Property clubs that dupe investors out of large amounts of cash with dubious below market deals are coming back to buy to let, according to one lender
Student letting was a key target market for property clubs at the height of the buy to let boom in 2007.
The dust is still settling on court cases involving some of the most high profile get-rich-quick schemes falsely promising to make investors in to property millionaires in double quick time.
Several property club directors have been jailed for mortgage fraud and other crimes of deception, while lenders have tightened up the rules for panel solicitors and valuers who often worked with the property clubs to scam hundreds of thousands of pounds from unwitting investors.
Writing in a mortgage broker trade paper, Bob Young, managing director of CHL Mortgages, claims shadowy middlemen skimming cash out of deals have re-emerged in the buy to let market place.
“There is a tendency for markets that are perceived to be strong to appear attractive to the bottom-feeders circling around looking for such opportunities,” he wrote
“I am not just talking about the formal entities, of which you can find a growing number on the web, advertising seminars and the like. I’m also talking about informal middlemen who make money from property club-style services.
“Unfortunately they appear to be returning, although one would hope that potential investors, brokers and lenders are less open to their charms. I hear that clubs are looking to make money via networks and we should be on our guard against such attempts.
Only the clubs make money from such arrangements while all the risk lies with borrowers. On top of this we should remember that they are probably committing mortgage fraud and will be setting themselves up with a significant mortgage.”
Meanwhile, financial research and monitor Experian reports mortgage fraud is up for the three months ending September 30.
One in around every 200 mortgage applications was found to be fraudulent – 77% up on the year and 53% up from the previous quarter.
The firm blamed applicants inflating their incomes to qualify for larger loans or better interest rates.
