The Financial Services Authority (FSA) is considering asking each building society to conduct a health check, particularly of buy-to-let businesses, according to a well- placed source. The Serious Fraud Office and the police are already investigating buy-to-let rackets all over the country. Adrian Coles, director general of the Building Societies Association told The Sunday Telegraph: "There is no indication that fraud is a widespread problem in the mortgage market but Chelsea could be a wake-up call to other building societies to be vigilant and check their books, especially in the buy-to-let space." Although the watchdog does not have a specific remit to regulate the buy-to-let market, it is able to demand that companies do it themselves. Chelsea Building Society found evidence of fraud after the FSA asked the firm to conduct an investigation. KPMG was appointed and discovered the irregularities, thought to be in property valuations. The provision made at Chelsea Building Society plunged the lender into a loss for the first half of the year and saw a clear-out of the executive team. Stuart Bernau, the new chairman, said: "Obviously it's criminal activity. "We have insurance and will try to recover what we can but I'd rather we were up-front with the charge." Mr Bernau stressed that there is no suggestion any Chelsea employee committed fraud, but did admit to "questions about our lending policies". There has been a rising incidence of mortgage fraud in buy-to-let. Bradford & Bingley has written off £271m.Building societies to check books for 'black holes' after Chelsea buy-to-let affair
Britain's building societies could be forced to conduct individual investigations into their mortgage books to prove they do not have financial "black holes" in the wake of the alleged £41m fraud that rocked Chelsea Building Society last week.
Sunday, 23 August 2009
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