AMSTERDAM - Dutch financial institution Rabobank was issued a 12 million euro fine for violating rules related to its mortgage services. The fine was issued by the Netherlands Authority for the Financial Markets (AFM) on December 4, and was published on Thursday.
"Research by the AFM shows that Rabobank provided customized mortgages between mid-2019 and mid-2021 without appropriately assessing whether this was, and remained, responsible for customers," the regulator said in a statement. The AFM accused the bank of being "careless" with its customized mortgages by granting applications without carrying out appropriate checks.
Rabobank offered customized mortgages at least until April 2022. Lenders are allowed to offer such mortgages with a higher maximum value when they can substantiate their reasoning with calculations and documentation as part of their due diligence. "The AFM is of the opinion that Rabobank has not acted with sufficient care in this regard," the AFM stated.
Specifically, the bank did not provide enough guidance about when a mortgage should be "responsibly" approved. "In many cases, whether a mortgage could be taken out was left to the personal interpretation of the Rabobank employee involved. This created a serious risk that Rabobank customers took out loans that were too high for their situation," the regulator noted.
AFM began their investigation into Rabobank after an audit of a random sample of approved mortgage applications showed many instances where the amount approved was higher than what borrowers should have been able to obtain based on their income. "For the customers involved, this meant that they entered into a payment obligation that was too high, usually for a period of 30 years. Rabobank should only have granted these loans if it had determined with sufficient certainty that they were nevertheless justified."
About 20 percent of the mortgages examined involved "incomplete, unverified and sometimes even factually incorrect information," the AFM continued. "The AFM has repeatedly expressed concerns about the method of mortgage lending by Rabobank."
Rabobank said it was considering filing an appeal, arguing that the decision to sanction the bank was based on a random sample of 42 customized mortgages. The bank confirmed it was unable to demonstrate that eight of them were approved in an appropriate manner. "However, these types of customer files are a very small part of the bank's total mortgage portfolio and are therefore not representative of the entire portfolio. The bank disagrees with the AFM's conclusion that the standards have been violated structurally, and therefore believes the fine amount is disproportionate. The annual accounts for 2022 include a provision for part of the amount of the fine," the bank said.
The bank added that it offered customized mortgages in many situations, including when its customers faced major life changes, like the end of a relationship. "The AFM decision concerns matters from the past. Our acceptance policy and acceptance process have been continuously tightened and clarified in recent years, in close consultation with the AFM, in order to continue to provide credit in a responsible manner," said Rabobank executive Stefaan Decraene.
The AFM added that it still believes banks should be allowed to offer tailor-made mortgages to reach a more diverse set of customers with specific needs. At the same time, the regulator said this must be handled responsibly. "Customization is not intended as a means to borrow more where it is not responsible. It should not create a financial problem for a home buyer in the long term."
