The Financial Conduct Authority has backed up some lenders recently warning that the MMR restrictions for owner-occupier purchasers might lead some of them into making fraudulent applications for buy to let mortgages.
We expect firms to ensure that application verification procedures for buy to let products are robust says a guidance note from the FCA. We are conscious it goes on that some borrowers who are constrained by the flow limit might be encouraged to make fraudulent applications for buy to let mortgages.
Back in the spring a poll of 382 brokers conducted by Mortgage Strategy magazine revealed that 53 per cent of advisers - 203 individuals - had a client who attempted to get a property for residential purposes by getting a buy to let mortgage.
The FCA regulates the residential mortgage market but not the BTL sector. Some brokers have been removed from mortgage lender panels for deliberately submitting buy to let applications for residential mortgage clients, to avoid new MMR affordability checks which came into effect in April.
Robert Sinclair, chief executive of the Association of Mortgage Intermediaries, says his organisation has been aware of the fraud for some time with some lenders who rejected an application for an owner occupier mortgage finding just days later a buy to let application from the same borrower for the same property.
However, other lenders have dismissed the problem - known in the mortgage industry as gaming' - as an exaggerated threat.
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