The month at a glance

Amid reports of spiralling mortgage fraud, the lender community was also saddened by Santander’s announcement to merge its Alliance & Leicester business with the Abbey brand

Alan Mathewson

August began with the news that mortgage fraud almost quadrupled in value in the first six months of 2010, according to KPMG’s Fraud Barometer.
Some 21 cases with a value of £96m were reported compared with the same period in 2009, when there were 18 cases worth just £24m. The whole of 2009 only saw fraud amounting to £77m.

Mortgage fraud accounted for more than half of all fraud committed in the financial sector during the period. One of the biggest cases was worth £50m, involving two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty.

An estate agent was also jailed for six years for attempting to pull off a £2m mortgage fraud after stealing the identities of two home owners.

Hitesh Patel, partner at KPMG Forensic, says the fact that an increasing amount of mortgage fraud is being discovered is cold comfort for the industry.

He added: “Clearly, more is coming to light and undoubtedly yet more will follow. The issue is probably far bigger than our figures show.”

There was sad news for the lender community as Santander announced its decision to merge its Alliance & Leicester business with its Abbey brand. From October 15 all broker business will come under a single Abbey brand.

Alan Mathewson, managing director of intermediary distribution and Santander Private Banking (UK), says the decision was taken to allow the bank to align its offering and increase efficiency.

He says: “Our priority is improving service and focusing all our resources on a single brand.

“We believe the integration of our broker offering will [help] us to be the intermediary lender of choice.”

The move will result in the closure of mortgage and lending operations in Wigan where 52 people are employed. Staff will be offered redeployment to the Bootle site.

New A&L mortgage applications at less than 75% LTV can still be submitted until October 15.

Abbey is offering an additional 0.02% for all new Abbey business placed between August 5 and October 31 this year.

Anyone getting ahead of themselves with hopes of a recovery were brought back down to earth by industry experts in August. Despite Barclays and Lloyds

Banking Group both reporting substantial rises in profits for the first six months of 2010 claimed this was unlikely to signal more mortgage lending.

Lloyds group saw a huge jump in pre-tax profits to £1.6bn compared with a loss of £4bn in the first half of 2009.

The group has maintained its 23% share of the gross mortgage market and reduced the amount it sets aside to cover bad loans from £13.4bn to £6.5bn.

Meanwhile, Barclays made a pre-tax profit of £3.95bn, up from £2.75bn a year earlier. It has a 14% share of gross mortgage lending.

But Ray Boulger, senior technical manager at John Charcol, says the dramatic rise in profits is due to a reduction in bad debt and does not necessarily mean the banks will be doing more lending.

He says: “A critical factor in any bank’s ability to lend in the future will be the extent of its repayments to the Special Liquidity Scheme next year.”

Boulger says some lenders will have the funds to repay the money they owe the government but others will fall short and remain unable to access wholesale funding, meaning they won’t be able to increase their lending.

Responding to a Freedom of Information request from sister magazine Mortgage Strategy, the FSA confirmed that it has received three applications from three new mortgage lenders.

Alan Cleary, managing director of Precise Mortgages, says the number is smaller than he would have expected. He adds: “The number of lenders applying is small but funding is still a massive issue and there’s no point in anyone applying if they haven’t got funding in place.”

But while new entrants are waiting in the wings to enter the market, the Council of Mortgage Lenders has lowered its gross lending forecast for the year by £10bn.

The trade body is now predicting gross mortgage lending of £140bn for 2010, £10bn lower than its original estimate of £150bn in November 2009. It has also lowered its arrears and repossessions forecast for the year. It expects 175,000 mortgages to end the year 2.5% or more in arrears compared with its previous forecast of 205,000.

The Royal Institution of Chartered Surveyors revealed house prices fell in July for the first time in a year. More chartered surveyors reported a fall in prices than a rise for the first time since July 2009 as demand slipped and the number of properties coming to market continued to rise. Some 8% more surveyors reported a fall than rise in house prices in the month.

As the month drew to a close Genworth Financial warned that the economy faces a systemic risk from lenders offering 90% LTV loans without some sort of mortgage indemnity guarantee.

The mortgage indemnity provider warns that where lenders are accepting a parental guarantee to encourage first-time buyers on to the housing ladder, in a falling market, such a guarantee becomes worthless as both the borrower and their parents’ source of income are at risk.

Other countries such as Canada have a system whereby a mortgage indemnity is a mandatory requirement and as a result its housing market has stayed relatively stable.

Angel Mas, president of mortgage insurance for Europe at Genworth, says the Canadian model shows mortgage insurance works.

He says: “Maximum arrears in the Canadian system are below 1% and the first and secondary markets have remained open.”

The industry bid farewell to yet another brand as In the Loop Mortgages, a subsidiary of Stroud & Swindon Building Society was axed.

Linda Will, sales and marketing director (and founder of the brand) says: “Coventry Intermediaries offered the same pricing through the society and brokers, whereas Stroud & Swindon took the opposite view in pricing differently for each distribution channel. This meant at times there were better rates on either side. There was virtually no rational for keeping an additional intermediary brand.”