Mortgage fraud doubles

Mortgage lenders could soon be hit by a new crunch as the levels of fraud claims have doubled in the last year.

Yesterday the Council of Mortgage Lenders (CML) revealed a 42 per cent fall in mortgage lending to £17.7 billion in September, but it is estimated there could be as much as £17 billion worth of fraudulent loans on bank and building society books.

The Land Registry told Channel 4 News that in 2007-2008 it paid out almost £4 million in compensation to lenders and defrauded homeowners, compared to just over £2 million in 2006-7.

Paul Doxey, a forensic accountant at Navigant Consulting, told Channel 4 News: "There's been a complete explosion in mortgage fraud.

"There is probably over £7 billion worth of fraudulent mortgages sitting on lenders' books. It could be much higher than that - as high as £17 billion."

He went on to estimate between 30,000 and 60,000 properties in the UK could have been bought with fraudulent loans.

Property fraud occurs by criminals obtaining false ID papers of a homeowner and then going to the Land Registry to transfer ownership to a new name. Under the new name they obtain a mortgage and then disappear with the cash, leaving the owner facing repossession.

A spokesperson for the British Bankers Association said: "This is something we remain concerned about.

"In a market downturn the risk of fraudulent activities always increases, especially given the big gains seen recently in the property market."

Earlier this year the BBA raised the problem with the Financial Services Authority to investigate.

Watch the Channel 4 News report below