Apprentice star commits mortgage fraud!

The conviction of Apprentice star, Christopher Farrell, reveals the shady side of the housing boom.

Last year’s crop of contestants for The Apprentice included 29-year-old Christopher Farrell, a former Royal Marine sniper who claimed to take his ‘killer instinct’ into business.

Chris the colourful character

As Series 6 of the hit BBC1 show -- presided over by entrepreneur Lord Sugar (catchphrase “You’re fired!”) -- got underway, news emerged of Farrell’s less-than-squeaky-clean past.

First came reports that a routine police search uncovered a knuckleduster and an extendable baton in Farrell’s Mercedes. In September 2009, and before filming started, Farrell pleaded guilty to two counts of possessing offensive weapons. Magistrates gave him a two-year conditional discharge and ordered him to pay costs of nearly £850.

So far, so bad.

Farrell the fraudster

Alas, last week saw the latest instalment in Farrell’s fall from fame, when he admitted four counts of fraud.

At Plymouth Crown Court on Friday, Farrell was given a nine-month prison sentence, suspended for two years, after pleading guilty in December to four charges of fraud by false representation. In addition, Farrell was ordered to perform 200 hours of community service.

Before winning a place on The Apprentice, Farrell worked as a mortgage broker at Mortgages for Plymouth from November 2007 to August 2009. During this time, he altered mortgage applications in order to help homebuyers to borrow more. By inflating his clients’ incomes, Farrell also boosted his earnings by pocketing commissions on home loans obtained using false information.

What’s the harm?

Some readers may be wondering, “What’s the big deal, did he really do any harm?”

After all, the borrowers got their loans, the sellers sold their homes, and Farrell trousered generous commissions, so who loses out? The answer is that mortgage lenders lost out, because they were duped into making loans that they would otherwise not have granted.

In court last month, Merseyside-based Farrell admitting submitting false information when making three mortgage applications and one remortgage application. In total, these four loans came to more than £750,000.

It’s important to note that Farrell’s clients had no knowledge of his fraudulent actions. For instance, in order to get one loan approved, Farrell tripled an applicant’s salary from £40,000 to £120,000 a year. These ‘liar loans’ came to light when one bank uncovered false information in one of Farrell’s caseload, leading to his arrest last August.

At first, Farrell tried to ‘do the dirty’ on his colleagues, blaming co-workers for the forgeries. However, he quickly changed his tune and pleaded guilty in front of Plymouth magistrates, who referred him to the Crown Court for sentencing.

Bubbles breed sharks

While Farrell will probably be 2011’s famous mortgage fraudster, he’s just one of a growing band of mortgage advisers who broke the law during the housing bubble.

With house prices rising every year from 1996 to 2007, it became increasingly difficult for people on modest incomes to buy their own homes. In response, banks and building societies repeatedly relaxed their lending criteria in order to lend ever-higher sums to the widest possible range of borrowers.

This ‘race to the bottom’ led to the creation of self-certified mortgages: home loans that didn’t require borrowers to declare their incomes. Now dubbed ‘liar loans’, these high-risk loans became early victims of the credit crunch that began in August 2007.

Nevertheless, despite lax lending standards, even self-cert loans weren’t loose enough for some borrowers and mortgage advisers. Thus, a few ruthless brokers and homebuyers overstepped the line by inventing or falsifying information aimed at transforming bad loans into good.

The tip of an iceberg

Such fraudulent behaviour -- breaking the law to keep a worn-out bandwagon going -- is a classic sign of the late stages of a bubble. Unfortunately, frauds of this kind are often discovered years later, when hard-pressed borrowers begin defaulting on unaffordable loans.

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Therefore, as the housing tide goes out and lenders pore over their loan books, I expect more and more cases of this kind to come forward. In time, dozens of mortgage advisers could face charges for altering P60 forms, printing bogus payslips or faking key documents -- with or without the approval of borrowers.

Play it safe

Of course, borrowers and their advisers should avoid making false claims when applying for credit. Otherwise, as well has getting a black mark on their credit ratings or CVs, these folk could end up facing the full force of the law, up to and including a prison sentence.

What’s more, by playing it straight and not borrowing up to the hilt, borrowers won’t end up with loans that become impossible burdens.

Finally, Farrell lasted a full eight weeks on the show before being given the push by Lord Sugar. This just goes to show that even the most demanding and savvy bosses can be fooled by smooth-talking shysters and spivs!

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