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  • Buy-to-Let

    From Buy To Let To Mortgage Fraud

    Hi Guys
    Just posting this article as its important that we all do our due diligence properly on any company we use to buy property from and also as a heads up to those who want to get into property and build their portfolio as fast as they can and at any cost. Its all part of the education and its good to keep stories like this in the back of your mind.
    Taken from the This Is Money website:
    A buy-to-let investor tempted by a ‘discounted’ Manchester new build flat is £100,000 down and was led into mortgage fraud
    Philip George had suffered a divorce and was unhappy. To rebuild his life he hoped to make a fortune through property.
    That was 2006. Today all his money has gone, debts are mounting and bankruptcy looms.
    First he lost tens of thousands of pounds in a Bulgarian property swindle. A further £7,000 disappeared in a property-related insurance scam.
    Philip was greedy and naive, probably. Unlucky, certainly. But his most ruinous venture was the Manchester flat on which he is losing £1,000 a month and where his mortgage is £100,000 greater than the property’s value.
    To buy this property, a two-bedroom flat in a vast, canal-side development called Spinningfields, Philip committed mortgage fraud, though he says it didn’t seem like it at the time.
    The flat - built by Westbury, now part of Persimmon - was listed for sale at £356,976. But the two property companies who advised Philip to buy the place, one called JAWS Management and the other RightSource Properties, negotiated a ‘ discounted’ price of £321,200.
    When he applied for the mortgage, Philip failed to disclose the discount. Instead he applied for the maximum mortgage of 90% of the higher £356,976 value.
    This meant that in March 2007 the bank lent £321,200, which was 100% of the price Philip actually paid. Today the property might fetch only £200,000, say local estate agents.

    This type of mortgage fraud was common. It was the ruse countless dubious companies peddled when they promised to provide investors with the ’secret’ to buying property with ‘no money down’. Solicitors, valuers, mortgage brokers, developers and even lenders knew it was rife in the heady years of 2006 and 2007. But they never admit to playing a part in it.
    Property law expert Paul Marsh, president of the Law Society, tells Financial Mail: ‘In a buoyant property market all the buyer wants is to get the key and all the bank wants is to sell the mortgage. The solicitors cannot cross-examine their clients.’
    Did Philip understand the seriousness of his actions when, as urged by RightSource boss Adrian Needlestone (see email, above), he lied about the price he was paying to his solicitor, Leeds-based law firm Lupton Fawcett LLP?
    Philip, 43, a degree-educated aviation electronics engineer from Bracknell, in Berkshire, says not. ‘At the time I felt I was being given reliable advice from a range of trustworthy sources,’ he says. ‘I can’t remember ever thinking I was defrauding the lender or committing a crime. I know it seems stupid, and I feel sick thinking about it, but at the time it wasn’t clear.’
    Lupton Fawcett says it has no knowledge of any irregularity in the transaction and no evidence of mortgage fraud being perpetrated. It moved all monies to appropriate recipients and managing director Richard Marshall last week said he had checked the firm’s ledgers to prove it.
    Marshall said he was ‘horrified’ by the implications of Needlestone’s email, but said his firm could demonstate-that it had acted scrupulously at all stages. JAWS Management, which took a 2% fee for ‘finding’ Philip’s property, was dissolved on Tuesday. Its two directors, Andrew Smith and Janet Wearmouth, have emigrated to Hollywood, according to records at Companies House. Calls to the US phone number shown on their files were not answered.
    Adrian Needlestone of RightSource claimed not to recognise the incriminating email. ‘I sent hundreds of emails,’ he says. He denies playing any part in mortgage fraud.
    ‘I’ve never arranged a mortgage, I’m not a mortgage broker. When clients have lost money I’ve often helped them out of my own pocket.’
    Persimmon says it could not be responsible for how third parties sold its properties on, but says it runs checks on all buyers.
    And the bank? The loan comes from a division of collapsed lender Bradford & Bingley, which means Philip’s enormous mortgage and the property itself - if it is repossessed - will become the problem of the UK taxpayer.
    Don’t fall victim Spot the signs
    Philip George admits that he was the architect of most of his financial difficulties and knows that he will be seen by others as stupid.
    But Steve Playle, a Trading Standards official with decades of experience, is sympathetic.
    ‘There are patterns to all of our behaviour which can make us victims,’ he says.
    ‘To begin with, we lose our objectivity. We are desperate to believe that something is an opportunity or bargain, and so our guard goes down. We believe what we want to hear.’
    Later comes the ‘denial’ phase, he says, when people realise they may have made a mistake but refuse to acknowledge it. ‘A little voice tells us we have been stupid,’ says Playle. ‘But we don’t want to listen. We certainly don’t want other people to point out our stupidity, so we keep quiet about it.’
    Bizarrely, some victims in denial might even make their situation worse by, for instance, committing more cash to the same fraudster in a misguided attempt to convince themselves that everything is all right.
    Shame and embarrassment are major reasons why scams go unreported, says Playle, who reckons that for every one victim who approaches Trading Standards, another 19 have been taken in by the same con.
    So how do you safeguard against becoming a victim? Playle’s first tip is to talk to friends and family BEFORE getting involved in any major investment or financial undertaking.
    ‘Involve others,’ he urges. ‘They might change your mind. Even if you are hellbent on doing something foolish and risky, they could make you a little more sceptical and objective.
    ‘And before you enter into any financial arrangements with other businesses, check their references thoroughly.’
    ----
    Does this sound similar to the No Money Down scheme you are currently being sold?!

    Regards
    Wasim
    http://www.greenlightmortgageservices.co...lost-100k/
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    Thanks Wasim. That email telling him to lie to the solicitor is truely shocking! Interesting to note that what we have said all along is happening - the person who signed the mortgage application is the one suffering in more ways than one.
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    Hi Vanessa
    Agreed...the solicitors will be ok, if they are investigated by the Law Society, as they acted on what their client told them and why would they think he was lying to them. Its the "Deal Engineers" who have caused this problem and "Philip" should have done his due diligence as well.
    Claiming he didnt think he was lying to the lender or the solicitor isnt really an excuse as he signed the mortgage application saying that he was buying the prop for the higher price...even though he knew he wasnt.
    Regards
    Wasim
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