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Abbey owns up to mortgage malpractice
Simon Duke, Daily Mail
4 September 2009, 8:17am Reader comments (21)
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.
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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centre and took disciplinary action against two staff members for booking customers onto mortgage rates that had been withdrawn,' the spokesman added.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 broker 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.'
Simon Duke, Daily Mail
4 September 2009, 8:17am Reader comments (21)
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.
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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 broker 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.'
