Hodge announces residential mortgage re-entry

Hodge has re-entered the residential mortgage market for its 50+, RIO and holiday let mortgages, after a short break from new business.

Having experienced record volumes of business Hodge made the call to close to new applications for a two-week period to restore the levels of service it prides itself on.

As of 9am on Monday 4th July, new applications for all products are now open again, with service level agreements (SLAs) back to 48 hours with other service guarantees to intermediary partners available again too.

Emma Graham, Hodge’s mortgages business development director, explained: “We pride ourselves on both our service and the fact that our underwriters assess applications on a case by case basis. We remain fully committed to maintaining a personal approach but will continue to invest in technology to provide additional levels of automation while ensuring we’re able to offer the services our brokers have come to expect.”

Has Confirmation of Payee Reduced APP Fraud?

Originally announced in October 2018 but not made mandatory at major banking groups until June 2020, Confirmation of Payee (CoP) took a considerable amount of time to get up and running, especially when considering the huge problem it was trying to fix. Given the rise in Authorised push payment (APP) fraud, has the CoP effort been a success or do we need to do more?

Authorised push payment fraud is one of the biggest concerns in the digital payments industry. According to UK Finance, more than £580m was lost to this type of fraud in the UK in 2021, a 40 percent increase year-on-year.

The wheels began turning towards CoP in September 2016 when Which? filed its super complaint with the Payment Systems Regulator. Which? was worried there was not an appropriate level of security around push payments compared to other types of scams. Four years later, banks were directed to implement CoP.

Before CoP was introduced, account names were not robustly examined when setting up a new payee. Payments were made to sort codes and account numbers, making it considerably easier for fraudsters to trick someone into sending them money. CoP is essentially a name-checking service, making sure the transaction matches the name on the recipient’s account.

Issues with CoP

Any new tool against fraud is a welcome addition. But criminals are quick, creative, and ruthless so it is essential to have new security measures regularly introduced. CoP is not a silver bullet, and should not lead to complacency.

We also need to consider the functionality of CoP and whether it is giving away too much information. Fraudsters are meticulous and looking for any chink in the anti-fraud armoury, however insignificant it might appear.

When setting up a payment, if the intended recipient is named James but the payer accidentally types Jamie, the bank will flag this. In some cases, it will go as far as stating that the correct name is James. Whilst this is a great tool to avoid honest mistakes, this is also the type of information that fraudsters can benefit from. They can set up incorrect transactions of their own, knowing that the bank will suggest the correct name. With a name, account number, and sort code in hand, fraudsters are well-equipped to steal. A fraudster who has a customer under their spell can also easily provide a convincing explanation as to why names don’t match.

CoP means nothing without a robust application fraud process. Unfortunately, it is all too easy to open accounts fraudulently which renders CoP useless, in the same way that DeviceIDs lost potency when fraudsters seized on APP fraud. Banks should also look out for a blend of APP and account takeover fraud, where fraudsters change the name on the recipient account so it matches the name the scammer is trying to convince the victim to send money too.

What’s the Answer?

What banks need is to implement a multi-layered approach (of which CoP is a useful addition) to stop any potential danger slipping through. And all those affected need to contribute. Consumers and businesses can no longer lean on their banks for security and reassurance, they must take proactive steps to educate themselves and be aware. Banks and regulators must make full use of the tools available to them to match the fraudsters’ pace and creativity.

One key way banks can step up their game is to profile customer behaviour. Regardless of the type of fraud being committed, fraudulent transactions will look out of character when compared against usual behaviour. Fraud models can be trained to specifically look for signs of APP fraud — FICO made such models available last year. Such models should be at the core of every multi-layered approach. Banks can also use customized communications to customers who are potentially in a ‘live’ APP fraud scenario, rather than just generic messaging at payment initiation. Measures such as these can help stop the ‘scamdemic’.

No wonder that kleptocrats continue to wash dirty money in the UK – Comment on the Foreign Affairs Select Committee’s ‘damning report’

Following the news today of the Foreign Affairs Select Committee’s damning report on the UK’s continuing failure to tackle Russian kleptocrats laundering dirty money through the UK, Martin Cheek, managing director at SmartSearch, said: “Dirty money continues to flow into the UK because too many regulated firms persist in using inadequate, legacy and manual processes to check the identity of new customers.

“Our recent survey of 500 regulated firms in the property, finance and legal sectors showed that 70 per cent of property companies, 47 of legal firms and 34 per cent of financial firms had not changed their approach to onboarding new customers since sanctions were imposed on Russia after its invasion of Ukraine.

“It’s no wonder that criminals and kleptocrats are taking advantage of these loopholes to wash their money in the UK.

“Electronic verification is the most robust way to identify bad actors, prevent sanction avoidance and to keep this dirty cash out of the UK economy.”

CHL Mortgages launches Buy-To-Let refurbishment range

CHL Mortgages has introduced a buy-to-let refurbishment product range which is designed to help landlords improve the energy rating of their rental stock and/or improve the general condition of the property. The products offer the ability to release the costs of the refurbishment upon completion, without having to change product.

The refurbishment product range consists of three products: Light Refurbishment, Cosmetic Improvement and EPC Improvement. The first two products are designed to increase the future asset/rental value of the property, with the latter a Green Mortgage option which is specifically designed to improve the energy efficiency of the property.

The range is available to individuals and limited companies and is applicable on standard buy-to-let properties, small houses in multiple occupation (HMO) and small multi-unit freehold blocks (MUFBs) with five-year fixed rates starting from 4.41%*. Lending will be calculated on the pre-works value with a retention held based upon the post-works estimated valuation.

The product range has a maximum 75% loan-to-value (pre and post works, which means landlords can release more if the value of the property has increased post works) and the maximum cost of work must not exceed 25% of the pre-work property value.

Light refurbishment – this product has been designed for works not requiring building regulation sign off and includes works that can be signed off under the Competent Person Scheme.

Examples of these works include:

  • installation of a replacement kitchen
  • installation of a replacement bathroom
  • rewiring
  • new hot water & heating systems
  • installation of replacement doors & windows
  • replacement roof coverings

EPC improvement product – is for landlords looking to improve the energy efficiency of their buy-to-let property to meet the UK Governments’ proposal for existing rented properties to have a minimum EPC rating of C or higher from April 2025.

Examples of these works include:

  • installation of replacement hot water & heating systems
  • installation of new windows
  • installation of new doors
  • installation of insulation improvements

Cosmetic improvement product – designed for properties requiring cosmetic and minor improvement/repairs works, allowing the landlord to improve the condition of the property.

Examples of these works include:

  • general painting, plastering & decorating
  • installation of replacement floor coverings
  • minor improvement works – such as replacement of internal doors
  • updating fixtures and fittings

For all products the refurbishment works must be completed within three months of completion of the initial advance and landlords must supply a detailed schedule of the proposed works at application.

Ross Turrell, Commercial Director, CHL Mortgages commented: “This product range has been designed and developed in line with feedback received from our intermediary partners and a growing number of their landlord clients who are looking for a product which offers a single, one-stop solution which removes uncertainty around funding refurbishment supported by a simple process.

“This alternative Green Mortgage product is more than a simple pricing play and provides an additional and viable option to alternative forms of finance such as ‘bridging’ and ‘refurb in term’ solutions whilst helping to reduce administrative burdens and save on multiple inspection and legal fees. Our extensive and highly knowledgeable BDM team will play a key role in supporting our intermediary partners to help them explain the options we can now provide that will make a real difference for their landlord clients.”

Money-laundering loopholes missed by property firms

Up to 70 per cent of property firms surveyed for an anti-money laundering campaign have not changed their approach to onboarding new customers since sanctions were imposed on Russia after its invasion of Ukraine.

The disturbing statistic is revealed in a comprehensive, cross-sector survey commissioned by SmartSearch, the UK’s leading provider of anti-money laundering (AML) software.

The survey is the second in SmartSearch’s continuing Electronic Verification Uncovered campaign, which aims to make financial firms aware of the dangers of relying on flawed, old-fashioned methods of identity verification, and shows “the worrying size of the challenge when it comes to closing AML loopholes being exploited by criminals in the UK”.

Decision-makers in 500 regulated UK businesses across the legal, property and finance sectors were questioned on a range of AML compliance issues. Their answers revealed continuing shortfalls in the way some regulated firms check on new and continuing customers and continue to rely on hard-copy documents rather than digital checks to identify them.

More than a third (34 per cent) of firms in the finance and banking sector and 47 per cent of those in the legal sector had also not changed their approach to new customers since the sanctions were imposed.

The Know Your Customer (KYC) process has come under closer scrutiny since the sanctions – which placed restrictions on individuals, entities, and their subsidiaries, and introduced legislation to limit deposits held by Russian nationals in UK bank accounts – were introduced.

SmartSearch’s campaign argues that regulated businesses should use digital onboarding to ensure they properly identify and screen clients.

The gaps in new customer checks were compounded by some property firms’ continued reliance on hard-copy documentation to verify new clients’ identities. Almost half (45 per cent) of those surveyed said they were using documents like passports or utility bills to identify new clients – even though 14 per cent of them admitted they were “not confident” in their ability to spot a fake.

A fifth of financial firms and 23.5 per cent of legal companies also relied on manual checks – with 16 per cent of firms in the financial and banking sector admitting they were similarly “not confident” about spotting a fake. That figure was one in ten among firms in the legal sector.

Martin Cheek, SmartSearch’s managing director, said: “Our latest survey shows the worrying size of the challenge when it comes to closing the AML loopholes being exploited by criminals.

“As the Government increases its censures on companies for breaching compliance rules, some are continuing to risk fines and reputational damage by either failing to increase their surveillance in the light of sanctions or relying on outdated manual checks. Or both.

“Such firms are unwittingly exposing themselves, and the UK, to the proceeds of some of the world’s worst crimes – people trafficking, drug running, tax dodging and scammers who prey on the most vulnerable.

“Regulated businesses need to ensure they are doing everything they can to prevent these crimes and the only way to do so is to embrace electronic verification (EV). EV uses credit reference data, combined with other reliable sources, to create a unique ‘composite digital identity’ which is virtually impossible to fake.

“Not only that, a system like SmartSearch’s can complete a check in just two seconds.”

MotoNovo Increases Vehicle Finance Lending for SMEs

MotoNovo’s growth in lending to SMEs is in stark contrast to the broader picture reported by the Federation of Small Business (FSB), which has said recently that SME finance applications had plummeted to the lowest level on record. A situation that saw the FSB’s national chair, Martin McTague, noting that; “Lenders pulling up the drawbridge for small firms will threaten our already faltering economic recovery.”

MotoNovo, which has enhanced its business finance capability, matching this with a desire to increase market share in the new and used vehicle financing sector, has aligned its ambition with action;

Over the last 12 months, MotoNovo has delivered;

  • 50% growth in lending volumes to corporate customers
  • 22% growth in LCV lending volumes
  • 55% growth in lending volumes to SMEs to purchase cars

In total, the business has helped SMEs by providing well over £100M of vehicle finance over the last year and as MotoNovo’s Commercial Director Debbie McKay concludes, the business plans to keep growing even in a more challenging market; “We remain very ambitious for ourselves and our dealers in terms of SME lending. The FSB’s research on SME borrowing notes that while 61% of businesses seeking funding sought traditional overdraft and loan products, only 25% applied for asset-based finance, a definition that included invoice finance.

“While not immune from the prevailing economic conditions, dealer finance can be very competitive and has the advantage of being ‘secure’, which typically helps acceptance levels. Dealer finance is also quick and easy to set up and frees up other borrowing. We want our dealers and their customers to appreciate these points because our dealer finance is very much open to helping SMEs.”

UK Finance Annual Fraud Report

UK Finance has released its Annual Fraud Report, reinforcing that we must not accept APP scams as an endemic part of life.

We must move resolutely away from the cure-over-prevention focus that dominates the landscape at present. The key question all sectors and industries should be asking is: How can we stop APP scams occurring in the first place?

No-one should be out of pocket because of criminal activity. Evidence shows scams impact victims’ mental health, leaving long-lasting feelings of guilt and shame. Reimbursementalone cannot reverse this damage; nor does it reverse the fact that the proceeds of scams often fund organised and other serious crime.

Relying solely on reimbursement diverts focus from preventing harm and stopping scams in their tracks.

The voluntary Contingent Reimbursement Model Code (CRM Code) is the only set of protections that require signatory payment service providers to detect APP scams, prevent them from happening and respond to them when they are successful.

Evidence shows the CRM Code’s introduction, and its prevention focus, has stalled an exponential rise in APP scams. That said, we must not rest on our laurels and payment service providers should not be treated as the only line of defence against these criminals.

Often by the point of payment it is too late. Social engineering has convinced the victim that the payment is legitimate. The earlier prevention steps are taken, the greater the chance of protecting the customer.

Other sectors involved in the scam journey – including utilities, telecommunications, and social media – must step up to the plate, identify how they can intervene and act on this immediately.

Meanwhile, firms that are eligible to sign up to the CRM Code must work towards this as a matter of urgency.

Emma Lovell, chief executive, Lending Standards Board

Money-laundering loopholes missed by financial firms

More than a third (34 per cent) of finance and banking firms surveyed for an anti-money laundering campaign have not changed their approach to onboarding new customers since sanctions were imposed on Russia after its invasion of Ukraine.

The disturbing statistic is revealed in a comprehensive, cross-sector survey commissioned by SmartSearch, the UK’s leading provider of anti-money laundering (AML) software.

The survey is the second in SmartSearch’s continuing Electronic Verification Uncovered campaign, which aims to make financial firms aware of the dangers of relying on flawed, old-fashioned methods of identity verification, and shows “the worrying size of the challenge when it comes to closing AML loopholes being exploited by criminals in the UK”.

Decision-makers in 500 regulated UK businesses across the legal, property and finance sectors were questioned on a range of AML compliance issues. Their answers revealed continuing shortfalls in the way some regulated firms check on new and continuing customers and continue to rely on hard-copy documents rather than digital checks to identify them.

Up to 70 per cent of property firms and 47 per cent of those in the legal sector had also not changed their approach to new customers since the sanctions were imposed.

The Know Your Customer (KYC) process has come under closer scrutiny since the sanctions – which placed restrictions on individuals, entities, and their subsidiaries, and introduced legislation to limit deposits held by Russian nationals in UK bank accounts – were introduced.

SmartSearch’s campaign argues that regulated businesses should use digital onboarding to ensure they properly identify and screen clients.

The gaps in new customer checks were compounded by some financial firms’ continued reliance on hard-copy documentation to verify new clients’ identities. A fifth of those surveyed said they were using documents like passports or utility bills to identify new clients – even though 16.7 per cent of them admitted they were “not confident” in their ability to spot a fake.

Up to 45 per cent of property firms and 23.5 per cent of legal companies also relied on manual checks – with 14 per cent of property firms admitting they were similarly “not confident” about spotting a fake. That figure was one in ten among firms in the legal sector.

Martin Cheek, SmartSearch’s managing director, said: “Our latest survey shows the worrying size of the challenge when it comes to closing the AML loopholes being exploited by criminals.

“As the Government increases its censures on companies for breaching compliance rules, some are continuing to risk fines and reputational damage by either failing to increase their surveillance in the light of sanctions or relying on outdated manual checks. Or both.

“Such firms are unwittingly exposing themselves, and the UK, to the proceeds of some of the world’s worst crimes – people trafficking, drug running, tax dodging and scammers who prey on the most vulnerable.

“Regulated businesses need to ensure they are doing everything they can to prevent these crimes and the only way to do so is to embrace electronic verification (EV). EV uses credit reference data, combined with other reliable sources, to create a unique ‘composite digital identity’ which is virtually impossible to fake.

“Not only that, a system like SmartSearch’s can complete a check in just two seconds.”

Hargreaves Lansdown’s first move into Open Banking

Hargreaves Lansdown has selected Ecospend, the UK’s leading Open Banking provider, to provide a “pay by bank” service for its clients. Ecospend’s solution will allow HL’s clients to make payments directly to their HL accounts more easily and securely and without the need for cards.

George Rodgers, Senior Product Manager, Hargreaves Lansdown: “Offering an Open Banking payment method is a step change in the payments experience that Hargreaves Lansdown offers its clients. Our clients can expect a simpler payment journey as well as instant settlement for deposits and withdrawals compared to days under the current system. Our adoption of Open Banking is a key milestone in our digital transformation strategy and we will continue to use the best available technology to benefit our clients.”

James Hickman, CCO, Ecospend: “We are thrilled to be working with the clear market leader to deliver a new solution that is both a natural replacement for cards and the perfect response to changing consumer behaviours and digital adoption.

“There is no one better placed than Hargreaves Lansdown to be driving this change and setting the agenda for the entire Wealth Management industry. We are very excited to introduce so many new consumers to a simpler, faster and more secure way to pay.”

Loans 2 Go reflects on 5 years of success with ADP

A new video outlining how the lender Loans 2 Go has harnessed the benefits of using Auto Decision Platform (ADP) has been released by LendingMetrics.

The three-minute production sets out how Loans 2 Go have used the multi-award-winning SaaS platform to adjust its lending appetite in light of changing market conditions over the past few years. The video has been made in response to the growing number of requests LendingMetrics receives from businesses wanting a real-world insight into how ADP can transform their lending practices.

David Wylie, Commercial Director of LendingMetrics, said: ‘The video provides a first-hand account from a lender explaining how it has employed our technology to navigate what is a fast-changing lending landscape. Our customers are at the forefront of our business and being able to reflect on the success of working with Loans 2 Go has been enlightening. We hope it will communicate the benefits of implementing ADP to those curious about taking the next step in underwriting technology.’