Nationwide PowerPoint Template

Impact of MMR on
mortgage fraud
Matt Jones
Senior Manager – Financial Crime Risk Policy &
Controls, Special Investigations Department
Overview
What we
thought would
happen
What actually
has happened
Risks, Issues
(…& Opportunities!)
What we put in
place
What we thought would happen
Following the tightening of affordability and plausibility criteria
by Lenders in order to meet MMR rules fraud professionals
across the mortgage market have widely anticipated that there will be increase in
certain mortgage fraud types as individuals struggle to access lending that they may
have previously been eligible for…..
Risk 1
Risk 2
Risk 3
Buy to Let lending is
exploited and levels of
‘Scheme Abuse’ would
increase
The amount of false
documentation used to
support prime
applications would
increase
Regulated Buy to Let
applications are
concealed
What we thought would happen
Prime Residential
Buy To Let
False income
documentation
Scheme Abuse
AKA
Hidden Residential
AKA
“Affordability
Circumvention”
False employment
What actually has happened
Prime Residential
Case by case analysis of the declines confirmed that >95% of the
Declined (fraud) application data for false documentation, false
applications could be linked to known organised crime gangs –
employment and non-receipt of documentation was analysed for the
almost all applications received through direct channels (online &
period February to September 2014
telephone)
NBS internal MMR ‘live’ date
140
120
100
False income
documentation
80
60
40
20
0
March
FalseFeb
Documentation
False employment
April of Proofs May False Employment
June
Non Receipt
What actually has happened
Buy To Let
Prior
to MMR
implementation
Scheme
Abuse abuse
represented
26% of all
Declined
(fraud)
application data
for scheme
and non-receipt
fraud
declines on Buy
to Let
applications.
Post implementation
of documentation
was
analysed
for the period
February to
there has been
a
marginal
2%
increase
September 2014
TMW is 100% intermediary sourced business
NBS internal MMR ‘live’ date
20
18
2% increase in
decline volumes
16
14
Scheme Abuse
AKA
Hidden Residential
AKA
“Affordability
Circumvention”
12
10
8
6
4
2
0
FebScheme Abuse
March
April Non Receipt
May of ProofsJune
What we put in place
- The creation of a dedicated credit underwriting unit (CUU) within Retail
Credit risk department
- Task based plausibility check removed from operational teams, to be
replaced with Holistic Plausibility check for 20% cases, and Income Review
within CUU in 38% of cases
- Low risk cases where plausibility issues are highly unlikely to affect the
lending decision receive income and proof verification by operational
teams
- Dedicated application vetting team within fraud department unchanged
remaining separate from core underwriting process
Risks, Issues (…& Opportunities)
Risks
- Damaging the customer experience of a good quality mortgage customer
- Diluting the skills of credit risk and fraud SME’s
Issues
- The fine line between Plausibility and fraud
- Management of Plausibility declines
Opportunities
- Better demarcation of roles and responsibilities between mortgage processing
teams, credit risk and fraud
- Reduction in ‘soft fraud’ alerts to fraud enabling greater focus on managing
professional enablers and focusing on the drivers of mortgage fraud
Questions
Any Questions?

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