BRITISH lenders are set to lose millions of pounds on fraudulent mortgages, many of them sub-prime, in the first sign that the home-loan crisis in America could be echoed in the UK.

Four mortgage firms could see an estimated £40m wiped out after lending to bogus borrowers on off-plan apartments in Thamesmead, south London, built by Persimmon, the listed property company.

The firms involved are believed to be Alliance & Leicester, one of the country’s top ten lenders; GMAC-RFC, part of the American giant; Platform, the sub-prime arm of Britannia building society; and Rooftop, part of Bear Stearns, which has already been hit hard by the failure of two of its hedge funds.

The Metropolitan Police is investigating the fraud and has made 11 arrests, but the lenders do not expect to get all their money back.

Alliance & Leicester (A&L) has since reined in its lending on all new-build developments across Britain amid fears that the fraud could be the tip of the iceberg.

Fraud has been one of the hallmarks of the US crisis, where thousands of borrowers misstated their incomes to get loans, often with the encouragement of their brokers. More ambitious fraudsters appear to have taken out multiple mortgages and walked away with the cash, and the scam has been mimicked here.

Persimmon sold apartments in one of its Thamesmead developments to a property developer, Atrex, at a deep discount. Atrex is then believed to have created false identities to borrow from lenders at inflated prices, and then pocketed the difference.

In other cases, it is believed to have used “mortgage mules” – genuine people, but who had no connection with the properties in question. A&L has since ordered its surveyors to make more stringent checks amid fears that genuine buyers in new-build developments could be left stranded in negative equity with loans worth more than their properties because they have been forced to pay inflated prices for flats.

Solicitors have also warned of a rise in mortgage fraud as the property market slows down, as happened in the early 1990s.

A spokesman for the Solicitors Regulation Authority said: “If there is a property downturn, significant new levels of mortgage fraud could recur. Loans are being obtained based on heavily discounted prices that are not disclosed to lenders and are disguised by cashback schemes and transactions structured to give lenders misleading information.

“This may even be facilitating a false market in that the recorded sale prices of properties on a development are higher than the real prices paid and therefore the true value of the properties.”

The Metropolitan Police confirmed that it was investigating mortgage fraud in Thamesmead. A spokesman said: “I can confirm the money-laundering team is investigating suspected large-scale mortgage fraud.

“The investigation has established that between May and November last year, a company bought 84 off-plan new-build flats in Thamesmead. The company then resold the flats at greatly inflated prices using mortgage brokers and chartered accountants to fraudulently provide inaccurate mortgage applications for the genuine buyers. In most cases the buyers would not otherwise have qualified for a mortgage.

“The fraud came to light following reports from banks and building societies when either the properties came to be sold or repossessed and the true property value was realised by the lender. The full loss to the lenders cannot be ascertained but the benefit to the conspirators is estimated in the region of £3m-£4m. The investigation is ongoing and arrests have been made.”

A spokesman for Persimmon admitted selling to Atrex, but said it had made the necessary checks.

“We have developments across the region that attract interest from both private and buy-to-let investors and at the Pinnacles in Thamesmead we sold approximately 40% of the apartments to a single property company, Atrex Property Company Limited,” the spokesman said.

“It is not our policy to discriminate against any purchaser wishing to buy the property within an expected time-scale from the date of the reservation. The formal procedure that we require is a money-laundering identity check.

“We meet our legal requirements but are always reviewing our procedures to ensure they are as effective as they possibly can be.”

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