Fraudulent activities are not un-common in the dealings
of human beings. Housing finance is no exception to this.To attract the people
financial companies and banks are now competing with each other and are relaxing
their lending procedures and processes. We read in news papers that home loans
are sanctioned within 24 hours and upon verification of minimum documents.Services of external agencies are utilized for processing loan applications.Services of direct selling agents are utilized to attract the customers.The
hallowed precincts of the bank have given way to brokering shops run by direct
selling agents.All these factors have become instrumental in housing finance
frauds. The magnitude of housing frauds can be ascertained by analyzing few
types of frauds noticed by various banks. They are:
Fabrication of income
documents:
For consideration of housing loan, banks do insist the
income proof of the borrower.The income proof documents mainly consist of salary certificate, salary slip, income-tax return and balance sheets.The borrowers
normally fabricate the documents which depict their income. Banks are often
fooled by inflated salary certificates because they fail to cross check such certificates with the
employers of the applicants.These certificates are often certified by
unauthorized persons.The reason for such frauds could be that the banks do not
insist on the documents being sent by the employer by post or courier. Also the
banks do not write directly to the employer for these documents. Reliable
methods are sacrificed at the altar of speed.
Some preventive steps could be:to cross check the salary
slip with the employer; uploading on the website of the income tax department
the list of income tax payers; comparing the salary amount with the bank
statement; to have a personal interview with the borrower by the Manager.
Fraudulent
cheque/demand draft encashment:
In many cases, the
bank officials give cheques/demand drafts to the borrower/vendor at the venue
of the bank itself before registration of the sale deed in favor of the
borrower and such cheques are sometimes delivered to third parties or
middlemen.When such cheques or demand drafts fall into the hands of third
parties they encase them by opening false bank accounts and defraud the banks.There are also cases where the properties have been registered in the name of parties
other than the borrower.Some preventive measures could be :to hand over the
cheque to the vendor at the office of the sub registrar when the sale deed is registered
and the deed should have the full details such as cheque number, date, amount
and the drawee bank. Alternatively, cheques may be issued in the banker's name
with the bank account number of the vendor.
Forging of title
documents
As a rule, advocates never
certify the authenticity of title documents but only trace the title.This
becomes more complicated when the bankers forward only the Xerox copies of the title
deeds for opinion of the advocate.Till payment of the loan amount neither the bank
nor the advocate insists for production of the original deeds.Generally,to
give effect to such frauds,colored Xerox copies of documents such as encumbrance
certificates are created. Fake stamp papers are used. Such forged documents are
hard to be distinguished from the authentic ones.However,an experienced advocate may be able to detect a forged document when he minutely examines the
document to check the place of registration and the stamp duty paid.
Further, tracing of
the title should go to the roots of the title and not be restricted to 13
years.It is necessary to examine the original title deeds sufficiently in
advance and should not be postponed up to the date of registration.There
should be direct interaction between the vendor and the banker.A request
should be made to the advocate on the panel to search and verify the title of the
vendor from the records of the sub-registrar's office. Remedial measures could be
that the information of the black listed builders and developers, if any,
should be shared by all the banks; the documents such as agreement for sale
should be in DEMAT form;The authenticity of stamped paper, documents and
registration receipts should be verified by banks at the sub-registrar's
office.
Over-valuation of
properties:
Generally, some
borrowers conspire with the vendors/valuers to inflate the market value of the property.Various non-existent expenditures such as additional amenities,fixtures, legal
charges, society advance and maintenance charges are cited. Advances are
released on properties which have been overvalued leading to over finance. Because
of this, the banks are not able to realize the amount advanced while the
borrowers are least bothered about clearing the debt.Remedies could be utilization
of services of two independent values for valuation of property worth more than
Rs. 25lakhs; introduction of certificate course for approved valuers;
development of in-house expertise by banks for the accurate valuation of
properties.
Multiple financing:
Some fraudulent
persons produce fabricated documents to different banks or housing finance agencies
in respect of a single property to obtain loan from each bank without the
knowledge of the other in respect of the same property.Remedies to prevent
such frauds could be to introduce the DEMAT format for sale agreements,
insisting for production of original title deeds by the lending institution,
introduction of registration of mortgage deeds.
Cancellation of
booking for flats:
Another type of fraud
noticed is that some of the borrowers cancel their bookings for flats within a
couple of months after obtaining the loan from the bank and obtain the refund
of the money paid towards the flat directly from the builder without the
knowledge of the lending bank. In these cases, apart from personal liability of
the borrower, the banks do not possess any security for the amount which has
been advanced.One way to curb such mischief is to insist for an undertaking
from the builder stating that in case the booking for any flat by the borrowers
is cancelled, the advance amount will be directly remitted to the bank.In addition,
it is better to pay the initial loan amount directly to the builder on behalf of
the borrower.
Fake or duplicate
title deeds:
In this type of fraud,
the borrower of the bank sells his property with the help of duplicate or fake
title deeds before clearing of the loan amount though legal title deeds over
the property are deposited with the bank or housing finance company.To prevent
this type of fraud, banks are now getting the memorandum of deposit of title
deeds registered so that the fact of mortgage of property is reflected in the
encumbrance certificate.
Utilizing housing loan
for commercial property
Housing finance companies
and banks grant loans at concessional rate of interest in respect of
residential buildings.In addition, rebate is also available to the borrower on
such housing loan. In some cases, the housing loans obtained by the borrowers
are actually used for purchase of commercial property.To avoid such abuses, it
is suggested that there should be inspection and verification of the property
by officers of the bank to find out whether it is residential or commercial
property.
Outstanding loans from
the builders:
There are also cases
where the builders sell the property without repaying the loan obtained from
the bank or housing finance company.The loan availed by the developer or builder requires to be verified by the banks at
the project clearance level. At the time of appraisal, the banks should consider
only the original documents and not any other type of document. An analysis of
the above would go to show that there are different kinds of frauds adopted by
people regarding housing finance and no straight jacket formula is available to
remedy such frauds. However, alertness and strict adherence of the procedure
laid down could reduce fraudulent banking transactions.
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