Should bank be reported for increasing salary on mortgage application?

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Timjoe

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In 2007 a mortgage applicant went to a broker with proof of income, of €40,000 per year. The mortgage was for an expensive piece of land. She gave the broker three years of audited accounts. Details of her income were left blank on the mortgage application form. However, some years after taking out the mortgage, the borrower obtained the file from the bank, having made a Subject Access Report request under the 1988 and 2003 Data Protection Acts. She was shocked to discover the bank lied about her income. It went from 40k a year to over 160k a year, despite her accounts, which she had provided to the bank, showing it was 40k a year. On internal notes the bank said because of the borrowers annual income of over €160,000 she could afford the mortgage. The borrower was not asked how she would pay for the property, and she always said her income was €40k a year. Maybe in her own mind she thought she could sell it after six months or a year and make some profit. No projections were made. Unsurprisingly it was repossessed and the borrower is now deceased. Of course the borrower, an uneducated lady of modest means, should not have borrowed the money, but that is beside the point. I am not looking for judgement on the borrower.

As someone in the bank changed her income and invented a figure of over €160,000 per year, presumably to make the sale and get the commission, is that not fraud? If her income was not put down by the bank at 160k, the borrower would not have been able to borrow so much money. After getting her file years after taking out the mortgage, the borrower asked the bank for an explanation and the bank could not explain it. In the borrowers file it is all there in black and white, the audited accounts showing 40k per year, and the internal bank letter stating the borrower had an income of about €160,000 per year. and hence could afford the mortgage. The borrower could not have changed the figure from his audited accounts provided to the figure on internal bank documentation.

Should the matter be reported to the Gardai Fraud department, as someone in the bank benefited, maybe got a commission or a bonus as a result of altering the figure so much, and if white collar crime is not at least investigated, it will happen again? If someone changed documentation, got 5k commission and done it 20 times, that is €100,000. I have seen people go to jail for less. Given what happened to shareholders and borrowers too, there were victims.
 
As you've rightly done the first port of call would be the lender. They would be best placed to examine the issue against their own internal policies and checks. To see if they were a victim of fraud. From there they might want to involve the guards.

Of course lending standards in 2007 were a lot less rigorous then they are now. It was more like the wild West back then. Policies were fairly lose. Remember this was the time when you could get many multiples of income not too mention multiples of potential income. Some banks would lend against potential rental income from renting a room regardless of whether you did it not. Mute rooms more money..... Credit policys were made up in the spot, 100%+ mortgages were much more common than today. A banking crises later things are a lot more sensible. So I doubt you'd find many policies that existed baxk then that apply today


But to play devils advocate:

You mention that audited accounts were provided. Did the borrower run their own business. Were there additional income/revenue accruing to the borrower from business? There might be a legitimate reason why the bank looked beyond a basic salary when assessing their borrowing capacity.

Was there a commercial element to the purchase of the land that might have warranted an assessment of the firm and not just the individual?
 
When the borrower contacted the bank, and obtained the file from the bank, it included getting copies back of the accounts showing annual income of 40k. The bank could not explain why they stated her annual income was over €160k. However, they did say they did not think there was fraud involved. Maybe they were afraid of opening up a can of worms? They did not want to admit a fault on the banks part, as the banks image is bad enough?

As regards your second paragraph, even though 2007 was a different time, the borrower would not have been lent the money on a salary of 120k never mind 40k...so why did the bank inflate her income to over 160,000 in order to sell the mortgage / get the commission? Surely white collar crime should be investigated to see if it occurred, especially when there is a paper trail? If it did happen, surely it should be punished, no matter when it occurred?

Skrooge, the borrower was self employed and the accounts were audited. There was no additional income like rent a room at home or any additional income or business. She was renting a small apartment to live in herself and had no room to rent, no anticipated inheritance or windfalls etc. And no, there was no firm involved with the borrower, or that the borrower was part of, and no commercial plan sought or provided.

If changing figures so dramatically on important bank documentation, with life changing consequences, could occur 13 or 14 years ago and went unpunished it could occur again, history always repeats itself as they say, so the more I think about it there is more than one reason for at least reporting suspected white collar crime? Has anyone else reported such matters to the Garda Fraud dept?
 
Timjoe said:
so why did the bank inflate her income to over 160,000 in order to sell the mortgage / get the commission?
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There's a reason I asked if a broker was involved.
Who do you think got the commission? Who benefitted from changing the income figure?
 
I would be sure of the facts before escalating the matter.

For slightly more complex cases, banks will look at what a ‘self-employed’ borrower’s income could be if they chose to increase it.

e.g. Say I’ve my own company or business. I may choose to pay myself €40k to use up my 20% rate band and look to accumulate the rest via pension or a deferred retirement relief claim. But let’s say the underlying profits are €160k. I’ve seen banks use the higher figure.

I had one pal whose income was zero because he was taking tax-free loan repayments from his company; eventually a bank saw sense and looked around that.

I’d also be less suspicious about an increase from €40k to €160k than I would be for a smaller jump. It would be such an egregious fraud, my suspicion is that there may be a reasonable explanation.
 
Timjoe said:
Should the matter be reported to the Gardai Fraud department, as someone in the bank benefited, maybe got a commission or a bonus as a result of altering the figure so much, and if white collar crime is not at least investigated, it will happen again? If someone changed documentation, got 5k commission and done it 20 times, that is €100,000. I have seen people go to jail for less. Given what happened to shareholders and borrowers too, there were victims.
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This will be difficult to impossible for the Gardai to do anything with now that the borrower is no longer with us. The details presented here would be a long way off the requirements to trigger a fraud investigation.

My own experience talking to brokers back in those days was some were willing to get a little creative (a little, not 4x) in the form-filling, but only in collaboration with the borrower and with the objective of enabling them get the loan they wanted.
 
Leo said:
My own experience talking to brokers back in those days was some were willing to get a little creative (a little, not 4x) in the form-filling
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I've heard this said before and don't doubt it, but how were they able to get away with it? Did the banks just take the broker's word on what the mortgage applicant's salary was, without looking for proof via a salary cert etc from their employer?
 
Coldwarrior said:
I've heard this said before and don't doubt it, but how were they able to get away with it? Did the banks just take the broker's word on what the mortgage applicant's salary was, without looking for proof via a salary cert etc from their employer?
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Allowances, bonuses, share options, the banks were busy riding a wave and fighting for market share at that point, there was likely a lot less scrutiny of the details than there is now.
 
RedOnion said:
There's a reason I asked if a broker was involved.
Who do you think got the commission? Who benefitted from changing the income figure?
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The bank has not said how much commission the broker got, or if the person in the bank who approved the mortgage got a bonus or commission for reaching a target or whatever. Any proper investigation should uncover who was at fault.

Gordon Gekko said:
I would be sure of the facts before escalating the matter.

For slightly more complex cases, banks will look at what a ‘self-employed’ borrower’s income could be if they chose to increase it.
e.g. Say I’ve my own company or business. I may choose to pay myself €40k to use up my 20% rate band and look to accumulate the rest via pension or a deferred retirement relief claim. But let’s say the underlying profits are €160k. I’ve seen banks use the higher figure.
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I have seen the 3 years of annual accounts, they are very simple. There was no ltd company, no pension, no deferred retirement relief claims, no bonuses, no shares, no share options, no complications. The self employed persons income per year was 40k and her accounts and accountant confirmed that. The bank has failed to explain why they used an annual figure of over 160k. It could hardly have been a mistake when they had clear copies of the accounts and a letter stating the borrowers annual income was 40k. Luckily it is all in the file.
 
I'd start with the broker, kind of unlikely the form arrived into underwriters incomplete with sections re income unfilled so who filled in the income amounts? Most underwriting departments would not be on commission as they are not direct sales, might have a bonus structure alright based on processing loans but it's the broker who gets the commission
 
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Plus what exactly was the mortgage for, 'an expensive piece of land', what's that? A site to build on, farming land, something else? Was there an expected income from the land or some plan for it? Sounds like a commercial proposal of some sort as if a site then where was the money to build the house going to come from as seemed person was over extended even at the increased 'income' amount.
 
You haven't put any figures in this, but you've said an income of 120k wouldn't have been enough to borrow, so we're talking well in excess of 500k?

Any broker would not have submitted an application for that amount on an income of 40k, because they'd be wasting their time.

In my opinion, there's more to this than shared here.

Write to the fraud department of the bank. They've clearly been the victims of fraud, and might want to initiate an investigation.
 
Timjoe said:
Should the matter be reported to the Gardai Fraud department
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No.

The events took place a long time ago. You are a third party. The borrower is deceased and not around to give evidence. Memories of everyone involved will have faded. Most of what you have is paperwork which will be open to interpretation. The chance of a successful prosecution is very low.
 
Monbretia said:
I'd start with the broker, kind of unlikely the form arrived into underwriters incomplete with sections re income unfilled so who filled in the income amounts?
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Little point in doing that though, why would the broker discuss details of a transaction the OP had no part in? Even if they were foolish enough to engage, and then doubly foolish to release something incriminatory, the Gardai are almost certain to do nothing. If there was fraud here, it's between the broker and the bank, so one of those parties would need to make a formal complaint.
 
Leo said:
Little point in doing that though, why would the broker discuss details of a transaction the OP had no part in?
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Well that is true but my point was there is an intermediary here between customer and bank and the intermediary submitted the application so first port of call for whoever is investigating it.
 
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Monbretia said:
I'd start with the broker, kind of unlikely the form arrived into underwriters incomplete with sections re income unfilled so who filled in the income amounts?
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Yes, the form did arrive in to the bank with sections unfilled, and in the file obtained from the bank years afterwards the income section is still unfilled. The broker said they just sent off the form with three years accounts.

RedOnion said:
Any broker would not have submitted an application for that amount on an income of 40k, because they'd be wasting their time.
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It slipped through the net in 2007 anyway, and the bank made the sale of their product and the broker more than likely got their commission.

RedOnion said:
Write to the fraud department of the bank. They've clearly been the victims of fraud, and might want to initiate an investigation.
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The late borrower did write to the bank who said they did not consider it fraud, but neither did they give any explanation for the discrepancy in the figures, even when provided with copies of the accounts and loan documents. The broker did not deal with the bank for very long and no longer does so. It was the borrowers wish before she passed away that it should be investigated properly, so it would not happen again, and any white collar crime should be investigated and punished. Perhaps the bank was afraid to open a can of worms, and possibly unearth other similar cases?
 
Again what was the mortgage for? It doesn't sound like an ordinary type mortgage?

If there was nothing filled in income wise then surely there was a covering letter or something to explain income, no one would submit an application for the large amount you imply with a salary cert of 40k, there is more to this story somewhere.
 
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