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About Pecco

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  1. Couldn't resist digging this out from here GMAC made a similar move a few wks back, but changed thier minds the next day. I expect some lenders will follow; it demonstrates just how crude risk assessment is in the mortgage industry imo.
  2. QFE. 'Subprime' is a term created by lenders and it specifically refers to set criteria which contain product ranges unique to them, purely based on adverse credit (at least in the UK). 'Self Cert' is not so black and white, as you can have 'Self Cert prime' (or Alt A/A minus), but you can also have 'Self cert Subprime' *shudder* It's misleading to lump all these mortgages in together. 'Prime' is also murky, due to 'fast tracking' whereby references aren't asked for - making them pretty much indistinguishable from their Self Certified Alt A mortgages. I can understand why people are trying to use the word 'subprime' as a concept to cover risky unaffordable loans, but it would be better to call them unaffordable, or high-risk, etc than try apply a category label to an idea, as it just confuses and dents credibility cos some are calling 30%+ subprime while the official figures are less than 10%. It also excludes 'fast-tracked' prime, or stupid income multiples on prime which are just as bad. Better to come up with some word (and I'm sure the media will at some point) that encompasses all these dodgy mortgages, whether they be subprime and/or self cert, or prime imo.
  3. GMAC have a UK operation, and they are the biggest subprime lender in the UK. Also the 10th largest overall mortgage lender, or 12th, depending on which stats you believe. I believe they were actually the first to use the securitisation model, but I'm not positive - it was around the same time as NRK, and they were one of GMAC's biggest competitors a few years back. They got a loan this week for around $21bn from Citigroup, though Citigroup are a stakeholder. Lucky GMAC ^^ Interestingly they also recently made a sale of £1.1 bn of their assets to B&B, so have some capital handy http://www.mortgagestrategy.co.uk/cgi-bin/...pndh&f=pndf I'd be interested to know where you got the 9 out of 10 figure - depends what you're measuring it for as they do self-cert mortages as well as verified. Do you mean out of all applications, or of those on Verified? I can only yet again bump this article done by the Beeb in 2004, in particular note 'fast-tracks', and suggest extrapolating the figures to where they might be today in a highly competitive market. http://news.bbc.co.uk/1/hi/business/3478635.stm {Edit: and yes, regulated by the FSA}
  4. This is probably going to be a stupid question, but why would house prices slowing cause the subprime collapse? That implies subprime would never collapse after reaching a critical mass where credit extended overtook the possibility of repayment to the point of no return (which is where second charges were headed imo). If House prices stopped increasing and everything else remained static, why would sub-prime borrowers suddenly be exposed (ie start defaulting) any more than they would if prices continued rising? Agreed these borrowers wouldn't be able to keep remortgaging to delay the inevitable, but borrowers with that attitude to credit are going to default whether they can delay it by 'debt consolidation' or not, and the longer it's delayed the less chance the lender has of making any profit. Foreclosures have been growing alarmingly in the UK even while house prices are still rising, and at the LTVs offered, on automated 'approximate' valuations, the asset isn't guaranteed to cover the costs. Would the UK subprime market collapse even if house prices continued marching on? Maybe there are other triggers to bring down that house of cards. Don't know. I've been waiting to see how and when it would start to implode, and if it would be 'too late'. I only really took a real interest in trying to understand the wider context that mortgage credit risk fits into when the Bear Sterns funds collapsed in June, so I'm still on a learning curve. Apologies for any ignorance, don't bite me ^^
  5. Your guesswork isn't far off I'd say - if I understand your figure, and you're saying 2/3rd of subprime will now fail criteria. But criteria has also tightened on prime, self cert and BTL as well, and this doesn't factor in business lost due simply to rate increases deterring people from remortgages/purchases. I don't know whether things will get bad enough to cause a crash, but I do feel it won't play out until Q1/Q2 of next year. Lenders are claiming withdrawals of products and tighter lending is temporary (some don't want it to be over), but it's probable the current crunch and rate increases will exacerbate foreclosures and losses, hurting investor confidence, exposing bad risk and creating a cycle. It's too soon to say either way for certain on a crash imho, there are a lot of precedents happening, and number of unknowns.
  6. There wasn't one - subprime is usually split into 'levels', from 'near prime' right down to what DB call 'Extra heavy' also known as 'Unlimited'. For this product the Lender doesn't know how many CCJs the applicant has I believe, or what value, as the applicant pays a premium for being allowed to have literally 'unlimited' adverse. This product has been completely pulled by at least one lender. The good news, kinda, is that only a small percentage of subprime business is on the heavier adverse levels, over half are in the 'light' or 'near prime' category, the most restricted of adverse levels. These 'levels' aren't optimal though, they are a legacy from the days prior to more sophisticated risk assessment, though loosely correlated with risk, they're not perfect and people in 'light adverse' range from genuine 'near prime' to 'pretty damn bad' (technical word ). Sorry if I'm preaching to the choir here. I heartily agree! I don't think it will be long before lenders start offering to good quality FTBs again. It's sub-prime and self cert customers who will struggle to get mortgages long term.
  7. Aye I'm regurgitating Lender perspective, that's why I added 'so far' in the fact that arrears have been lower than residential - I'm quite sure there are other reasons for that to do with the market rather than the underwriting. I haven't had a chance to do my own analysis on BTL data yet, it will be interesting I'm sure.
  8. http://www.mortgagestrategy.co.uk/cgi-bin/...;h=24&f=254 I'm sure they won't be the last.
  9. That shocked me, let alone them - I will pass that on, thanks. Not really just gut feeling, I've worked for a subprime lender for years so I know what's coming. I don't know much about economics though, so I don't understand the impact it might have. Some of the conclusions here seem sensible, others not so, a lot is simply over my head. If they had a decent deposit (heck, any deposit) I would urge them to go for it and probably help them out, but I know they will be stretching themselves and be vulnerable to any drop in equity or raise in IR. They have no clue what's going on in the states, or what 'subprime' is, only that their best mates have just bought a house. I would urge them to wait at least 6 mnths and see where things land, but they're not listening to me anyways, I bought a couple of years back and they just see me in my own home and not the vast difference in financial circumstances. Apologies
  10. Traditionally BTL investors have been considered lower risk than occupiers, the risk is assessed on the property rather than the applicant, based on the reasoning that the property should be able to 'pay for itself'. So property details, local rental demand and rental income become the key criteria, rather than the credit worthiness of the applicant (though that is also assessed). Arrears figures so far back this up, investment is less risky than residential, though whether by accident or design I don't know.
  11. Aye I agree. For purely selfish reasons I'm very glad of this timing, as my brother and his new wife were talking about getting a house, at 100% LTV. They're quite young on a low income, and I strongly advised them against it and tried to explain why, but all they're seeing are new buildings springing up around them (Bournemouth) and feeling like they're going to be left behind and priced out. A month ago, they might have got a mortgage, but thankfully I'm pretty certain they won't now. This will give them a couple of years to get some savings and get something at a more reasonable price hopefully.
  12. I enjoyed the way every mention of subprime was carefully preceeded by 'US' ^^ I think ratings should be taken with a pinch of salt at the moment, although at least they're being open, albeit carefully. I also think if all the questions were answered at once by UK banks it would cause panic and drive a self-fulfilling prophecy - better for it to trickle out.
  13. To be fair, it may not be the CML that is driving the witholding of information. I wouldn't be surprised if they have reached an agreement with their members to conduct a private study among themselves - and I don't doubt a few would make it a condition of their participation that CML isn't allowed to go public. I'm speculating, but I also give zero credence to the CML after they retrospectively and openly fiddled their foreclosure figures so they could publish a 30% increase rather than a 70%+ increase, misleading anyone who doesn't bother to dig deeper (ie. a large percentage of the public who trust them). Companies who are so irresponsible and inept with stats and analysis shouldn't be allowed near a calculator. Grrr!
  14. Are these Commercial papers a regular thing that normally present no problems, or is the hike in Libor and credit drought spectacularly bad timing just preceding a larger than usual maturity of these papers? I'm trying to understand the impact and implication.
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