The Financial Services Authority has been slowly ramping up its operations to target mortgage fraud in the UK by gathering enough evidence to successfully prosecute perpetrators. High on the list is fraud involving adverse credit mortgage products. This type of home loan is geared towards borrowers who are most at risk of default and are a prime target for fraudsters.
The FSA has recently urged both lenders and brokers to help the authority fight mortgage fraud. The regulator has limited resources and the scope of fraud in the mortgage market is estimated to be enormous. While the Financial Services Authority has had some success in recent years in discovering brokers and borrowers who have obtain home loans by deception, and in some cases has successfully brought them to justice, more needs to be done to put an end to the rampant levels of fraud within the industry.
There are currently thirty five lenders who are involved in a scheme to assist the FSA in uncovering fraud by passing them information which could be relevant. However more lenders are required to join the scheme to make it the success story that the regulator would like it to be and a majority of the thousands of intermediaries in the UK could be of help as well.
High on the list of products that are prone to illicit activity are self-cert mortgages and adverse credit mortgages. These products tend to be made available to borrowers with little regard for credit checks and proof of income and are therefore perfect for fraudsters. When offered in combination a situation occurs whereby a borrower with poor credit could obtain finance with a severely impaired credit file and without proving their income. It seems comical to think that any lender would issue a home loan in such circumstances, but some have been and the delinquency rates are high.
In fact it is this type of mortgage product that has provided most of the fuel for the credit crunch fire. Lenders were dishing out adverse credit mortgage products as if they were credit cards with a five pound limit before their loan books started going bad. These loan books are worth hundreds of billions of pounds worldwide and lenders are now being forced to write off billions of pounds worth because of their own lax lending criteria.
The past cannot be changed, however, so the focus is now squarely on the future. Because of this the FSA has been busy upgrading its anti-fraud devices in order to do its part in ensuring the credit crunch is not repeated in another ten years time. High on the agenda is stamping out fraud related to adverse credit mortgage products and self-certification mortgages.
By eliminating the possibility for people to obtain home loans by deception the risks of delinquency in the future will be greatly reduced. Achieving this goal will require cooperation from mortgage lenders and brokers alike to ensure that the only people who are approved for mortgages are those who deserve them. With the Financial Services Authority leading the charge this may yet happen.
Over the last ten years the availability of credit has significantly grown, resulting in a knock-on affect in the mortgage industry. Recent studies have revealed that the number of people experiencing bankruptcy have a reached an all-time high. In fact, the number of bankruptcies in 2005 had doubled on the number of bankruptcies in the previous year. It would appear to be inevitable that as the amount of people using credit increases the number of people experiencing adverse credit problems also rises. However, surveys suggest that many people using credit do not necessarily realise that running into adverse credit problems can actually result in serious affects in every part of their financial dealings. It is often claimed that as many as a quarter of finance applicants are declined a mortgage, credit card or loan. This can make finding the best adverse credit mortgage seem practically impossible. However, by following a few simple steps, your path to finding the best adverse credit mortgage can be made much shorter.
Best Adverse Credit Mortgage Solutions
If you are in an adverse mortgage situation then there are a few simple steps which you can follow to boost your credit rating enabling you to find the best adverse credit mortgage available on the market
1)Ensure that the financial areas of your life remain stable. This means that you should avoid moving house more than once every eighteen months and avoid changing your jobs to increase your salary. These two documented changes are seen in a negative light by the credit report agency as they show an inconsistency in your financial situation.
2)Always make sure that your name is on the electoral roll. This again shows a level of consistency within your life.
3)Request a copy of your credit report and make sure that you go through it with a fine toothcomb. If you already have adverse credit against your name you need to make sure that it is at least correct. If you find any discrepancies then report them immediately.
4)Limit the number of times that you apply for an adverse mortgage. Every time you make an adverse mortgage application it is documented. This means that the next time that you apply for a mortgage the lender will be able to see how many times you have already applied and will therefore see your application as a high risk. Remember that every mortgage application you make is documented and will result in an even lower credit score next time.
5)Avoid opening any further bank accounts. You need your financial situation to look as stable as possible. This means spreading your debt across your accounts, not opening more.
6)Repay all your current debts on time. This will count heavily in your favour when trying to get the best adverse credit mortgage.
Both Michael Sterios & Elizabeth Grant are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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