Mortgage Fraud Buy to Let Lending and Property Clubs
My blog post last week (about what mortgage companies could do to support landlords more), generated 27 emails from managers at buy to let mortgage lenders and ten from landlords.
One aspect that I referred to, in passing, was how the mortgage lenders had been “behind the play” in terms of understanding how bad buy to let mortgage lending and mortgage fraud was being carried out in respect of below market value (BMV) deals financed by techniques such as Bridging Loans and Next Day Remortgages.
I have written at length about this in other blog posts, so do not propose to go into it again here. All I will say here is that the mortgage companies could still do a lot more and do it a whole lot better.
To assist my understanding of what mortgage lending banks do today and how they assess risk, I now subscribe to “Mortgage Finance Gazette” – a publication widely read by those concerned with the business of making mortgage loans with a readership including mortgage companies, mortgage brokers, valuers and conveyancing solicitors.
A lot of the talk in this magazine these days is about mortgage fraud and bad lending – who was responsible for it happening in the past, who is going to pay for the past mistakes and how to avoid making mistakes in the future.
Of course, this is all rather late in the day, but “better late than never” I guess. But there seems to me to still be a long way for the mortgage lenders to travel.
The Latest Wheeze
I’m not a fraud expert but I have said many times that if the mortgage companies want to see how they might be taken to the cleaners in the future, they really ought to tear themselves out of their offices and get down to see the latest wheeze the “Get Rich Quick in Property” advisors are coming up with at the various “free events” that they put on to attract the more “hands off” (some would say, lazy) investor.
Of course property advice from property clubs is not regulated and at these events there seems a never ending stream of “investors” ready to hand over large amounts of cash to advisors who claim they can source “Below Market Value” properties for them. At least four of these firms have now gone bust taking a lot of the “investors” cash with them. (If you are an “investor” and you wish to buy property this way, please check out the trading position of the “advisor” at Companies House first and never hand over large amounts of money to an advisor to source a portfolio of properties for you. If you really are tempted, at least do it on a “one property at a time basis” only.)
Strange Financing Techniques
Why should the mortgage lenders attend these types of events?
Because a lot of the time the deals the “advisers” propose using strange financing techniques which they sometimes try to run in parallel with a straight mortgage application.
Not all the property advisors are bad. Far from it. But if I was a lender I would like to know about such techniques and yet, mortgage lenders are conspicuous by their absence at the events.
In the last edition of Mortgage Finance Gazette, one expert was still talking about Next Day Remortgages and Back to Back Bridging Loans, but the game has already moved on – to Lease Options and other techniques.
And yet, how many lenders and their advisors are even aware of these new techniques?
My local building society had to be bailed out and is now in the process of changing its name – and it had to do it primarily because of bad lending on buy to let (which also included some fraud.)
All mortgage lenders need to sharpen up their game to avoid the same fate in the future.
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LettingFocus.com is the home of Private Rented Sector expertise and Landlord Information and I’m David Lawrenson, a landlord and property investor myself for over 25 years and author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 25,000 copies sold (to Jan 2011).
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