Times Online: Truth Will Out As City Regulator Prepares To Kill Off ‘Liar’S Loans’

[eric pebble]

Truth will out as City regulator prepares to kill off ‘liar’s loans’

The multibillion-pound self-certification mortgage industry, in which customers are not required to provide proof of income, is set to be banned by the financial regulator.

Dubbed “liar’s loans” by critics, self-cert loans were blamed for playing a large part in the housing bubble and ensuing financial crisis.

The Financial Services Authority (FSA) is effectively planning to kill off self-cert home loans by introducing a rule compelling lenders to insist that customers provide evidence of their income.

Read all here:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6872004.ece

Barn door swinging in the wind..... No horse to be seen. Bolted 6 years ago.

Read this --- http://www.ianfraser.org/?cat=4 --- VERY VERY GOOD on all this......

Edited October 13, 2009 by eric pebble

[Bootstrap]

New loans in both self-cert and buy-to-let have plunged to almost zero in the past year as lenders have deserted the riskier parts of the housing market. Self-cert loans have been one of the fastest-growing parts of the mortgage market in recent years. They were mainly targeted at the self-employed, who had found it difficult to secure a mortgage because their income was irregular.

So with liar loans and BTL apparently out of the picture house prices have naturally resumed their march upwards... wtf?!!

I smell the rotton stench of £ devaluation in the air!

[Dubai]

Door... horse.... bolted. The FSA are fvckin' useless.

[Timm]

So with liar loans and BTL apparently out of the picture house prices have naturally resumed their march upwards... wtf?!!

I smell the rotton stench of £ devaluation in the air!

That might explain why prices in Central London, Oxford and Edinburgh are down some 35% against the Canadian Dollar.

Probably best if I don't mention the soft metal.

[Byron]

ERIC

Didn't you invent

LIAR LOANS ???????????????/

[Dubai]

ERIC

Didn't you invent

LIAR LOANS ???????????????/

Yes, he did, but is probably too modest to say so. If he were a man of means he would be employing lawyers to sue for breach of trade mark, but if he isn't I think we should all chip in to employ Sue, Grabbit & Run on his behalf.

[Patfig]

Truth will out as City regulator prepares to kill off liars loans

The multibillion-pound self-certification mortgage industry, in which customers are not required to provide proof of income, is set to be banned by the financial regulator.

Dubbed liars loans by critics, self-cert loans were blamed for playing a large part in the housing bubble and ensuing financial crisis.

The Financial Services Authority (FSA) is effectively planning to kill off self-cert home loans by introducing a rule compelling lenders to insist that customers provide evidence of their income.

Read all here:

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6872004.ece

Barn door swinging in the wind..... No horse to be seen. Bolted 6 years ago.

Read this --- http://www.ianfraser.org/?cat=4 --- VERY VERY GOOD on all this......

So will this herald a return to a sensible salary multiple regualtion or will they just dress it up as something else?

Edited October 13, 2009 by Patfig

[Dubai]

So will this herald a return to a sensible salary multiple regualtion or will they just dress it up as something else?

We need less regulation and more education.

[A.steve]

The Financial Services Authority (FSA) is effectively planning to kill off self-cert home loans by introducing a rule compelling lenders to insist that customers provide evidence of their income.[/i]

This, while bearish in tone, has several significant problems. These were problems I discovered when I looked into getting a mortgage in ~2003/2004 - essentially, what constitutes evidence of income... particularly evidence of future income. I'd assumed, up until that point, that mortgage lenders would be adept at assessing personal circumstances - but, amazingly, I discovered, they seem utterly incapable of

Anyone can be fired or made redundant - or have the bad fortune to be employed by a company that finds itself bankrupt.

Anyone can significantly increase their income for a short period by, for example, massively increasing hours worked - or by swapping a secure job for a less secure one... transferring risk from employers to themselves.

Can anyone provide credible evidence that they will continue to earn at least as much as they do now for the duration of their mortgage - often 20-30 years into the future? Is this move anything more than setting the stage for insurance to run a protection racket in documenting evidence of future income?

You see, the point is that the people I know who are most likely to be able to repay a mortgage from earnings have considerable uncertainty in their earnings. These are people who are unlikely to be able to document their "salary" as public sector workers might - yet these people have far better prospects - in my view, at least. They are most likely to increase their earnings in future - and they're most adept at managing their own financial risk. How are lenders going to be able to establish individuals' prospects?

I'm going to wait until I know what the new rules are before I declare this a victory for common sense.

[buytoilet]

This, while bearish in tone, has several significant problems. These were problems I discovered when I looked into getting a mortgage in ~2003/2004 - essentially, what constitutes evidence of income... particularly evidence of future income. I'd assumed, up until that point, that mortgage lenders would be adept at assessing personal circumstances - but, amazingly, I discovered, they seem utterly incapable of

Anyone can be fired or made redundant - or have the bad fortune to be employed by a company that finds itself bankrupt.

Anyone can significantly increase their income for a short period by, for example, massively increasing hours worked - or by swapping a secure job for a less secure one... transferring risk from employers to themselves.

Can anyone provide credible evidence that they will continue to earn at least as much as they do now for the duration of their mortgage - often 20-30 years into the future? Is this move anything more than setting the stage for insurance to run a protection racket in documenting evidence of future income?

You see, the point is that the people I know who are most likely to be able to repay a mortgage from earnings have considerable uncertainty in their earnings. These are people who are unlikely to be able to document their "salary" as public sector workers might - yet these people have far better prospects - in my view, at least. They are most likely to increase their earnings in future - and they're most adept at managing their own financial risk. How are lenders going to be able to establish individuals' prospects?

I'm going to wait until I know what the new rules are before I declare this a victory for common sense.

the problem with self cert is that it was also avaliable to employed people. Brokers would self cert the employed person stating that the applicant had a second job that paid cash in hand to get arround the problem. The amount of people that had second jobs was

unbelieveable.

Right at the top of the market DB Mortgages (Deutsche Bank) were offering 90% self cert with unlimited arrears.

Self cert does has a place but will always get abused and so it has to end.

[winkie]

the problem with self cert is that it was also avaliable to employed people. Brokers would self cert the employed person stating that the applicant had a second job that paid cash in hand to get arround the problem. The amount of people that had second jobs was

unbelieveable.

Right at the top of the market DB Mortgages (Deutsche Bank) were offering 90% self cert with unlimited arrears.

Self cert does has a place but will always get abused and so it has to end.

What will the self employed do now?

How will those that lied to buy re-mortgage?....who will want to touch them?...what rates will they have to pay?

[Johnny Storm]

The amount of people that had second jobs was unbelieveable.

Had these applications somehow been forward to the tax man the whole thing would have been stopped very easily.

[winkie]

The FSA is also considering regulating buy-to-let loans for the first time. That could require professional landlords, who may have portfolios of 500 properties, to fill in the same forms that individual homeowners have to complete. Such a move would be inappropriate, experts assert, and could further stifle buy-to-let lending, which has also nose-dived in the past 12 months.

[stuckmojo]

What will the self employed do now?

How will those that lied to buy re-mortgage?....who will want to touch them?...what rates will they have to pay?

well, that's easy now, with the base rate at 0.5%. The banks can decide whatever price for the risk for all the above. The problem will come when the base rate goes up and these mortgages will reset into the stratosphere. By then all the decision makers will have moved to another host.

[NotMyHouse]

There was a time (1998) when I could have done with a self-cert mortgage. They were available but weren't really known about and were noticeably more expensive.

I was working as a freelance IT trainer and was getting regular work at £400 a day. This work was available week after week. I was a sole trader and then a limited company.

However, because I didn't have three years accounts, I couldn't get a mortgage from a mainstream lender. We ended up renting for a year, then found that prices had jumped noticeably in that time, so bought in 1999, by which time I did have three years accounts.

If we'd bought in 1998 on a self-cert, we could have got a detached with 1/4 acre garden. In 1999, the semi-detached with a small garden that we did buy was more expensive.

With respect to Eric, I think there are situations where those types of mortgage are appropriate. However, they should not be mainstream products for employed persons and I absolutely agree that they have been abused and used to push prices higher.

[eric pebble]

The essential point is - this whole "Self-Cert" phenomenon is THE KEY to the absolutely ABSURD and UNSUSTAINABLE price of property. It is THE BIGGEST RACKET of ALL TIME.

House "prices" would not be ANYTHING like as high as they are now had it not been for "Self-Cert" mortgages. In the space of 10-12 years - they went from a tiny proportion of all mortgages to the PREDOMINANT proportion. Correspondingly, house prices, unlike REAL, NON-LIAR INCOMES, went up 300-400%....

AND -- It is VITAL to understand this: When Person A, having obtained a "Self-Cert" LIAR LOAN, went to Street, Village, Town X, and "bought" a property in said Street, Village, or Town X, he/she OVERNIGHT TURBO-CHARGED the "price" of property in that Street, Village, or Town X. SO THAT - any person B, C, D, E [etc.] who wanted to buy a property in that Street, Village or Town X, HAD TO FIND THE "MONEY" to MATCH the "price equivalent" Person A had paid in that locality USING HIS/HER LIAR LOAN.

i.e. LIAR LOANS GROSSLY and FRAUDULENTLY INFLATED ALL LOCAL and, very soon, NATIONAL HOUSE PRICES - because house "prices" are DETERMINED by COMPARISON PRICING by the local estate agents/surveyors.

SO IT ONLY TOOK A FEW PEOPLE USING LIAR LOANS USED IN ANY LOCALITY TO ARTIFICIALLY & FRAUDULENTLY RAISE ALL LOCAL HOUSE "PRICES".

THUS - PEOPLE WHO FOLLOWED AFTERWARDS AS WANNABE BUYERS IN THAT LOCALITY EITHER HAD TO TAKE OUT A LIAR LOAN TO MATCH THESE PRICES - OR - AS IS THE CASE TODAY - HAD/HAVE TO RESORT TO STUPID MULTIPLES MORTGAGES TO "AFFORD" CURRENT HOUSE "PRICES".

That is where we are today........... i.e. Prices have been artificially and fraudulently hiked as a result of this whole "Self-Cert" LIAR LOAN phenomenon. You now have to take out ridiculous 6, 7, 8, 9, 10+ x your REAL income to "afford" a roof over your head.

GO FIGURE.

Edited October 14, 2009 by eric pebble

[Y-QUERK]

This is a disaster. What now for the £1.38 billion house of the future?

[flapjack]

Truely amazing - this scam first broke on here - how long ago!! Congrats to Eric for his stirling work. It only took - what three years for the FSA to catch on! Staggering.

Keep up the good work.

[douggggy]

The essential point is - this whole "Self-Cert" phenomenon is THE KEY to the absolutely ABSURD and UNSUSTAINABLE price of property. It is THE BIGGEST RACKET of ALL TIME.

House "prices" would not be ANYTHING like as high as they are now had it not been for "Self-Cert" mortgages. In the space of 10-12 years - they went from a tiny proportion of all mortgages to the PREDOMINANT proportion. Correspondingly, house prices, unlike REAL, NON-LIAR INCOMES, went up 300-400%....

AND -- It is VITAL to understand this: When Person A, having obtained a "Self-Cert" LIAR LOAN, went to Street, Village, Town X, and "bought" a property in said Street, Village, Town X, he/she OVERNIGHT TURBO-CHARGED the "price" of property in that Street, Village, Town X. SO THAT - any person B, C, D, E [etc.] who wanted to buy a property in that Street, Village or Town X, HAD TO FIND THE "MONEY" to MATCH the "price equivalent" Person A had paid in that locality.

i.e. LIAR LOANS GROSSLY and FRAUDULENTLY INFLATED ALL LOCAL and, very soon, NATIONAL HOUSE PRICES - because house "prices" are DETERMINED by COMPARISON PRICING by the local estate agents/surveyors.

SO IT ONLY TOOK A FEW PEOPLE UISNG LIAR LOANS USED IN ANY LOCALITY TO ARTIFICIALLY & FRAUDULENTLY RAISE ALL LOCAL HOUSE "PRICES".

THUS - PEOPLE WHO FOLLOWED AFTERWARDS IN THAT LOCALITY EITHER HAD TO TAKE OUT A LIAR LOAN TO MATCH THESE PRICES - OR - AS IS THE CASE TODAY - HAD/HAVE TO RESORT TO STUPID MULTIPLES MORTGAGES TO "AFFORD" CURRENT HOUSE "PRICES".

That is where we are today........... i.e. Prices have been artificially and fraudulently hiked as a result of this whole "Self-Cert" LIAR LOAN phenomenon. You now have to take out ridiculous 6, 7, 8, 9, 10+ x your REAL income to "afford" a roof over your head.

GO FIGURE.

THE ABOVE SHOULD BE PRINTED OUT AS A POSTER WHICH SHOULD BE FLY POSTED ON EVERY ESTATE AGENTS WINDOW

IN THE COUNTRY

All done on the same day would have an effect

[browneconomy]

As has been said by many:

After years of dithering the FSA are preparing to ban self certification mortgages.

I have a better plan. Banks/B.S. who issue/issued them should send the application forms to the Inland Revenue. If the mortgagee claims to have earned say £25000pa on their tax return but £100000 on a mortgage application then I figure that they owe the taxpayer tax on £75000. That would stop Liar Loans!

[eric pebble]

As has been said by many:

After years of dithering the FSA are preparing to ban self certification mortgages.

I have a better plan. Banks/B.S. who issue/issued them should send the application forms to the Inland Revenue. If the mortgagee claims to have earned say £25000pa on their tax return but £100000 on a mortgage application then I figure that they owe the taxpayer tax on £75000. That would stop Liar Loans!

So true.

And - here is the last paragraph of that Times article:

"In March Lord Turner floated the possibility of capping loan-to-value or loan-to-salary ratios in an attempt to stop the housing market overheating in the future. The FSA is unlikely to introduce caps after canvassing the industry. Banks have warned that the move would be a blunt instrument and could hit first-time buyers particularly hard."

THICK OR WHAT???

NO -- PRICES WOULD - AND SHOULD - HAVE TO COME DOWN TO REFLECT REAL, NON-LIAR INCOMES!!!!

[Oh - of course, we can't have that can we!!!]

DURR ........................................

Edited October 13, 2009 by eric pebble

[juvenal]

Had these applications somehow been forward to the tax man the whole thing would have been stopped very easily.

The requirement to produce a P60, and that be the only evidence of income, would have stopped this scandal in its tracks. Mortgage brokers, banks, BS found themselves surprisingly unable to deal with this huge task.

[tinker]

The corruption goes to the top.

The culture of lying to 'get on' was allowed to fester, encouraged by the incompetence/compliance of the regulator and the greed of the banks.

Politicians and their regulators are supposed to look after our interest. As evidenced by the expenses scandal the ruling elite have turned a blind eye (encouraged it) because they, being at the top of the pyramid, were able to gain from it.

Just think the money these people are on, what are they going to do with it - to make more money? Selfish, greedy b@stards.

Apart from the whole liar loan inflating the whole house price fantasy; they are are no prosecutions for fraud, no rebalancing (same people still in charge) and no redress.

Edited October 13, 2009 by tinker

[GordonBrownSpentMyFuture]

The corruption goes to the top.

The culture of lying to 'get on' was allowed to fester, encouraged by the incompetence/compliance of the regulator and the greed of the banks.

Politicians and their regulators are supposed to look after our interest. As evidenced by the expenses scandal the ruling elite have turned a blind eye (encouraged it) because they, being at the top of the pyramid, we[re] able to gain from it.

Just think the money these people are on, what are they going to do with it - to make more money. Selfish, greedy b@stards.

Apart from the whole liar loan inflating the whole house price fantasy; they are are no prosecutions for fraud, no rebalancing (same people still in charge) and no redress.

+1

Absolutely. Flipping second homes, building their own BTL portfolio, etc.

Professionally and personally MPs were benefiting and profiting from the credit bubble and wide-spread mortgage application FRAUD in which they were complicit.

How many properties does former Prime Minister Tony Blair now own? What is their estimated "worth"?

It's easy to operate "within the rules" and "not break any laws" when you're the very people who pass them.

Which reminds me...

http://www.independent.co.uk/news/uk/politics/labour-lords-bribery-peers-get-sixmonth-suspension-1685194.html

Labour Lords: Bribery peers get six-month suspension

By Andy McSmith

Friday, 15 May 2009

Two Labour peers who were willing to be bribed to help rewrite the law for the benefit of a wealthy client are to have their membership of the House of Lords withdrawn for six months.

I cannot think of a more serious crime than this in terms of abusing ones power and influence in authority.

The punishment for this crime? Sweet FA.

In the words of the great bard: The state of Denmark f ucking stinks.

[eric pebble]

Which reminds me...

http://www.independent.co.uk/news/uk/politics/labour-lords-bribery-peers-get-sixmonth-suspension-1685194.html

I cannot think of a more serious crime than this in terms of abusing ones power and influence in authority.

The punishment for this crime? Sweet FA.

In the words of the great bard: The state of Denmark f ucking stinks.

Incredible in't. INCREDIBLE. Astonishing. Beyond belief.....