A man who built up a huge buy-to-let empire through a £300m mortgage fraud has been jailed, along with others including a chartered surveyor who overvalued the properties.
The fraudsters were brought to justice after an investigation by Northumbria Police working closely with the RICS.
David Purdie, 57, ran North East Property Buyers, and Newcastle Home Loans, operating a sale and rent-back scam.
Properties were bought cheaply, often from distressed sellers who were told they could continue to live in them as tenants.
Mortgage applications were falsified on some 2,400 properties, with purchase prices and potential rental income overstated.
The mortgages were put in the names of Purdie and his co-defendants, but also unsuspecting family, friends and associates.
The scam collapsed after one of the lenders noticed irregularities in some of the paperwork and alerted the Financial Services Authority.
The homes were then repossessed, leaving hundreds of tenants including pensioners homeless.
Southern Pacific Mortgages, the Chelsea Building Society, and Mortgage Express lost more than £110m.
Losers also included the innocent people named on the mortgage applications. The court heard that some were left in financial ruin.
Purdie, 55, who lived in a mansion in Gateshead, was jailed for five and a half years.
Michael Foster, 43, a partner at North East Property Buyers and director of Newcastle Home Loans, was jailed for three years and nine months.
Linda Patterson, 57, a mortgage underwriter and subsequently a director of Newcastle Home Loans, received a sentence of three years and two months. She had authorised many of the fraudulent mortgage applications.
Chartered surveyor Stephen Keay, 54, of Sunderland, was jailed for 23 months.
Jane Bewsey QC, prosecuting, told Teeside Crown Court that the scale of the fraud was “truly massive”.
She said: “NEPB would source properties from individuals, many of whom were in financial distress, on the basis that they would receive a sum of money sufficient to pay off existing mortgage commitments but falling short of the full market value of their property.
“They would be told that they would be able to continue to live in the property as tenants.
“The terms of the agreement varied from case to case.
“Some, indeed many, distressed sellers were led to believe that they could stay in their homes on tenancy agreements, which proved to have no proper legal foundation.”
North East Property Buyers insisted, as part of the sale and rent-back deal, that the sellers used Hall & Co Solicitors to act for them in the sales of their homes to NEPB.
Hall & Co closed in 2011 and the sellers’ solicitor, Peter Maine, who failed to warn them of the risks, died of stab wounds while out jogging in 2013.
An inquest in January this year was told that two days before his death, Maine had heard that he was to be charged with conspiracy to defraud.
The coroner recorded an open verdict, saying he could not be certain if Maine had been murdered or stabbed himself.
The sale and rent-back sector was closed down by the then Financial Services Authority in 2012.
I think one or two other “Quick buy” housing agents will be a little worried this morning reading this story. The net is closing in on you.
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Interesting to me as my creative company has just taken an order to create a new website for a middle aged married couple who want to start buying from distressed vendors and renting back to them.. Being an ex agent of (20 years), I questioned them (out of interest and because I couldn’t get the mechanics of what they wanted to do clearly in my head).. Seems there are ‘breakfast clubs’ all over the country set up to pull new investors in like these two… telling them how to max their credit cards to make a purchase deposit, how other investors in the group will then co-purchase etc…
To me it just sounds like a pyramid scheme with property instead of purfume..
Here is some of the blurb they want on their website..
We would like to be known for ……helping YOU to find a solution which will enable you to move on with your life with the least amount of damage to you, your credit file and most importantly to your pocket.
“We understand that when people fall into financial difficulties through no fault of their own it can be a struggle to pay all the bills. Often the mortgage doesn’t get paid and that means the real possibility of repossession and maybe even bankruptcy.
A quick solution may be to sell but this may mean dropping the price to avoid repossession and you still won’t have enough money to pay the mortgage amount back to the lender.
We will help you see your choices.. Everything will be your CHOICE..we will give you as many options as possible to solve your problem and then YOU choose the best for YOU. We are a business and in it to make money however if we can’t find the best solution for YOU, then we’ll tell you.
We’re part of an extensive network of investors and property professionals throughout the UK and we are at the forefront of providing solutions in this field.
We can offer :
· A sensitive and confidential approach to understanding your property needs , including repossession, separation and divorce, bereavement, relocation and your unwanted or problem properties
· To purchase your property AND, in some cases, allow you to stay in your home.
· To rent your home from you, pay your mortgage and in some cases pay you a monthly amount too.
· A quick purchase on inherited properties, avoiding the long drawn out process of selling on the open market.
· To pay you a Finders Fee if we take on a property that you have referred to us
· · To help smart people get high annual returns on spare cash sitting in the bank
· Landlords with single let properties FREE management and more money in your pocket.
· HMO landlords who would like to remove ALL the management and tenant hassle from their portfolio overnight.
· Landlords peace of mind by paying a guaranteed rent with no voids”
All sounds too good to be true…
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