Chelsea has identified that there are cases within its buy to let mortgage book where fraud has occurred. This relates primarily to lending during the period 2006 to 2008 and is mainly as a result of the artificial inflation of property values by third party professionals involved in the transactions. External consultants have completed a review of the entire mortgage book for suspected or proven fraud and the results of that review have been incorporated into the half year results resulting in a charge of £41million.
The Group ceased new buy to let lending (other than pipeline business previously committed) in the last quarter of 2008. Apart from a small confirmed recovery, the half year results exclude third party recoveries which the Society is pursuing vigorously.
In line with the market the Chelsea say they have seen rising levels of arrears on mortgages due primarily to the worsening UK unemployment situation; although there is indication from July 2009 data that the number of mortgage accounts in arrears is levelling off. The existing commercial book has performed well with no cases in arrears to date.
Stuart Bernau Chelsea’s chairman and interim chief executive commented, ‘The Society has been through a difficult period and reporting a loss in the first half of the year is disappointing. However the underlying performance is strong even though we have had to make provision for impairment and fraud losses.
In a competitive market, we have continued to attract strong retail inflows with our savings accounts increasing by over 38,000 in the first six months of the year, a testament to our strong and trusted brand. Our mortgage lending is now fully covered by our retail deposits and this has significantly reduced our reliance on wholesale markets.
This is a good platform from which to build and we are concentrating on the society’s strengths by returning to its traditional values. We will continue to focus on providing excellent value and service to our members and Chelsea remains well placed to benefit from any recovery in the economy and housing market over the coming months.’
Its finance director, Andrew Parsons, has now joined its chief executive in agreeing to resign.
