Protect your business from fraud

Staged income is one area where lenders have seen an increase. For example, a customer has received a recent wage rise which is quite a big jump in income and happens to be the amount they need for the affordability to work. Often there is a family connection, e.g., they work for a family business, making it ‘easy’ for applicants to receive a temporary wage increase which is not in fact real.

Another area is around second jobs. For example, a recent second job has been taken, with the income needed for affordability. Often the total amount of working hours is not plausible, and a family member has employed them.

Lenders are sharing more risk data. They will check, for example, with the client’s existing bank to see how long the customer has been receiving the income.

Application flags

Whenever you submit an application, it will be checked by the lender for any suspicions of fraud. When there are issues on an application, e.g. 2^nd job, the employer is far away from the applicant’s home, a big pay rise, employment by the family, the applicant appears to earn more than the employer etc, then the application will be flagged.

The lender will then increase the questions about the application and also ask for further documentation.

Of course, just because there is a flag does not mean this is not a genuine application. You can avoid any misunderstanding by making sure when the application is submitted, more detail explaining the applicant’s circumstances that may mitigate the risk, is provided upfront.

Remember, the underwriter has not had the benefit of getting to know the client in the same way you have. Use the application notes section to provide more information about something that may otherwise appear suspicious if not explained. Don’t wait for the lender to ask for the information!

If the lender does ask for more information or documentation, It’s incredibly important to respond to any requests, even if the case is not proceeding, or the lender could add suspicion to your lack of response.

Sending a client’s application to multiple lenders to see what ‘sticks’ could also earn you a red flag from a lender. Lenders expect you to have reviewed their criteria and submit cases to them that are a suitable fit. While there may not be a suspicion of fraud, you can still be removed from a lender's panel for quality if you continuously send applications they have to decline due to criteria.

Check out the resources offered by the Society of Mortgage Professionals to help you learn more. Many lenders are also offering fraud training, with HSBC, Lloyds and Barclays regularly offering events. Take the time to understand more in this area, and the common trends, hear about real-life examples and ultimately, protect your business!