Emergency inspections by SRA inspectors of firms where property fraud is suspected are estimated to have saved lenders £15-20m in the past 9 months, as part of an SRA campaign to target solicitors involved in property fraud, and to give guidance to solicitors who might become involved unwittingly.
There has been concern about rising levels of property fraud from a number of sources, with the SRA's own figures showing an increase in reports of suspected property fraud from 85 in 2005 to 356 in 2008. We dealt with more than 400 similar reports in 2009.
In the 12 months to the end of December 2009, the SRA completed 106 investigations into firms where there was suspected misconduct in relation to mortgages or property. Of these 106, 22 firms have been closed down by the SRA, 24 cases have been referred to the police for investigation, and 30 cases have been referred by the SRA to the Solicitors Disciplinary Tribunal, which has the power to strike off solicitors. There are other investigations continuing.
The SRA has issued advice and warnings to all solicitors' firms, alerting them to the warning signs of suspicious transactions, and reminding them of their obligations to ensure they do not become involved and to report any suspicions.
Head of the SRA's Fraud and Confidential Intelligence Bureau Steve Wilmott said: "Last year the SRA stepped up its work to prevent, deter and tackle mortgage fraud. We've recruited two dedicated fraud officers, increasing our fraud unit to 18. Mortgage fraud is a serious issue for homeowners and lenders. We are working closely with major lenders and the police to share intelligence and take prompt action."
Lloyds Banking Group's MD for Mortgages, Dan Watkins said: "The Financial Services Industry faces a serious and continued threat of mortgage fraud that is orchestrated by rogue solicitors. Lloyds Banking Group supports all efforts that are made to combat this threat."
Detective Superintendent Robert Wishart, of the City of London Police, national lead force for fraud investigation, said: "We are committed to working closely with the SRA during 2010, and beyond, to target corrupt solicitors who, we believe are a significant enabler of property fraud. Working in collaboration will help us to better understand the threats and give us the opportunity to take preventative and enforcement action to protect the financial community".
Notes to editors
- What is Mortgage fraud?
Mortgage fraud occurs when a loan is obtained on the basis of untrue statements to the lender, such as when a lender is led to believe that a property is worth more than its true value and therefore lends more than it would if it knew the true position. Some property frauds do not involve a mortgage – only the deception of buyers. The facilitation of mortgage frauds by solicitors can be due to incompetence rather than dishonesty.
- Arrangements are in place – through indemnity insurance and the Compensation Fund - to ensure clients are protected where solicitors have failed to account for clients' money.
- The SRA has recently published a leaflet warning solicitors about property fraud and alerting them to the warning signs, see www.sra.org.uk/warningcards
- Consumers can suffer directly from the improper obtaining of mortgages:
- dubious brokers might charge them unnecessary fees;
- they are unable to pay their mortgage which, usually because of the broker, has been obtained at too high a level for them;
- sometimes they find that the property they have bought is in poor condition and worth less than they paid for it—particularly if the broker is associated with the seller;
- they feel unable to take action to help themselves because they are warned that they are implicated in wrongdoing—often because the broker uses this as pressure upon them.