A SECOND solicitor has been arrested in connection with what police believe is one of Britain’s biggest property frauds.

Police are investigating 2,000 mortgage applications as part of the inquiry into the affairs of North-East Property Buyers and Newcastle Home Loans.

Malcom Graham, 33, who is the latest to be arrested, had already been suspended from practising law by the Solicitors’ Regulation Authority.

He ran SFM Legal Services, which operated from an office in the same Gateshead block as North-East Property Buyers.

Another solicitor arrested at her home in Whickham on Thursday is understood to be Mr Graham’s former business partner, Wendy Gurr, 32. Both have been questioned and bailed.

A police spokesman said: “Over the period we are looking at, there were at least 2,000 mortgage applications, and we suspect the people we have arrested appear to have been involved in a significant proportion of them.”

The companies offered to buy homes from people struggling to make mortgage repayments and then rent them back to them, but have allegedly defaulted on the payments themselves.

As a result, hundreds of people are thought to have received eviction notices as the mortgage lenders attempt to regain their money.

The investigation has resulted in raids at the offices of several North-East estate agents, including David Oliver, a former estate agent in Duke Street, Darlington.

Andrew Oliver Bellwood, a partner in David Oliver, was arrested on suspicion of money laundering in March after £34,000 was found at his home in Newton Aycliffe, County Durham.

Craig David Purdie, a former representative of Newcastle Home Loans and a partner in David Oliver, is also being investigated, as are Mr Purdie’s stepmother and father, Grace and David Purdie.