Redundancy, mortgage fraud & prosecution: a cautionary Reddit thread

[KievLoverTwo]

Posting without judgement. People have to do what they have to do to keep a roof over their heads.

However, I see people advising folks just to keep quite on MN now and then too. I neither agree nor disagree with that advice. Home ownership is tough.

Anyway, I felt duty bound to post it here.

www.reddit.com/r/HousingUK/comments/1p5e9fo/lender_pulled_offer_after_exchange_please_help/

Cut and paste of the OP's text:

"We are honestly in tears and don’t know what to do.
Currently buying our dream home, in a chain of five (people buying our house are FTBs). Conveyancing has taken over 4 months, but we finally exchanged last Friday, with an agreed moving date of 05/12.
2 months ago, my wife unexpectedly lost her job. Everyone we spoke to, all the advice we read on Reddit and other forums, told us to remain silent. This we did, because we knew we could just about afford the mortgage payments on my salary alone, and my wife has been frantically searching for a job. Then this morning, my MIL (who is gifting a small amount towards the deposit) phoned the solicitor to ask him about some final AML checks he needed to undertake, and during this conversation my MIL let slip that my wife had recently lost her job
Cue a call to us to confirm this was true, and we had no choice but to admit it was. He informed us that he would be placing the process on hold with immediate effect, and had a legal duty to inform our lender. He also reprimanded us for withholding it and said there’s a good chance we could be prosecuted for mortgage fraud. He also said that the lender is within their rights to withdraw the offer, place a mark against our credit files and that we will most likely now lose our (£60k) deposit.
As we feared, when we spoke to the lender later this morning they confirmed the withdrawal of our offer pending further checks (though we know that our current situation will not pass their affordability criteria). They will be investigating further the question of possible mortgage fraud.
To say we are scared out of our minds about the fall out from this is an understatement - my wife is virtually having a breakdown over the prospect of losing our entire life savings that we have spent the past decade saving, and our dream home. We’ve also been told that we could now be liable for our buyer’s legal costs - their solicitor informed ours that they will be looking at claiming compensation if we don’t complete on the 5th, and everyone else in the chain above us is furious and panicking of course.
I admit, we played a stupid gamble and it has backfired hugely. Please, any help or advice at all on what we can expect to lose, the effects and whether we’ll be able to save this house sale will mean so much to us.
EDIT: MIL is in her 80s and English isn’t her first language. She phoned the solicitor To ask what the final AML checks on her gift contribution would entail. We don’t yet know the full story but think she might have said something that raised red flags about our situation, solicitor got pushy and she admitted up to my wife being unemployed.
EDIT 2: I have looked into bridging loans and it seems the most we will get is 75% of the value of the property. As this is £400k we would be £40k short of the amount we need to complete, when our deposit is included. we don’t have any relatives that could lend this amount. Any ADVICE please???"

Yikes!

I've always known that conveyancers work for the bank - although they of course don't state that for newbs who are under the impression they're really working for the buyer. But this particular one's actions are a bit shocking. I guess they can get into big trouble if they don't declare that they knew.

Oh that's blinking miserable. I mean, it was foolish to do that, but I suspect lots of people get away with it. I feel for them 😱

Why are they shocking? It would be more shocking if they knew but didn't inform the lender.

It's the first time I've ever seen anyone be told they're likely to get prosecuted in 3+ years of being on housing forums.

Until now, I always thought it was a 'could be.'

Gosh i knew the mortgage offer would be withdrawn but never thought of someone being prosecuted.

Now that I've had a few more minutes to think about it, what's shocking to me is that the conveyancer gave the buyer no opportunity to pull out of the purchase. They could've called and said 'things about your finances have come to light that will make the lender come down on you like an absolute ton of bricks, you really should consider putting off your purchase because I am duty bound to disclose them within [x time]' - but they chose not to do that.

Now the person might be ten year's worth of savings down and have a wrecked credit rating.

So, I suppose it's the lack of humanity that's shocked me the most.

Not that humanity and mortgage lender should ever appear in the same sentence, mind you.

I think the solicitor just has to stop acting in this situation - doesn't have to tell the bank (but of course, the solicitor stopping acting is a massive red flag to the bank).

The solicitor couldn't offer the buyer the opportunity to withdraw because they'd already exchanged. That's why they'll lose their £60k deposit.

Oh gawd, I didn't spot that bit. Crikey.

I feel really sorry for them. They haven't been deliberately fraudulent, just really, really stupid. They can afford the mortgage payments on his salary and assumed the wife would find something else soon, which she may well – if the mother hadn't made the call they'd have got away with it.

Yep, that's why it's so serious, because they're in breach of contract to the seller as well as being in the frame for mortgage fraud. The seller has the right to take their deposit.

How do conveyancers work for the bank? Conveyancers are regulated by the SRA and have a set of standards and practices they nees to adhere to. If a customers circumstance has changed and they have become aware of it they need to declare it. There will be a clause on the mortgage terms and conditions which states a change in circumstance must be declared. If the solicitor ignores this it could jeprodise their career and maybe the entire firm.
Its a terrible situation, the couple shouldnt have exchanged whilst in this precarious position but heindsight is 20/20

But they have been deliberately fraudulent, they withheld information on purpose. That's deliberate. Ignorance isn't an excuse.

The stress tests mortgages put people through exist for a very good reason.

The mortgage companies are not your friends, they exist purely to profit from lending money. Stupid mistake that could cost them thousands.

When we bought our house, I had to sit near the builder on the next table who was having an absolute rage attack at the estate agents (who were lovely). He wanted to buy a house, he said he earned loads of money and could afford it, but the estate agents pointed out his tax returns only had declarations of a 13k per year income. He was red faced and raging. He pulled out a wad of cash (you can see where this is going cant you) and was shouting about being rich enough. It would have helped to declare all that on his tax return for three years prior.

FWIW I think the threat of prosecution is a little heavy here. V daft move though.

I have to admit I never saw advice of keep quite about job loss that has happened, rather, keep quiet about job loss expected to happen after purchase.
It is fraud and it was bound to show at some point.
I do feel for them about losing the money. That is incredibly tough.

I do get what you're saying, but there was no malicious intent to defraud, it was out of desperation. And really, really stupid. Not only will it cost them thousands but there will also be a mark on their credit report that the mortgage was withdrawn and that will make it so hard for them to find another lender, which they desperately need to find so they can complete.

Blimey, I’d love to know the outcome of this. I wonder if a last minute job offer or a relative being prepared to offer security on a bridging loan or getting a loan on their behalf or something might work. It’s a lot of money but not a crazy amount in the grand scheme of things. It was fraudulent. I’d have been way too nervous to do something like that myself.

I am not a conveyancer or legal, but I don't understand why the AML checks would be continuing after the exchange took place ?

The OP has updated his Reddit thread:

I have looked into bridging loans and it seems the most we will get is 75% of the value of the property. As this is £400k we would be £40k short of the amount we need to complete, when our deposit is included. we don’t have any relatives that could lend this amount.

What a mess

I think they got confused because AML should have been done well before. It's possible solicitor said they might need something and then didn't and poster thought they will after exchange if that makes sense

It staggers me people take advice on such important things from reddit
It's very sad, but they will lose their deposit
They may even have to pay compensation to the others in the chain

I can see the temptation to just “stay quiet’ but it’s so incredibly stupid. I worked in mortgages for a high street bank for years, the rules are there for a reason.

On the Reddit thread the OP said the solicitor told them on exchanging that they needed to do a few final AML checks that included reviewing mum's bank statement to confirm money was a gift. Very odd to be doing it after exchange.