Mortgage fraud or bad banking?

The Chelsea Building Society is in the red. In fact it has lost £41m as a result of mortgage frauds involving some of its buy-to-let loans. Well, they say it is mortgage fraud. These frauds appear to have involved professionals colluding to inflate the value of buy-to-let properties. Now does that come as a surprise? Not to me it doesn't and it shouldn't to anyone else.

Ray Boulger seems to have hit on something. He is from mortgage brokers John Charcol and he says that the Chelsea had not in fact been a big player in buy-to-lending lending. "It wasn't particularly big in that market, the niche area it was most well known for was sub-prime lending." Sub-prime, did he say? So it wasn't mortgage fraud? It was reckless banking practice that may well be the culprit? Who knows. The truth is convenviently muddied when it comes to delving into the accounts of the money shops. The Chelsea saw a fair amount of their (ehem, savers) money get frozen solid in Iceland.

It is relatively easy to blame "third parties". Yes, some brokers and valuers may get involved in some fraudulent activity. But you don't need a sub-prime lending frenzy for that. It was always the case that property prices get overvalued when money is flowing fast. My father was decidedly unimpressed when a neighbour once boasted how much his house was worth. "His house is only worth what someone is prepared to pay for it!" he grunted, as if to suggest worth and buyer were not connected in his case.

When the financial chickens come home to roost they will find the bonus-bulging cockerels very distinterested. But dare to suggest that the cockerels have their combs out of place and you will be blamed with any old excuse.

Posted in: banks,building societies,Chelsea Building Society,mortgages