Where there is money to be made, there's a strong chance that there is also money to be stolen.  In this regard, the housing market is no exception...

Take the UK property market - with house prices rising by double-digit percentages each year, it would hardly be surprising if conmen and fraudsters were licking their lips at the prospect of such a juicy target.

In the US, they certainly have been.

"On 30 September 2006, we had 818 pending cases," says Bill Stern, the supervisory special agent in charge of mortgage fraud at the FBI's Washington DC headquarters. "As of 24 April 2007, we have 1,079."

In Spain, meanwhile, a string of big-money corruption and money laundering cases involving property have hit the headlines as the market for new holiday homes there has boomed - and could now be about to bust.

But could it happen here?

Dirty money

According to police and other experts, it already has.

On the most basic level, there are the cases where people lie to buy a home for themselves.

Cases like that of Wayne Larkins, the former England cricketer who narrowly escaped a jail sentence after his partner forged her sick father's signature in an attempt to take out a £155,000 mortgage on his house.

Or as house prices and interest rates seem to rise inexorably, there are the people who lie about their income to get a toe-hold on the property ladder.

But some people's ambitions soar much higher, as organised criminals across the UK play the property market to launder the profits of their activities.

Crucial to their activities are a small minority of property professionals - estate agents, independent financial advisers, accountants and lawyers - prepared to offer their services to crooks.

"Organised criminals are exploiting these professionals," one senior detective investigating property-related crime says.

"It's a small minority, but once criminals find out who they are, they become the one everyone goes to."

Several police forces in the UK are noticing the trend. One English force is increasing the size of its economic crime division by some 20% simply to handle property-related cases.

And at least one ongoing money laundering investigation in the north of England involves tens of millions of pounds washed through multiple, rapidly-repeated property deals.

Quick deals

At the heart of these activities is a process called "flipping".

A property is bought - perhaps with cash, but often with a mortgage, and probably using someone else's identity.

It is put back on sale at a price far above its real value - and often bought again by the same people, using a different front identity, known as a "straw buyer".

"You buy up loads, making lots of sales and clocking up £20-30,000 a time - and the more times you do it, the more difficult it is for us to track where the money came from," the detective says.

The false identities often come from identity theft - sometimes from within the offices of finance firms, with added details provided by accountants or other financial professionals.

Alternatively, there are those who willingly - if, perhaps, naively - allow their identities to be abused in this way.

Killing the market

In the US, where the process of prosecuting mortgage fraud is more advanced, there are graphic examples of how this can work.

Recent cases in the southern state of Georgia demonstrate both techniques.

In one, the FBI put away a ring of 21 people - estate agents, valuers, brokers, lawyers - who were paying a university administrator $10,000 a time to provide personal information about students, so their identities could be used to make fake loan applications.

In another, a recent conviction looks set to jail Phillip Hill for much of the rest of his life, after a fraud ring he headed managed to lure dozens of Atlanta's great and good into putting their name to property investments.

Those investments resulted in more than 400 fraudulent applications for mortgages, as properties were flipped at eye-popping prices - and then hundreds of repossessions, which have actually caused property prices in some neighbourhoods to collapse.

Under-regulation of the US's tens of thousands of mortgage brokers has helped relax standards, US authorities say, and created loopholes for fraudsters to exploit.

On the up

One reason for the greater prominence of cases coming out of the US, compared with the UK, is the state of the property market there.

Interest rates have soared. Housing starts - the issuing of permits for new homes - are plummeting, as are mortgage approvals. Rampant lending to people with poorer credit ratings - so-called "sub-prime" lending - is coming apart at the seams.

And prices in many parts of the US are heading downwards.

The result: dodgy deals which might have slipped under the radar, disguised within a booming housing market, are now being spotted as lenders and homebuyers tighten their belts.

In the UK, things are still on the up.

"Clearly there is mortgage fraud, and clearly in a rising market one of the things that can be trickier for lenders is spotting it, because property price inflation can mask a multitude of sins," says Sue Anderson, at the Council of Mortgage Lenders.

"In an environment where house price inflation is likely to be less marked, lenders are going to be cautious."

After all, it has happened before.

"Some people have very short memories," says the fraud chief at one UK building society.

"The [housing market crash of the] early 1990s showed it wasn't a good idea to lend to all and sundry, and there are still some organisations which are going for quantity rather than quality."

His institution has only had "half a dozen attempts in the past three years or so", he says - the result of what he calls a "fairly antiquated mortgage approvals process" - in other words, one which remains conservative about who it will lend to, and how much it will lend.

"We got hit as badly as anyone else in the 1980s and 1990s, and we were keen to see it didn't happen again."

New opportunities

As yet, few of the UK cases under investigation have made it to the courts.

And the housing market is still soaring, with March providing yet another annual price rise in excess of 10%.

If the US experience is anything to go by, any marked slowdown in house prices could bring more cases out into the open, risking further downward pressure on prices - as well as creating opportunities for conmen among hard-pressed homeowners.

"We're seeing a shift," says the FBI's Bill Stern. "Before it was 'get rich quick'; now it's foreclosure rescue schemes where there's either outright theft of fees for services never rendered, or people are persuaded to sign over title but end up still carrying the debt."

For the moment, though, the fraudsters and launderers are still looking for new markets.

New-build properties in the UK, for instance, have been at the heart of the housing boom - but valuations are difficult, and rapid resales are far from uncommon.

The perfect cover, some experts fear, for the aspiring fraudster...

Source: BBC News