On income fraud on self-certification mortgage applications and the bias of journalism reporting

BBC reports that:

A mortgage broker from South London has been banned from the financial services industry for submitting fraudulent mortgage applications.

Apparently, the Financial Services Authority (FSA) said that between June 2006 and February 2008 Isah Attayi Mohammed (the alleged fraudster) had tried to trick three lenders into granting nine mortgages based on inflated incomes. Seven of these loans were for him –greedy- and two more were for customers.

Jonathan Phelan at the FSA said that “Mr Mohammed was found to lack honesty and integrity for submitting fraudulent mortgage applications”.

Let us focus just on his seven mortgages. The journalists, Council of Mortgage Lenders and the FSA quickly name him an “unscrupulous professional in the property industry”.

The story goes like this, these “dishonest” financial advisors get you sorted inflating the customer’s income on self certification mortgages. The client still has to come up with the money for the stamp duty, agent fees, solicitor fees, mortgage fees, deposit and, obviously, the monthly mortgage payments.

I seem to be the only person who cares, but what really interests me is how many clients got fraudulent mortgages through Mr Mohammed –I doubt the banks are going to dig in, what would they shareholders say!-, and how many of them defaulted and got their properties repossessed. Anybody else interested out there?

Speaking of honesty, 3-times, 4, even 5-times net salary are the maximum you can get as a mortgage. It seems that this one-size fits all arbitrary policy is like the constitution or the bible, that is what is written with blood and cannot be touched, modified or updated to the personal circumstances of the applicant. Let’s be honest, once your mortgage moves to the standard variable rate, nobody checks if you can still afford the payments. At that point it doesn’t matter whether you have the income you need (you might have a kid, lost your job or won the lottery).

Well dear scaremongers, stop focusing on the wrong side of the problem here, it is not about dodgy independent financial advisors (and I wonder why they call them independent since they get commission for selling products of particular financial organizations, I call that salesmen), and TV programs about stupid people who bite more than they can swallow (that’s the way some people learn), it is about how the draconian and unrealistic mortgage terms and conditions.

Again, how many fraudulent mortgages have gone burst?

At the end of the day, the amount of money you can afford every month it is not a percentage of your income, but of your disposable income. And here lays the main difference. A 100k a year fashion victim professional couple into going out, holidays abroad, convertible cars and skiing and a 25k a year family with two kids and a dog living below their means are equally able to pay the same mortgage so long as they can put the deposit and purchase costs together.

Stop blaming the middle men, if there is a need, there will always be a supplier. I agree that some people are unable to take upon the basic due diligence required, but I don’t see why they need to be portrayed as victims of a scam. They are victims of their own lack of personal responsibility. Plus, when the self-certification mortgages were created, don’t tell me that they didn’t know people would report biased incomes.

I don’t have any hope of reading anytime soon a story on fraudulent mortgages that never went burst. But I dare banks and serious journalists to dig in.



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