Fraud-watch warning for lenders

Lenders are being urged to be on their guard against rising levels of mortgage fraud as the economy picks up.

The National Fraud Authority said organisations involved in all stages of the lending process should continue to work to combat mortgage fraud, which it estimates costs around 1bn a year.

In a report published today the group said significant progress had been made by public and private organisations to combat the problem during the past 12 months, leading to around 130m-worth of fraud being stopped.

But it called on these groups to continue to work together to combat new fraud threats.

Its chief executive, Bernard Herdan, said: "In the economic downturn, there has been a reduction in the availability of products that were targets of fraud such as sub-prime, buy-to-let and self-certified mortgages.

"The economic climate also has increased pressure on lenders to reduce costs, so there has been a greater emphasis on fraud prevention, detection and recovery of losses.

"The NFA urges mortgage lenders to maintain this robust approach in the anticipated economic upswing."

One of the key problems in detecting mortgage fraud is problems lenders and intermediaries sometimes have identifying fake documents.

However, a pilot scheme run by HM Revenue & Customs to help lenders tackle the problem helped to prevent commercial frauds totalling 111m.

The industry is also targeting corrupt mortgage intermediaries, solicitors and surveyors involved in mortgage fraud.