Page last updated: 24 July 2025

FMA letter sent to banks and non-bank deposit takers regarding mortgage fraud

There has been an increase in suspected mortgage fraud being reported to the FMA. Mortgage lenders have a responsibility to protect and support all borrowers by identifying, preventing and responding to mortgage fraud with fairness and vigilance. We expect that 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 ‘red flags’ (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.

On Wednesday 23 July, 2025, FMA Executive Director Response and Enforcement Louise Unger wrote to the chief executives of banks and non-bank deposit takers, sharing the list of red flags with them. We have also shared it with KiwiSaver providers, industry associations and other regulators.

Kia ora koutou

I am writing to you to share our concerns on the rise of mortgage fraud being reported to the FMA.

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. There are a number of different parties that play a role in protecting and promoting customer interests in these transactions, including your financial institution.

Mortgage lenders have a responsibility to protect and support all borrowers by identifying, preventing and responding to mortgage fraud with fairness and vigilance.

We must recognise 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.

We want to share information on the kind of red flags we are concerned about to help lenders identify potential indicators of mortgage fraud and to consider how they address any process or control exposures they may currently have to these indicators. We have attached the main red flags we are aware of as an attachment in the covering email.

Ngā mihi

Louise Unger

Executive Director, Response and Enforcement