6 out of 10 lenders flag foreign investment
By Chanice HenryB&C research has revealed that 60 per cent of lenders consider overseas investors as a red flag for fraud and 50 per cent think the same of unencumbered properties
B&C research has revealed that 60 per cent of lenders consider overseas investors as a red flag for fraud and 50 per cent think the same of unencumbered properties.
Findings reveal that six out of the ten lenders participating in B&C’s study agreed that overseas investors and unencumbered properties were in some cases seen as a red flag for fraud.
At the Association of Bridging Professional’s (AOBP) AGM, Mark Posniak of Dragonfly Property Finance said: “I do consider a foreign national, unencumbered property where you cannot follow your money a very high red flag, yes. That’s a no for us. If it’s a foreign national not in this country, encumbered property and they’re going to take their money outward, I’m out.”
When it comes to overseas investors, Capital Bridging partially agreed with Mark, it said: "Our funding lines do not permit us to lend to overseas investors due to the greater risks involved in the transaction, not just fraud. Issues surrounding know your customer and money laundering as well as not being able to substantiate assets held abroad.”
On the other hand, Aldermore Bank responded to the question by saying: “In isolation, no. The presence of an overseas investor doesn't immediately flag for possible fraud. Through our Commercial Mortgage business we will consider applications with overseas investors but require full disclosure and compliance with KYC & AML checks to satisfy ourselves of the individual's identity, source of funds and understanding of their wider investments.”
Participants who said yes to this section explained that as cases are approached on a bespoke basis decisions on overseas investments are determined by the situation at hand.
For example, Regentsmead said: We do see certain situations as a red flag, applications from certain countries but we do judge every case on its individual merits.”
When asked if unencumbered properties are flagged as a potentially fraudulent case, five out of the ten said yes.
The Lancashire Mortgage Corporation fell on this side of the survey and answered: "Yes, due to the increased money laundering threat and possibility of property ‘hi-jacking’. Again we assess the application carefully and carry out additional checks prior to funding."
When responding to the same question, like 50 per cent of the study, Hope Capital said: “No - As long as your legal process and framework is thorough, there should be no problems with taking a charge on unencumbered properties. This is why using a good law firm and solicitor is paramount.”
When asked if there is one key red flag for any fraudulent application, 40 per cent of the survey said ‘No’.
Omni Capital said: “If there was only one type of fraud and it followed a prescribed format, then detecting fraud would be a relatively straightforward process. Unfortunately, fraudsters are often sophisticated and inventive individuals. This makes fraud prevention difficult and lenders have to ensure that they are always alert to potential risks.”
It added: “Data sharing amongst lenders such as the astl Register is invaluable. Whilst we might all be competitors for new business, we are united against fraud.”
However, one lender mentioned it had become diligent to some key traits of fraudulent activity. Mint Bridging said: 'We have seen issues with seller’s solicitors not really acting for the seller and the sellers or borrowers being located more than a 25 mile radius from their solicitors.'
The remaining five participants did not answer the final question.
The 10 lenders in the survey included: Lancashire Mortgage Corporation, Hope Capital, Mint Bridging, Regentsmead, Capital Bridging, Aldermore Bank and Omni Capital.
The study also took into consideration three answers that were given on this topic at the AOBP’s Annual General Meeting last month. These include, Duncan Kreeger of West One Loans, Gareth Lewis of Precise and Mark Posniak of Dragonfly Property Finance.
Keywords: B&C, Bridging and Commercial, research, lenders, survey, overseas investors, unencumbered property, red flag, fraud, Association of Bridging Professionals, AOBP, Mark Posniak