Lenders lose out

The fraudsters involved are believed to have pocketed between £3m and £4m from the scam.

Four mortgage firms - Alliance & Leicester; GMAC-RFC; Platform, part of the Britannia building society, and Rooftop Mortgages, part of Bear Stearns, have been affected by the fraud.

Companies lent money to bogus borrowers for off-plan flats next to the Thames, off Miles Drive, Thamesmead, built by Persimmon Homes.

The Met Police are currently investigating the fraud and have made 11 arrests in connection with the case.

It has been reported Persimmon sold the properties in one of its Thamesmead sites to a property developer with a large discount.

The developer is then alleged to have created false identities to borrow from lenders at inflated prices before pocketing the difference.

A Met Police spokesman said: "I can confirm the money laundering team is investigating suspected large-scale mortgage fraud.

"The investigation has established between May and November last year, a company bought 84 off-plan new-build flats in Thamesmead.

"It then resold the flats at greatly inflated prices using mortgage brokers and chartered accountants to fraudulently provide inaccurate mortgage applications for the genuine buyers.

"In most cases, the buyers would not otherwise have qualified for a mortgage."

He added: "The fraud came to light following reports from banks and building societies when either the properties came to be sold or repossessed and the true property value was realised by the lender.

"The full loss to the lenders cannot be ascertained but the benefit to the conspirators is estimated in the region of £3m to £4m."

A spokesman for Britannia Building Society confirmed a number of these mortgages were taken out and stated the firm's loss at £5m.

And a Rooftop Mortgage spokesman says it has only very limited exposure to the properties in question and where such loans exist, its servicing team is actively involved in recovering the capital and interest due.

Jeff Knight, director of marketing at GMAC-RFC, said: "We are helping police with suspected fraud in Thamesmead. However, our involvement in this is very small."

Alliance & Leicester provided mortgages for some properties in Hill House, one of the developments affected, a year ago.

A spokesman said: "A small number of these properties have been repossessed, and there is one further case of repossession currently being taken forward.

"We are not able to go into more detail due to allegations fraud has taken place, and as an investigation is currently under way."

Persimmon Homes was unavailable for comment.

Erith and Thamesmead MP John Austin said: "I expressed my concerns about this to the police and local authority some months ago.

"In Thamesmead, this has led to a serious number of problems with absentee landlords of various quality.

"There needs to be some regulation of building-to-let.

"I would suggest a national register of approved landlords."