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Sky Exposes The Dodgy Mortgage 'Deals'
An exclusive Sky News investigation has found evidence of mortgage brokers misleading lenders and arranging loans they know buyers cannot afford.
Since the credit crunch began last summer, mortgages have become harder to obtain but we found some brokers prepared to bend the rules to seal a deal.
Mortgage fraud is a criminal offence.
It can land brokers in prison but if it goes undetected then the consequences are just as serious: buyers end up with mortgages they can't afford and lenders are more likely to see their investments turn bad.
Last November, the Financial Services Authority (FSA) warned there were an unacceptable number of dishonest mortgage brokers.
Six months on and our investigation has revealed that bad practice still exists.
We posed as a first-time buyer interested in a flat worth £250,000. We had a 10% deposit, the problem was we only earned £29,000 a year.
Most of the 15 brokers we visited told us such a loan was impossible.
To buy a flat like that nowadays we would need an annual salary of at least £50,000. We had champagne tastes and beer money and most brokers knew it.
In Kilburn in north west London, though, we found a broker who was more obliging.
On his website Sam Ratnam boasts that he is "committed to solve any financial and accounting problem" and within minutes he had solved ours.
"Let's say you're earning £60K", he told us. "We can give you a pay slip for that."
Mr Ratnam doubles our salary on the application form and, for a fee of £100, he offers to forge the payslips to prove it.
The plan works: First National agrees in principle to lend us the money.
The bad news is the monthly repayments will eat up 90% of our take-home pay.
This loan was clearly unaffordable: unless we stopped eating we would have ended up being repossessed.
Misleading lenders is a serious offence but when we asked Mr Ratnam if he feared getting into trouble he told us: "I'm not a fool, I'm doing hundreds of people.
"If it is illegal for me I would have got caught a long time ago".
Mr Ratnam declined our offer of an interview and insisted he had done nothing wrong.
When we visited bigger, more established mortgage brokers we also found evidence of bad practice.
Chase De Vere is a big name in fincanial services and won the What Mortgage magazine Best Overall Mortgage Adviser award in 2006.
Their broker quickly realised we couldn't afford the flat we wanted but instead of telling us to lower our expectations his solution was to invent a second income.
The broker told us: "I would rather you came in and said you were a department manager earning £29,000 but that you've also got another business on the side and earn £21,000 a year from that."
He was well aware that what he proposed could land both of us in trouble with the regulator.
He said: "If they (the FSA) randomly whip out your file and say, right, you gave this guy a mortgage and according to this he doesn't earn that money that's when I start sweating.
"We've broken the law basically".
Despite his reservations, the broker filled out an application form stating that we had a second job - although in the end he decided not to submit it.
Simon Tyler the managing director of Chase de Vere viewed the footage we had shot and said he was disappointed.
"It's absolutely not endemic in our business or in businesses like ours. It's a one-off case that we'll be dealing with," he said.
"We'll be thoroughly investigating and asking you for the tape, going through a training, retraining with our member of staff, disciplining and possibly taking it further than that," he added.
Alexander Hall is another big name in the City and their headquarters are a stone's throw from the Bank of England.
Their advertising promises: "Straight talking mortgage advice".
Their broker had another way around our problem - buy-to-let, then move in.
"Obviously if you do that you're not supposed to move in there but you know can move in there afterwards but then I'm not supposed to advise you to do that," he said.
In a statement Alexander Hall told us they were investigating the incident and took financial services regulation seriously.
It is a difficult job regulating all 5,000 of the mortgage brokers practising in the UK.
Many of the brokers we approached quickly realised we could not afford the flat we said that we wanted and reacted accordingly.
As one broker put it: "You need to lower your expectations or there's nothing I can do to help you."
However, the FSA will be concerned there was a significant minority of brokers who seemed prepared to do whatever was necessary to seal the deal.
Credit Crunch Drives Mortgage Brokers Towards Fraudulent Deals With Buyers |Sky News|Business
An exclusive Sky News investigation has found evidence of mortgage brokers misleading lenders and arranging loans they know buyers cannot afford.
Since the credit crunch began last summer, mortgages have become harder to obtain but we found some brokers prepared to bend the rules to seal a deal.
Mortgage fraud is a criminal offence.
It can land brokers in prison but if it goes undetected then the consequences are just as serious: buyers end up with mortgages they can't afford and lenders are more likely to see their investments turn bad.
Last November, the Financial Services Authority (FSA) warned there were an unacceptable number of dishonest mortgage brokers.
Six months on and our investigation has revealed that bad practice still exists.
We posed as a first-time buyer interested in a flat worth £250,000. We had a 10% deposit, the problem was we only earned £29,000 a year.
Most of the 15 brokers we visited told us such a loan was impossible.
To buy a flat like that nowadays we would need an annual salary of at least £50,000. We had champagne tastes and beer money and most brokers knew it.
In Kilburn in north west London, though, we found a broker who was more obliging.
On his website Sam Ratnam boasts that he is "committed to solve any financial and accounting problem" and within minutes he had solved ours.
"Let's say you're earning £60K", he told us. "We can give you a pay slip for that."
Mr Ratnam doubles our salary on the application form and, for a fee of £100, he offers to forge the payslips to prove it.
The plan works: First National agrees in principle to lend us the money.
The bad news is the monthly repayments will eat up 90% of our take-home pay.
This loan was clearly unaffordable: unless we stopped eating we would have ended up being repossessed.
Misleading lenders is a serious offence but when we asked Mr Ratnam if he feared getting into trouble he told us: "I'm not a fool, I'm doing hundreds of people.
"If it is illegal for me I would have got caught a long time ago".
Mr Ratnam declined our offer of an interview and insisted he had done nothing wrong.
When we visited bigger, more established mortgage brokers we also found evidence of bad practice.
Chase De Vere is a big name in fincanial services and won the What Mortgage magazine Best Overall Mortgage Adviser award in 2006.
Their broker quickly realised we couldn't afford the flat we wanted but instead of telling us to lower our expectations his solution was to invent a second income.
The broker told us: "I would rather you came in and said you were a department manager earning £29,000 but that you've also got another business on the side and earn £21,000 a year from that."
He was well aware that what he proposed could land both of us in trouble with the regulator.
He said: "If they (the FSA) randomly whip out your file and say, right, you gave this guy a mortgage and according to this he doesn't earn that money that's when I start sweating.
"We've broken the law basically".
Despite his reservations, the broker filled out an application form stating that we had a second job - although in the end he decided not to submit it.
Simon Tyler the managing director of Chase de Vere viewed the footage we had shot and said he was disappointed.
"It's absolutely not endemic in our business or in businesses like ours. It's a one-off case that we'll be dealing with," he said.
"We'll be thoroughly investigating and asking you for the tape, going through a training, retraining with our member of staff, disciplining and possibly taking it further than that," he added.
Alexander Hall is another big name in the City and their headquarters are a stone's throw from the Bank of England.
Their advertising promises: "Straight talking mortgage advice".
Their broker had another way around our problem - buy-to-let, then move in.
"Obviously if you do that you're not supposed to move in there but you know can move in there afterwards but then I'm not supposed to advise you to do that," he said.
In a statement Alexander Hall told us they were investigating the incident and took financial services regulation seriously.
It is a difficult job regulating all 5,000 of the mortgage brokers practising in the UK.
Many of the brokers we approached quickly realised we could not afford the flat we said that we wanted and reacted accordingly.
As one broker put it: "You need to lower your expectations or there's nothing I can do to help you."
However, the FSA will be concerned there was a significant minority of brokers who seemed prepared to do whatever was necessary to seal the deal.
Credit Crunch Drives Mortgage Brokers Towards Fraudulent Deals With Buyers |Sky News|Business
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