Mortgage fraud red flags outlined
There has been an increase in suspected mortgage fraud being reported to the FMA.
Monday, July 28th 2025, 9:22AM
by Sally Lindsay
As a result FMA response and enforcement executive director Louise Unger has written to the executives of banks and non-bank deposit takers and alerted KiwiSaver schemes, industry associations and other regulators by sharing a list of red flags.
Unger says the FMA expects lenders will already be aware of mortgage fraud risks and have systems and controls in place to identify and mitigate these.
“We have compiled a list of ‘mortgage fraud risk indicators where fraud is being pursued for profit by third parties that we are aware of to assist lenders to ensure their systems and controls are appropriate to detect and prevent mortgage fraud.
“As you are aware, buying and selling property is likely to be one of the largest financial transactions that individuals make and will be significant to their overall financial position.
“Mortgage lenders have a responsibility to protect and support all borrowers by identifying, preventing and responding to mortgage fraud with fairness and vigilance,” she says.
The red flags the FMA has outlined are:
Recognising the impact of mortgage fraud on customers in vulnerable circumstances
The FMA has become aware of an increase in the prevalence of mortgage fraud. The misconduct that has been reported to us is being carried out by third parties, and without the knowledge of the borrowers, compounding systemic inequities.
Victims of this kind of mortgage fraud often face long-term financial and emotional consequences, including taking on loans larger than they should have as a result of falsely inflated property values, with these often being unaffordable.
In some cases, victims risk losing deposits made up from first home KiwiSaver withdrawals, meaning they lose those savings too.
Lenders must commit to vigilance and early detection
Lenders play an important role in identifying and responding to mortgage fraud risk factors. The FMA expects to see lenders implement robust mortgage fraud detection and monitoring systems, with attention to red flags that may signal exploitation, and to keep these under active review to ensure their effectiveness.
Lenders should be providing training for staff to recognise both overt and subtle signs of mortgage fraud, including indicators that a borrower may be a victim, not a perpetrator.
The CoFI regime requires a greater focus on fair conduct and consumer outcomes
As part of CoFI, banks and non-bank deposit takers are required to ensure they are treating their customers fairly. We expect that this includes having appropriate policies, systems and controls to identify, prevent and respond to mortgage fraud with fairness and vigilance.
Early detection is not just about protecting the lender; it’s about protecting consumers too. Lenders should respond to victims of mortgage fraud with compassion and integrity, and an open mind.
Unger says the FMA wants to share information on the kind of red flags it is concerned about to help lenders identify potential indicators of mortgage fraud and to consider how lenders address any process or control exposures they may currently have to these indicators.
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