Cml Squealing Yet Again About Fsa Proposals--Merged

[Kyoto]

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8042130/FSA-reforms-would-have-meant-4m-fewer-mortgages-lenders-claim.html

a linky for the MSM,OP doesn't have one

'Almost 4m homeowners, nearly half the total, would have been refused mortgages if tougher lending rules proposed by the Financial Services Authority had been operating over the last four years, the Council of Mortgage Lenders said. '

It's a quite natural reining in from period of 'easy credit' expansion back into something altogether more sustainable.

Listen to them squeal!

[The Masked Tulip]

But it will be a slow process will it not? I mean, they are only talking about doing this - not like it is going to happen tomorrow.

[jonboy2010]

http://www.thisislondon.co.uk/money/article-23884776-new-lending-rules-will-rule-out-half-of-all-mortgages.do

More than half of all mortgages taken out during the past four years would have been barred if proposed new lending regulations had been in force, a trade body warned today.

The Council of Mortgage Lenders said 3.8 million credit-worthy borrowers would have been unable to get a mortgage between the second quarter of 2005 and the first quarter of 2009 if the Financial Services Authority's affordability rules had been in place.

Overall, it estimates that 51% of all mortgages written during the period would have been affected by the tighter lending criteria banks and building societies may be forced to adopt under the Mortgage Market Review.

The group has already warned that the proposed rules on mortgage lending will lead to house price falls and create "mortgage prisoners" who are unable to remortgage when their current deal expires.

Its latest research shows that around 16% of mortgages taken out between 2005 and 2009 would not have gone ahead if borrowers had been restricted to spending no more than 35% of their post-tax income on repayments.

A further 16% of people would have been barred by rules stating that lenders must assess affordability on the basis of a 25-year repayment mortgage, even if the mortgage term is longer than this or it is an interest-only loan.

Another fifth of mortgages were likely to have been blocked if lenders had had to assess affordability not just on the rate the borrower was applying for, but also on one that was 2% higher.

The CML said that while the proposals would have reduced the number of arrears cases by around 151,000 and repossession ones by 38,000, 3.8 million people who had never suffered repayment problems would not have been given mortgages.

It added that the impact of the measures would have fallen most heavily on first-time buyers, with 730,000 people who have not gone on to have problems keeping up with their repayments kept off the property ladder.

Around 80% of people with impaired credit histories who took out a mortgage during the period were also likely to have been excluded under the new rules, although the CML said around 20% of these people had run into payment difficulties in 2009.

The CML said: "Ultimately, re-writing the mortgage rulebook requires regulators to make a judgment about what level of exclusion of credit-worthy borrowers is an acceptable sacrifice for making lending 'safer' and minimising systemic risk of instability.

"We believe the current proposals sacrifice far too many borrowers, and do not chime with our recent research on levels of consumer aspiration to become homeowners in the future."

The proportion of people the CML thinks would be impacted by the new rules is far higher than the 17% the FSA estimates would have been prevented from borrowing if the regulations had been in place.

But the CML said the difference was because the FSA had only looked at the impact of limiting repayments to 35% of borrower's post-tax income, and excluded the other measures.

The CML research also found that the FSA's proposals would have done little to dampen boom and bust cycles in the housing market.

It said rather than preventing excessive borrowing when the housing market reached its peak in 2006/2007, they would have had most impact in 2008, when lenders had already started to tighten their criteria.

The group said: "Even in 2009, when mortgage underwriting criteria had become extremely conservative by any historic comparison, the proposals would still have affected 45% of the small volume of transactions that did take place."

The CML said it was not against regulatory change, but wanted to make sure that the new rules were fair on consumers, lenders and intermediaries.

But it added that the mortgage market had already changed significantly, and the number of borrowers impacted by the new rules going forward was unlikely to be as high as in the past.

The Financial Services Authority said: "Our proposals are designed to address the major failures that have occurred in the mortgage market and we are actively consulting with all stakeholders to ensure we get the right solution.

"Our evidence shows that 16% of borrowers are already financially overstretched and they are facing problems now as a result of their lenders' practices in the past, not the Mortgage Market Review.

"This is why it is imperative that we take steps to protect vulnerable consumers and ensure lenders are making responsible decisions.

"We will continue to work with industry and consumers to establish a strong mortgage market where those who can afford mortgages are able to get them. It is in the interests of all that we get this right: both lenders and borrowers suffer from irresponsible lending."

Looks like we are going back to the 90s

[The Masked Tulip]

it's already happening dealt with a few people in the last month coming to me with remo problems ie leaving their fix wanting a new one.kept getting rejected.all had major LTV issues that couldn't be reconciled without a major capital injection.

banks are reining in new lending.

So what happens then?

I was under the impression that when a fixed mortgage comes to an end the bank merely gives them another fixed mortgage albeit it for an arrangement fee and a higher IR?

Surely it would be more public knowledge by now if banks were refusing mortgages en masse - although, the Brits love to keep house price info very privately.

[Byron]

For the life of me, I cannot understand how the CML can object to people not be allowed to overstretch themselves.

People will not be refused mortgages once prices fall to proper 3x levels.

I think that what we are seeing is sheer greed and avarice on the part of lenders who see the profits they made under their evil invention 'affordability' evaporating away.

Perhaps they shpould be saying.

Mortgages will be available, but the CML profits will be severely dented.

[yokel]

I heard a CML man on the radio this morning giving the line `But most of these people didn't actually get into arrears - so the lending wasn't irresponsible (my paraphrase'

1. How many of them were rescued by the govt (sorry, the independent BoE) reducing interest rates to near zero to bail them out at the expense of savers?

2. How many are likely to get into arrears over the period of the loan?

3. The numbers seem inflated to me - if 4million mortgages would have been affected over 4 years, and this represents 50% of the total ........

Also, many journalists seem to think that house prices are what they are , and it is necessary to lend people that much money to buy them, not realising that sensible lending rules will eventually lead to sensible house prices and solve more than one problem.

Y

[Englaender]

While you were ranting, you forgot to mention SMI, which means anyone who has a bit of trouble with their income gets to keep their home forever, so it is the taxpayer on the hook, not the buyer and the bank as would have occured in days of Yore.

So I did. And I was ranting, wasn't it?!

[South Lorne]

How many of these are having their mortgages paid by the taxpayer? they may have been feckless but the reality is they have profited whereas savers have not.

.....not just mortgages but MEWs to pay for the upmarket car , foreign holidays and overseas pad....we tax payers are nice to the feckless and ensure they continue in their ways....it was the Nuliebour way ...glad to see it coming to an end under current regime.....

[Reck B]

mortgage prisoners

better than "mortgaged homeless."

[ChumpusRex]

So what happens then?

I was under the impression that when a fixed mortgage comes to an end the bank merely gives them another fixed mortgage albeit it for an arrangement fee and a higher IR?

Surely it would be more public knowledge by now if banks were refusing mortgages en masse - although, the Brits love to keep house price info very privately.

When the fix comes to an end - the mortgage usually reverts to a 'standard variable rate' mortgage, which tends to have a relatively uncompetative variable rate. Although, at the current time, with the base rate so low, the SVRs are very 'affordable'.

The borrower either stays on that SVR variable rate - or they go through the process of remortgaging (select a new product, valuation, conveyancing, etc.) although if staying with the same lender, the process is abbreviated (usually just selecting a new product and paying an admin fee).

The problem that people are finding is that their current lender (or, indeed any lender) does not offer a new product that they can switch to. E.g. they may have LTV of 95% - but the lender only offers new deals on 85% or less. In that case, the borrower has no choice but to either inject capital, or stay on the uncompetative SVR.

[The Masked Tulip]

When the fix comes to an end - the mortgage usually reverts to a 'standard variable rate' mortgage, which tends to have a relatively uncompetative variable rate. Although, at the current time, with the base rate so low, the SVRs are very 'affordable'.

The borrower either stays on that SVR variable rate - or they go through the process of remortgaging (select a new product, valuation, conveyancing, etc.) although if staying with the same lender, the process is abbreviated (usually just selecting a new product and paying an admin fee).

The problem that people are finding is that their current lender (or, indeed any lender) does not offer a new product that they can switch to. E.g. they may have LTV of 95% - but the lender only offers new deals on 85% or less. In that case, the borrower has no choice but to either inject capital, or stay on the uncompetative SVR.

Thanks.

I see the CML are going big time on the BBC and Sky today.

"Substantial house price fall" - CML boy just said on Sky if the new rules come into effect.

[@contradevian]

Thanks.

I see the CML are going big time on the BBC and Sky today.

"Substantial house price fall" - CML boy just said on Sky if the new rules come into effect.

Don't understand the CML at all. Its not as if their members have any money to lend (speculatively) anyway, and neither has the Government. Presumably they just want the "wriggle room" to lend recklessly if they want to.

Edited October 5, 2010 by Sir John Steed

[Kyoto]

"Substantial house price fall" - CML boy just said on Sky if the new rules come into effect.

Substantial? Shock horror, let's get lending again that would be awful!

[james_chch]

The Council of Mortgage Lenders said 3.8 million credit-worthy borrowers would have been unable to get a mortgage between the second quarter of 2005 and the first quarter of 2009 if the Financial Services Authority's affordability rules had been in place.

Overall, it estimates that 51% of all mortgages written during the period would have been affected by the tighter lending criteria banks and building societies may be forced to adopt under the Mortgage Market Review.

Hang on a minute, weren't half of these loans self-cert anyway? So 51% of them wouldn't have been allowed, even assuming people were being honest about their incomes. Plus the FSA are still being a bit lame with their rules, for example, they aren't insisting on rigorous LTV caps.

So the open question is, if lending standards had been sensible, just how many of those loans would have been allowed?

[Beggar Thy Children]

Don't understand the CML at all. Its not as if their members have any money to lend (speculatively) anyway, and neither has the Government. Presumably they just want the "wriggle room" to lend recklessly if they want to.

Trying to drum up outrage amongst the sheeple, suggesting house price falls is the best way to do that.

If you can get enough sheeple squealing and stamping their feet the gubmint/FSA will back down.

Edited October 5, 2010 by BTL Cattle

[bobthe~]

Don't understand the CML at all. Its not as if their members have any money to lend (speculatively) anyway, and neither has the Government. Presumably they just want the "wriggle room" to lend recklessly if they want to.

I think I understand it.

They don't want to lend, they just don't want the financial disaster that house price falls will give to the quality of their existing mortgage books.

HPI = UK Economic growth, sadly.

[Caveat Mortgagor]

FFS this makes me want to scream. Are they fecking stupid or just avoiding the bleeding obvious?

If the rules had been there, prices would have been lower and the percentages of applicants rejected they talk about would have been different.

Lower prices would have meant they would not have needed to reject 16% of applicant on the basis of breaching the '35% of income rule',

nor would they have been required to reject a further 16% mortgages on the basis of affordability over a 25 year mortgage.

Last of all, they would not have rejected one fifth of mortgages due to affordability over a 25 year period.

Its simple, regulation would have merely stopped the prices going ballistic - the applicants would have been able to proceed at sensible prices whilst lenders would have been able to work to a sensible lending framework.

And the mortgage prisoners they worry about who are not going to be able to re-mortgage; well guess what, yep thats right, if the regulations had been in place they would not be looking down the barrel of a 5 - 10 year stretch for crimes of financial recklessness.

The shame of this is that many innocent people will be those prisoners and the (ahem) 'regulators' and the banksters get off scot-free. Thats where the outrage should be directed.

[alexw]

Clearly I'm an old fashioned fuddy-duddy, but if I were handing over a six figure sum I'd want the above as an absolute minimum.

Clearly you have a brain bigger than a peanut which is marginally greater than that of the typical CML member.

[Chris G]

CML are so dumb aren't they?

If houses are £100k and max LTV is 50% per £1m of available funds lenders can do 20 mortgages

If houses are £200k and max loan is 100% per £1m of available funds lenders can do 5 mortgages

Look at all those arrangement fees lenders are missing out on wanting to ramp prices up and lend to anyone with a pulse! They are missing out on 15 just there not taking into account that with lower prices there will be more sales down the line. They need churn.

I really couldn't have said it better than that, this will hopefully encourage responsible lending.

[Redcellar]

One of them was interviewed on radio 5 before 7am this morning. He said his piece then the interviewers got stuck into him. He was squeeling like a stuck pig before they had finished and just sounded like a VI with little of interest to say. They grilled him on over priced houses being the problem, didn't ask about the low low low interest rate we have had being responsible for most people being OK for now, but well done BBC at last. I recall the interviewer even said house price falls are predicted !!!

Seems momentum has turned and price falls are mainstream thoughts now, and squeeling piggies at the trough are to become tomorrows bacon butties.

[Redcellar]

I really couldn't have said it better than that, this will hopefully encourage responsible lending.

Your logic makes sense but ...

Whilst house prices fall lenders do not lend anywhere near as much when they do. So CML are only interested in sustaining their stream of profits and bonuses that can never end (yeah right), i.e. short term vision that got us into this mess in the first place.

Plus many advisers will go to the wall as a result, so they are into protecting their market to the death. FSA needed to force them to behave responsibly, but should have done so ten years ago. Bleeting CML is incredible and dumb. Effectively some people want liar loans, why else would they complain about having to check income!! FFS its an absolute minimum requirement and irresponsible lending if they don't. I've yet to hear a good counter argument other than "my business will be imapacted, numbers of mortgages will be reduced".

[erranta]

Oh, that's ok then. But let's not bother considering the fact that for the last 18 months, the base rate has remained at an unprecedented 0.5% and having spent the 6 months previous to that tumbling too.

Oh, so you're not going to ignore the rate completely. Good oh. But yes, it's all the lenders' fault. Nothing to do with people over-stretching themselves and now suffering as a result.

Exactly - since 2007 interest rates have been set at record lows to support the UK housing market from collapsing/Govt paying peoples mortgages to stop them being repo'd.

Why?

Coz reduction of house prices = neg equity and defaulting 'borrowers' would take the City bankers down again!

Banks have hundreds/thousands? of houses secretly bought up by their shell companies to prop prices up which would also lose value.

Edited October 5, 2010 by erranta

[ccc]

FFS this makes me want to scream. Are they fecking stupid or just avoiding the bleeding obvious?

If the rules had been there, prices would have been lower and the percentages of applicants rejected they talk about would have been different.

Lower prices would have meant they would not have needed to reject 16% of applicant on the basis of breaching the '35% of income rule',

nor would they have been required to reject a further 16% mortgages on the basis of affordability over a 25 year mortgage.

Last of all, they would not have rejected one fifth of mortgages due to affordability over a 25 year period.

Its simple, regulation would have merely stopped the prices going ballistic - the applicants would have been able to proceed at sensible prices whilst lenders would have been able to work to a sensible lending framework.

And the mortgage prisoners they worry about who are not going to be able to re-mortgage; well guess what, yep thats right, if the regulations had been in place they would not be looking down the barrel of a 5 - 10 year stretch for crimes of financial recklessness.

The shame of this is that many innocent people will be those prisoners and the (ahem) 'regulators' and the banksters get off scot-free. Thats where the outrage should be directed.

Common sense is not allowed when discussing British house prices and lending practices.

[fluffy666]

Why? If you are paid bonuses to lend out money irrespective of the consequences you would just lend, it's not your money. If the bank failed it would not matter as you would get a large pay-off or pension, Crock and RBS for example. And the taxpayer would pay the 'poor hard-working' families mortgage so everones a winner - expect the taxapayer and savers who had to bail out the banks.

Bonuses for the bankers, free mortgage payments for the feckless and the CML want to repeat the process.

Fair enough. Interest free IO mortgages for all I say, and no income checks. Take that, Bears!

[lulu]

Clearly I'm an old fashioned fuddy-duddy, but if I were handing over a six figure sum I'd want the above as an absolute minimum.

It is quite frightening to me that they consider any of these measures in any way optional.

No wonder we are in such a mess...

* assessing an applicant's income and expenditure

* assessing their ability to repay on a full capital-and-interest basis

* assuming loans are for no longer than 25 years

* restricting the size of loans to people with past payment problems and

* assuming that interest rates might rise from their initial level.

I wonder exactly which of these criteria they think is excessive?