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Chelsea Building Society sank into the red during the first half after taking a 41 million pound ($67.72 million) hit from mortgage fraud, the British customer-owned lender said on Friday.
Chelsea, Britain's fifth-biggest building society, said the one-off charge reflected a write-down in the value of properties in its buy-to-let portfolio which had been fraudulently inflated.
That helped push the lender to a half-year loss of 26 million pounds, compared with a 23 million pound profit in the same period last year.
Mortgage fraudsters convince banks to advance home loans that exceed the value of the underlying property, often with the help of middle men such as mortgage brokers.
"The Society has been through a difficult period and reporting a loss in the first half of the year is disappointing" Chelsea Chairman and interim Chief Executive Stuart Bernau said in a statement.
The fraud charge, coupled with an increase in bad loans as more customers fell behind with their repayments, increased Chelsea's total impairment charge to 53 million pounds from 4 million pounds a year earlier.