Chelsea takes £41m hit over mortgage fraud

by Gill Montia

Story link: Chelsea takes £41m hit over mortgage fraud

Chelsea Building Society has admitted to having lost £41 million through mortgage fraud, plunging the mutual into a £26 million pre-tax loss for the first six months of 2009, compared with a profit of £23 million for the same period of 2008.

Impairments on loans and advances totalled £53 million for the period (compared with £4 million a year earlier) and included a charge of £41 million to cover fraud relating to the lenders’ buy-to-let mortgage book.

According to reports, property values were artificially inflated by third-party professionals between 2006 and 2008 and events came to light during a review of society’s overall mortgage book by external consultants.

On the 7th August chief Executive, Richard Hornbrook, resigned after 28 years with the society, to be replaced temporarily by chairman, Stuart Bernau.

Commenting on the interim results, Mr Bernau reassured: “Our mortgage lending is now fully covered by our retail deposits and this has significantly reduced our reliance on wholesale markets.”

He added “The building society’s new lending of £242 million is now focused on low-risk customers.”

The Society’s savings balances climbed by £498 million during the first half, to £10.1 billion.

The Chelsea, which ranks fifth among the UK’s mutuals, ceased making new buy-to-let loans last year.