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Abbey Admits To Pumping The Market
shakerbaby
Posts: 413 Forumite
Oh dear! No wonder all those prices are inflated. :eek:
Abbey owns up to mortgage malpractice
Simon Duke, Daily Mail
4 September 2009, 8:17am
Abbey sales staff doctored their customers' pay details to speed through mortgage applications in the run-up to the property crash, the Mail has learned.
They also flouted internal controls by channelling the most attractive mortgage deals through favoured independent brokers.
According to internal documents seen by the Mail, staff at Abbey's Leeds office regularly 'manipulated' mortgage applications staff during 2007.
Salary details would be altered so that applications came under minimal scrutiny by risk assessors. This would speed up the sales process, helping staff hit their targets and earn themselves chunky bonuses.
The revelations will be a stain on the reputation of Abbey's Spanish owner Santander, which has prided itself on its prudence during the credit boom.
They will also be an embarrassment for the government, which has called on the Madrid giant to shore up large chunks of the UK banking industry in recent times.
Santander rescued Bradford & Bingley's branch network in the wake of its nationalisation last Autumn just months after swallowing ailing Alliance and Leicester.
A spokesman for Abbey, now Britain's second largest mortgage lender, admitted that a 2007 internal probe uncovered sales practices that 'did not meet our requirements'.
'We reviewed all of the activities of all of the staff at the Leeds operation centre and took disciplinary action against two staff members for booking customers onto mortgage rates that had been withdrawn,' the spokesman added.
Abbey closed its Leeds office last year. Neither employee remains at the bank.
Although Abbey insists the malpractice was an 'isolated' event, it highlights sharp sales practices commonplace throughout the mortgage industry during the borrowing binge of the mid-2000s.
Abbey was by no means the only lender to have fallen foul of a devious salesforce and dubious intermediaries. Chelsea Building Society and B&B recently revealed that they have lost tens of millions of pounds each through mortgage fraud perpetrated by crooked mortgage advisors and solicitors.
In Abbey's case the bank's own staff were the ones gaming the system. In July 2007 two employees contacted Abbey's own internal whistleblowing unit. One of the whistleblowers was a senior 'underwriter', whose job was to judge whether prospective borrowers would be able to pay back their loans.
In a transcript of an interview with internal investigators - seen by the Mail - the underwriter alleged that 'manipulation' of applications was rife in the Leeds mortgage centre.
Sales staff would log into the booking system and alter an applicants' salary and employment details so that the loan would automatically be approved by the computerised risk system, said one insider.
One of the cases involved unnamed professional rugby league player, who earned a base salary of £60,000 a year plus a further £30,000 in endorsements. According to the whisteblower, one of the Abbey mortgage advisers revised the rugby player's pay downwards.
This was because a man in his twenties earning such a large amount would have automatically been flagged up by the system, leading to his application being examined by a risk assessor. He would then have had to provide pay slips and bank statements, delaying approval of the loan.
Staff in the Leeds office resorted to other outlawed tactics to keep sales ticking over. During 2006 and 2007 official interest rates were rising and the property boom was in full swing. When Abbey launched an attractive mortgage rate it would typically be sold out in double quick time.
However, not all of the prospective borrowers would end up taking their loans, leaving Abbey with unsold mortgages on their hands. Abbey sales staff would offer these lapsed deals, which were at highly attractive rates, through financial advisers. This breached the bank's internal rules.
Sources claim that the cheap deals would only be offered to customers who also agreed to buy an Abbey household or life insurance product. There is no suggestion that Abbey broke the law. These 'conditional' deals are permitted as long as the lender is transparent with its customer.
A spokesman for Abbey said: 'We honoured the deals to our customers and no customer suffered financially.'
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Comments
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Same as the big boy bankers then: a gross mismanagement of incentive structures. If these staff were given options for Santander shares that could be converted in 5 years time, rather than near-immediate cash bonuses, there would be far more circumspection.Salary details would be altered so that applications came under minimal scrutiny by risk assessors. This would speed up the sales process, helping staff hit their targets and earn themselves chunky bonuses.
Perhaps all financial institutions should be converted into partnerships making employees personally liable for losses."The state is the great fiction by which everybody seeks to live at the expense of everybody else." -- Frederic Bastiat, 1848.0 -
I have a friend who works in one of the Halifax subsidiaries. She often queried iffy mortgage applications (she's very dilligent at her job) but was always told to just wave them through by her bosses.0
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Rupert_The_Bear_2 wrote: »I've never had a mortgage where I haven't had to send in supporting material for declared income.
Same here.
My father-in-law told me of a time when he passed all the criteria for a mortgage and had been a long standing customer, but the bank manager was still about to reject his application until my FIL advised that he would then take his custom elsewhere.
Seems like we went from one extreme to the other.
Thing is, when it comes down to it, the banks operate to make a profit and they will only do this by lending.
Makes me think that we are unlikely to see the pendulum swing back to the opposite extreme although clearly back to reasonable requirements if applications were previously been pushed through:wall:
What we've got here is....... failure to communicate.
Some men you just can't reach.
:wall:0 -
IveSeenTheLight wrote: »Same here.
My father-in-law told me of a time when he passed all the criteria for a mortgage and had been a long standing customer, but the bank manager was still about to reject his application until my FIL advised that he would then take his custom elsewhere.
Seems like we went from one extreme to the other.
When we swapped from a repayment mortgage to an interest only mortgage in the 80s, we not only have to have proof of a repayment vehicle (endowment), but the mortgage lender held on to the policy!
It's frightening to think how many people have interest only mortgages now and no means of paying off the loan as they were relying on hpi to do that for them and the banks let them do it! No wonder so many people are turning to bankruptcy.RENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
Read the sticky on the House Buying, Renting & Selling board.0 -
Welcome to the recovereh...
http://news.bbc.co.uk/1/hi/business/8208343.stm
This with record low interest rates. Most of this debt is only getting paid down slowly. Want to guess what happens when lending costs rise further?
Debt muppets...0 -
Welcome to the recovereh...
http://news.bbc.co.uk/1/hi/business/8208343.stm
This with record low interest rates. Most of this debt is only getting paid down slowly. Want to guess what happens when lending costs rise further?
Debt muppets...
When interest rates rise it will not effect those with existing credit cards or personal loans.0 -
When interest rates rise it will not effect those with existing credit cards or personal loans.
Unless the credit card is on a fixed rate, the interest rate can go up. With more and more people faulting on their debts, the cc companies are going to be looking to recover their losses somewhere.RENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
Read the sticky on the House Buying, Renting & Selling board.0 -
Perhaps all financial institutions should be converted into partnerships making employees personally liable for losses.
I know of at least one of the city banks that did pay their staff bonuses in iffy debts this year.:DRENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
Read the sticky on the House Buying, Renting & Selling board.0 -
MissMoneypenny wrote: »Unless the credit card is on a fixed rate, the interest rate can go up. With more and more people faulting on their debts, the cc companies are going to be looking to recover their losses somewhere.
Sure, these are going up anyway regardless of the base rate.
Better switch to a nice 0% deal or a life of balance transfer deal.0 -
Better switch to a nice 0% deal or a life of balance transfer deal.
If they can get another company to take them.RENTING? Have you checked to see that your landlord has permission from their mortgage lender to rent the property? If not, you could be thrown out with very little notice.
Read the sticky on the House Buying, Renting & Selling board.0
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