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JimDiGritz

New Mortgage Company Ponzi Scheme

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Telegraph link

Ex FSA chairman sets up Halifax price index based mortgage ponzi scheme...

The mortgage involves no monthly repayments and will give customers a 20pc deposit to buy a home in exchange for 40pc of any profit made from a later sale. Castle will pick up 20pc of any loss on a property. The mortgage is only open to Castle's investment customers who can fund 20pc of their house price purchase.

Breathtaking.

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Telegraph link

Ex FSA chairman sets up Halifax price index based mortgage ponzi scheme...

Breathtaking.

Thanks for posting!

But that article is deeply unclear. Even muddled!

20% deposit in return for 40% of any price rise: that sounds like the kind of thing that generated lots of bad press when it happened before and became a good deal for the lender. Didn't that end up with some banks being pressured into paying compensation for misselling, because the recipients of the free money hadn't got all their HPI cake after eating it?

Still, at least that looks clear. Returns to investors look a lot more dubious. Linking to a house price index is attractive in principle: it enables the landless to hedge against being priced out by HPI. And that at least is funded, in that the underlying investment is geared at 2:1[1,2]. And falls in the index are even more problematic in terms of liquidity. Either way, we have potential for another misselling controversy when someone loses 40% of their gains (HPI) or some of their money (HPC).

[1] Or is it? A house isn't an index, and an index gets pulled up by those houses that someone substantially improves, and down by those which are unmaintained. And this deal is, by its very nature, unattractive to those who will put money into serious renovations and thus drive real rises.

[2] Subject of course to liquidity. Who is going to pay if savers want to withdraw money but borrowers are holding long-term? The hedge fund is putting in a float, but that would soon vanish if the scheme got popular - e.g. full bubble conditions returning.

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Thanks for posting!

But that article is deeply unclear. Even muddled!

I know, I have read and re-read it several times.. still I detect a staggeringly greedy ponzi scheme in the making!

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I know, I have read and re-read it several times.. still I detect a staggeringly greedy ponzi scheme in the making!

Just spotted that somebody beat me to it on this topic.

Mods, feel free to merge/purge.

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Thanks for posting!

But that article is deeply unclear. Even muddled!

20% deposit in return for 40% of any price rise: that sounds like the kind of thing that generated lots of bad press when it happened before and became a good deal for the lender. Didn't that end up with some banks being pressured into paying compensation for misselling, because the recipients of the free money hadn't got all their HPI cake after eating it?

It did, but that have so far not had to do so.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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