgage.

At first, borrowers' accountants were asked to verify the incomes people claimed.

But in recent years, with increased competition, these income checks have mostly fallen away and now even salaried employees, with incomes that are easily checked, can get a self-certified mortgage.

Most self-certified mortgages require borrowers to put down a significant deposit, typically 15% of the price of a property. This protects lenders if borrowers default.

The self-certification mortgages offered by most major lenders require an income declaration to which a stipulated multiple is applied.

In the case of the HBOS brand BM Solutions, it was 3.25 at the time of researching this programme, the HBOS brand Bank of Scotland applied a 3.5 multiple.

There is a small number of self-certification mortgages which do not require any statement of income.

The lenders in this case undertake what they call an "affordability test" to see if a borrower is likely to be able to meet the repayments they are taking on.

Sales of self-certified mortgages have been growing on average at over 27% a year over the past five years.

Source: Datamonitor Study 

The Ealing Research: Posing as first time buyers, researchers from The Money Programme team visited ten estate agents in Ealing, West London.

They asked for mortgage advice and, in every case, were referred to a specialist mortgage adviser.

Many of these advisers were connected to the estate agent through an affiliated company. Others worked for separate companies.

All the BBC's digital services are now available on Freeview, the new free-to-view digital terrestrial television service, as well as on satellite and cable.

Freeview offers the BBC's eight television channels, interactive services from BBCi, as well as 11 national BBC radio networks.



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