It has been alleged in a recent report that around 80 percent of loans that were approved by the Halifax Royal Bank of Scotland before the financial crisis hit were actually given approval without any income checks being carried out.
This means that in the vast majority of cases loans were approved by HBOS without proof of income that would determine whether or not the borrower would actually be able to make repayments on the loan.
The claims were made by a former senior employee of HBOS, which has now been taken over by Lloyds TSB after becoming another financial victim of the credit crunch and suffering huge losses.
The former senior employee, Michael Bolton, reportedly stated: ‘HBOS had five brands, all offering products without proof of income. It was offering a lot of self-cert, a lot of buy-to-let that needed no proof of income and a lot of Halifax’s mortgages were ‘non-verified income’ loans, which was essentially fast track. Before the credit crunch, as much as 80% of HBOS’ loans were going through without full proof of income.’
One mortgage broker said that before the global credit crunch hit the nation in 2007 many lenders who dealt with mortgages and loans tried to fast track applications by using the credit scoring system.
In the case of HBOS many loan applications were fast-tracked in this way, being approved at the time of the application in many cases, which meant that a traditional underwriter that would normally check things such as proof of income would not be used.
The broker stated: ‘A lot of mainstream loans were fast-tracked in the past, but HBOS went further than most lenders in that area of the market, in relation to bigger loans, so I would not be surprised if 80% were without full income verification.’
A spokesperson from the Halifax responded to the claims by saying: ‘Our underwriting approach is carried out in a responsible manner. We have one of the best underwriting approaches within the mortgage market, and the performance of our prime mortgage book is broadly in-line with many leading competitors in the market.’
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