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Barratt To Sell Part Of Shared Equity Book

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http://www.ft.com/cms/s/0/8f595232-c0db-11e0-b8c2-00144feabdc0.html

Barratt Developments, the UK’s largest volume housebuilder, has entered talks with investors to sell the its first tranche of shared equity loans, in a move that could herald a return of mortgage security products.

The group, which is being advised by Credit Suisse, is in negotiations with potential buyers for part of the £170m shared equity mortgage book it has amassed since the start of the recession.

Shared equity mortgages work by housebuilders, usually in partnership with the government, taking an equity stake of up to 50 per cent in homes sold to first-time buyers. The loan is paid back over a fixed period, with the value of the housebuilder’s stake rising and falling with the property price. Were it to go ahead, Barratt’s sale would be the first time a housebuilder had traded shared equity and could light the touchpaper for an industry-wide disposal of the mortgage products.

Most of the UK’s large listed housebuilders are thought to have considered selling their loan books. Thus far, however, investors have demanded the debt be traded at too large a discount.

“Barratt will have to take a haircut on the loans. But, if it is not too big, others will follow and it will make a nice little sideline for the industry,” said one real estate banker.

Innovative. :rolleyes:

Sort of Northern rock redux.

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Smells like sub-prime. No doubt RBS will dive in and buy it all up.

Your not joking are you?

If this deal was held up in neon lights with a big red arrow pointing towards the tax payer they still wouldn't get it. :(

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Your not joking are you?

If this deal was held up in neon lights with a big red arrow pointing towards the tax payer they still wouldn't get it. :(

yeah i thought the way it works is RBS would have a crack at making some private profit out of it and if that doesn't work they'll pass it onto the taxpayer to pay off. Seems to be normal banking practice these days. And bonuses all round for the hard working chaps in braces of course.

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wow!

this has got to be a turning point. could this be the end to shared ownership? will this highlight the scam?

no, and no. This will hide the scam. Me and you will end up paying the "shared" bit, it was meant very literally. Builders keep in work, house prices stay up, jonny foreign creditor thinks we're still AAA, everyone's a winner.

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So let's get this all straight. Barratt manage to sell 50% of the homes it has at an inflated price because it is providing the finance and then knowingly takes their haircut and touts what's left round the markets being left with the rump of the loan and the profits from the over priced sale.

Someone write to Watchdog would they.

nah this 170m will appear to be sitting quite legitimately on a banks balance sheet, while they shuffle 170m onto the taxpayer from another page of the same balance sheet. Who's to say it was the same 170m. Will we be able to know who these investors are? If it's one of our nationalised banks i'll be less than amazed.

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If these loans are such a good deal, why does Barrats need to sell them on...they do, after all, provide month on month income... and NOONE is going to get a better rate of return than the OWNER of the debt.

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If these loans are such a good deal, why does Barrats need to sell them on...they do, after all, provide month on month income... and NOONE is going to get a better rate of return than the OWNER of the debt.

because they know shared ownership is way of continuing sub-prime borrowing therefore likely to default somewhere down the line and they don't want to hold the risk. But you must know that so I guess it was a rhetorical question.

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If Barratts sold a house valued at £200k on a 50% shared equity what are they selling now?

A loan backed by the government for the 50% Barratts own?

In the good old days Northern Rock (etc) would lend the punter the money then securitise the mortgage and sell it off to some thicko bond buyer and reinvest the proceeds by lending the money again to another punter.

Today, 'cause the punter can't get the mortgage, Barratts are lending them the money direct so they can still flog 'em the house and keep prices high. Now they're going to securitise those loans and sell them direct to the market. They acting like a bank even though they're a builder.

Grantley Chapps of course just loves these shared equity mortgages 'cause they're innovative.

I read it as simply shifting the model from insolvent banks to builders - i.e. cutting out the middleman.

I have no idea what the FSA are doing - organising the next Christmas party I'd imagine.

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.... 'cause they're innovative.

You have to wonder about peoples sense...how innovative can you get lending money to someone who buys something with it then pays you back the lent amount + interest.

I think perhaps the word fraudulent could be used for innovative.

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You have to wonder about peoples sense...how innovative can you get lending money to someone who buys something with it then pays you back the lent amount + interest.

I think perhaps the word fraudulent could be used for innovative.

I wouldn't disagree with you.

Markets are all 'rigged' one way or another.

You have to make decisions with that assumption in mind I'm afraid.

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So if they sell their Shared Equity loans; what stops the people who buy them, calling the loans in, or changing the terms? Sounds pretty scary IMO.

(I don't know much about how this works, so I'm curious).

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In the good old days Northern Rock (etc) would lend the punter the money then securitise the mortgage and sell it off to some thicko bond buyer and reinvest the proceeds by lending the money again to another punter.

Today, 'cause the punter can't get the mortgage, Barratts are lending them the money direct so they can still flog 'em the house and keep prices high. Now they're going to securitise those loans and sell them direct to the market. They acting like a bank even though they're a builder.

Grantley Chapps of course just loves these shared equity mortgages 'cause they're innovative.

I read it as simply shifting the model from insolvent banks to builders - i.e. cutting out the middleman.

I have no idea what the FSA are doing - organising the next Christmas party I'd imagine.

Must admit I don't understand how these shared equity schemes work. They have never interested me because it just seems like people do it because they cannot afford a whole house but by doing it, they are just digging a hole for themselves by propping prices up.

On the Barratt site it says this:

How does the Shared Equity scheme work?

5% deposit payable by purchaser. Mortgage finance is arranged on up to 70% of the purchase price. The remaining balance up to 25% is a loan that you don’t have to pay back for 10 years or when you sell or transfer your home, whichever is sooner. No interest is payable during this period if you don't sell or transfer your home.

So you are saying the 70% mortgage is with Barratts as is the 25% loan for the deposit? I thought the 70% mortgage was with a bank.

Where does the government backing come in, part of the 25% loan?

Which bit are Barratts selling on?

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snip

Which bit are Barratts selling on?

x*5%=x~5-x/route 5.5+margin sq=bonus

Ill repeat in crayon for anyone who cares to challenge the logic

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What mess. The concept of shared equity is messy for the punters going for it and it looks like its got messy for the guys stumping the money.

Looks like the investors had enough. "Why has the housebuilding company that I partly own also become a large money lender?"

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Barratts know full well that these 25% loans won't only not be paid back, but there will be law suit after law suit for mis-selling them in the first place come 10 years. That's why they are getting shot of them.

What a mess! <_<

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You have to wonder about peoples sense...how innovative can you get lending money to someone who buys something with it then pays you back the lent amount + interest.

I think perhaps the word fraudulent could be used for innovative.

LIAR LOAN-BOOK......

.

:rolleyes:

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Must admit I don't understand how these shared equity schemes work. They have never interested me because it just seems like people do it because they cannot afford a whole house but by doing it, they are just digging a hole for themselves by propping prices up.

On the Barratt site it says this:

How does the Shared Equity scheme work?

5% deposit payable by purchaser. Mortgage finance is arranged on up to 70% of the purchase price. The remaining balance up to 25% is a loan that you don't have to pay back for 10 years or when you sell or transfer your home, whichever is sooner. No interest is payable during this period if you don't sell or transfer your home.

So you are saying the 70% mortgage is with Barratts as is the 25% loan for the deposit? I thought the 70% mortgage was with a bank.

Where does the government backing come in, part of the 25% loan?

Which bit are Barratts selling on?

Good question.

FT article states:-

The group, which is being advised by Credit Suisse, is in negotiations with potential buyers for part of the £170m shared equity mortgage book it has amassed since the start of the recession

Is this their own shared equity scheme as distinct from the Govt.s scheme?

Are they selling their 2nd mortgages over the 'shared equity' part of the deal? That's how it read to me. i.e. the bit that Barratts have loaned the buyer directly not the bit the buyer has borrowed from the bank to buy their 'half'. So Barratts can offload these 2nd mortgages into the market, raise cash, and use that to sell more shared equity houses, once sold, re-sell those shared equity mortgages, rinse/repeat until bank funding is relaxed/house prices recover.

That's my interpretation of what's going on but I'm open to offers..........

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You have to wonder about peoples sense...how innovative can you get lending money to someone who buys something with it then pays you back the lent amount + interest.

I think perhaps the word fraudulent could be used for innovative.

Financial Innovation = Obfuscation of fraudulent practices.

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Good question.

FT article states:-

Is this their own shared equity scheme as distinct from the Govt.s scheme?

Are they selling their 2nd mortgages over the 'shared equity' part of the deal? That's how it read to me. i.e. the bit that Barratts have loaned the buyer directly not the bit the buyer has borrowed from the bank to buy their 'half'. So Barratts can offload these 2nd mortgages into the market, raise cash, and use that to sell more shared equity houses, once sold, re-sell those shared equity mortgages, rinse/repeat until bank funding is relaxed/house prices recover.

That's my interpretation of what's going on but I'm open to offers..........

hmm..170m book...say 20% per house @160K (32K each), thats..5300 mortgages.

how long have they been doing this?....we can then see how much of the market was supported by these schemes...lets say 2 years....thats only 221 per month.....hardly a drop in the ocean,

EDIT..FAT FINGER

Edited by Bloo Loo

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hmm..170m book...say 20% per house @160K (32K each), thats..5300 mortgages.

how long have they been doing this?....we can then see how much of the market was supported by these schemes...lets say 2 years....thats only 221 per month.....hardly a drop in the ocean,

EDIT..FAT FINGER

Where does this bit come in?

"Shared equity mortgages work by housebuilders, usually in partnership with the government, taking an equity stake of up to 50 per cent in homes sold to first-time buyers."

So if Barratts are taking a haircut on the loans have we (taxpayers) just taken one as well? In that the loan i.e. house is not valued as much as it was?

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Only entered into talks. Doesn't mean anyone will buy.

Given the companies who recently got burned then it's unlikely anyone will want it. Not unless it's an absolute bargain and a big loss for Barratt.

It'll vanish and never rear its ugly head again.

Does this mean Barratt is desperately short of cash? Why are they selling it off?

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  • 284 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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