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cashinmattress

Eu Seeks To End Liar Loans

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European Union negotiators are expected to finalise the bloc's first common rules on mortgage lending on Monday, in an attempt to avoid a repeat of property bubbles that helped fuel the euro zone's debt crisis.

The legislation will force lenders in Europe's 6.5 trillion euro ($8.5 trillion) mortgage market to check the creditworthiness of potential customers and their ability to repay, effectively banning self-certified or "liar" loans.

The rules would also make it illegal for those carrying out credit checks within banks and other lenders to have their pay linked to the number of mortgages they approve - a practice blamed for encouraging irresponsible lending in the past.

"We are hoping to conclude talks with the European Parliament on Monday on these important new rules to protect consumers and mortgage holders," said a spokeswoman for the Irish EU presidency, which will negotiate on behalf of EU governments.

If a deal is reached, the draft rules will need to be rubber-stamped by the full parliament and EU governments before entering force in mid-2015.

Irresponsible home lending in the United States created a domestic housing bubble that, when it burst, helped to spark the global financial crisis.

Similar property bubbles in Ireland and Spain left banks holding hundreds of billions of euros in bad debts, forcing governments to prop them up and then seek euro zone bailouts when the expense proved too much.

As well as seeking to avoid reckless lending, the rules also increase consumer protection by making it harder for lenders to seize homes from borrowers who fail to keep up with repayments.

Other elements in the regulations are designed to encourage cross-border competition between mortgage providers, for example by requiring them to provide certain information in a standardised way to consumers across the bloc.

Regulators believe greater competition between lenders in different countries will result in a better deal for consumers and contribute to the bloc's economic recovery. ($1 = 0.7644 euros)

We'll see.

EDIT: and yes, it applies to the UK as well, particularly to BTL.

Edited by cashinmattress

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The legislation will force lenders in Europe's 6.5 trillion euro ($8.5 trillion) mortgage market to check the creditworthiness of potential customers and their ability to repay, effectively banning self-certified or "liar" loans.

Confused - surely they should only be looking to ban self-cert when it's based on a false financial information? Is this just sloppy writing?

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Watch the UK government fight tooth and nail for the UK to be exempted. It might hurt the financial sector, you know.

If the wording in the original quote is correct (all self-certs?), and if the UK did want to be exempt, then this has handed it to them on a plate. Compare and contrast:

  • "Self-cert is an important part of the British mortgage industry (although we acknowledge and condemn its misuse)."

  • "Lying about your income is an important part of the British mortgage industry"

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Watch the UK government fight tooth and nail for the UK to be exempted. It might hurt the financial sector, you know.

Well, every mainstream UK bank has to comply.

It might be worth them paying the fines for non-compliance though.

Wait and see.

The UK has very little pull in the EU, hasn't anybody noticed that on this forum?

EDIT: From another source:

The legislation will force all lenders in Europe to check the credit worthiness of potential customers and their ability to repay.

The rules will also make it illegal for those carrying out credit checks to have their pay linked to the number of mortgages they approve - a practice that has been blamed for encouraging irresponsible lending in the past.

The rules also increase consumer protection by making it harder for lenders to seize homes from borrowers who fail to keep up with repayments.

It should really come as no surprise as to why the banks aren't really lending. They know what is coming. CRASH.

Edited by cashinmattress

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Watch the UK government fight tooth and nail for the UK to be exempted. It might hurt the financial sector, you know.
What a load of rubbish. We will gratefully partly adopt it. We will do the bit about making it harder to repo.
Confused - surely they should only be looking to ban self-cert when it's based on a false financial information? Is this just sloppy writing?
All self-cert is unverifiable. You can't tell if the person has falsified the details or not as they don't have to provide any proof to back it up... they just sign a form saying they are telling the truth.

Self cert should NEVER have been allowed. It was always going to end in tears.

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All self-cert is unverifiable. You can't tell if the person has falsified the details or not as they don't have to provide any proof to back it up... they just sign a form saying they are telling the truth.

Then surely the underlined bit is the problem? I'm fairly agnostic on the principle of self-cert, but I can understand why it might suit certain professions and income streams.

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Then surely the underlined bit is the problem? I'm fairly agnostic on the principle of self-cert, but I can understand why it might suit certain professions and income streams.

Even "certain professions and income streams" have records of what they've earned in the past. And/or contracts for work in the future, preferably with sums of money mentioned.

On what planet is it a good idea to lend multiple thousands of pounds purely on the strength of a piece of paper that says "I, S. Bear, earn £XX/X,000 per year and can afford to repay a mortgage of £XXX/X,000, signed, S. Bear"?

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What a load of rubbish. We will gratefully partly adopt it. We will do the bit about making it harder to repo.

All self-cert is unverifiable. You can't tell if the person has falsified the details or not as they don't have to provide any proof to back it up... they just sign a form saying they are telling the truth.

Self cert should NEVER have been allowed. It was always going to end in tears.

It was pressure from Head office > branch managers on their staff to hit bonus targets that was the main scam.

Lure in and Sign off everyone who approached the banks for the greed

Why is this rarely mentioned - the bank staff are 50-50 to blame in every way they 'enabled' liar loans

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Then surely the underlined bit is the problem? I'm fairly agnostic on the principle of self-cert, but I can understand why it might suit certain professions and income streams.

Self-cert is simply "taking their word for it". Would you lend someone a quarter of a million pounds based purely on their word... without doing any checks into whether or not they are telling the truth?

If so... can I borrow some money from you?

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Governments are looking to maintain asset prices so why would they do this?

In the case of the EU, the Glorious Project comes first, and economic stress could hurt the precious Glorious Project, so banning things that cause economic problems will take priority over house prices. The UK government don`t really want high house prices, they want homeowners and "homeowners" who vote to think they do so that if they lose the next election the crash can be blamed on Labour, and if they win, Europe and it`s tight mortgage regulation :lol: That`s my take anyway.

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Self-cert is simply "taking their word for it". Would you lend someone a quarter of a million pounds based purely on their word... without doing any checks into whether or not they are telling the truth?

If so... can I borrow some money from you?

Funny how the EU have no problem with Goldman Sachs/JP Morgan setting up secret Multi-Billion $ non-payback "Loans" with corrupt politicians in Spain, Greece + anywhere else you dig far enough down, completely undermining their countries into grotesque austerity and social/civil breakdown

22/04/2013

"Angela Merkel says eurozone states must cede their sovereignty if the bloc is to overcome its debt crisis"

The 'coup-de-grace' that the Zionistas pre-sowed their tares for! The grand stitch-up

Rothschild Brothers of London, 1863.

"Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild

Edited by erranta

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:rolleyes::rolleyes:

I have been having fascinating conversations lately with an ex-mortgage broker I met in the pub.

In fact, brokers have been increasingly regulated - though until 2006 it was anything goes. I didn't realise that most of the high street lenders had a sub-prime arm. If you didn't fit the criteria at your high street bank, they would send you somewhere who would fit you in.

I also didn't realise the extent to which American sub-prime lenders were active in UK. This broker could get you a G-MAC mortgage at the time. You only had one line to sign on the form, 'I can afford the monthly repayments'. No supporting paperwork. By the way, 75% mortgages are rarely subject to any checks at all. People without a job could get these mortgages. Good for moving up the ladder while unemployed. There are also people buying pay slips online . . . all sorts of wobblies.

G-MAC sold these mortgages on to Bradford & Bingley - actually 9 billions worth. (Really, what killed them. But the CDOs were Triple-A rated of course.)

There are so many aspects of liar loans, however. Even with genuine documentation, this broker was writing mortgages for 10x salaries for Nationwide. No lies necessary. It's what Nationwide accepted as affordable, even if patently untrue.

The other thing is the extent to which people got deposits together on credit cards. And even crazier, the fact that - still today - having more credit cards gets you a higher credit rating score - all that counted to get your mortgage signed off. Couples with five credit cards each would often consider that the way to start a BTL empire. No end of true stories.

The compliance regulations mean that mortgage brokers are now very careful - both in view of the FSA and EU directives. Quite a few have been prosecuted. But the original sin was with the lenders, who seem to have evaded any kind of retribution over liar loans.

Amusing sidenote. Having seen the extraordinary, unpayable risks people took at this time of madness, the ex-broker was never tempted to buy any property himself. :) He now works in debt management, proving the opposite, that people have no means whatsoever. His latest client has a 250,000 mortgage and 57,000 outstanding in credit card bills. Client earns 15,000 a year. Ex-Broker has negotiated a settlement where the guy pays off at just £75 a month . . . and the banks are lucky to get that. The really funny part, they gave him the mortgage at the age of 70 . . . so he ain't gonna pay it off ever.

If the banks and credit card companies threw money at people, all unsecured, they only have themselves to blame. I really don't how the taxpayer ended up on the hook for all this.

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Funny how the EU have no problem with Goldman Sachs/JP Morgan setting up secret Multi-Billion $ non-payback "Loans" with corrupt politicians in Spain, Greece + anywhere else you dig far enough down, completely undermining their countries into grotesque austerity and social/civil breakdown

22/04/2013

"Angela Merkel says eurozone states must cede their sovereignty if the bloc is to overcome its debt crisis"

The 'coup-de-grace' that the Zionistas pre-sowed their tares for! The grand stitch-up

Rothschild Brothers of London, 1863.

"Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild

The "bloc" is not going to overcome it`s debt crisis IMO.

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My last two mortgages were self-cert - no issues whatsoever and they suited me perfectly at the time. In both cases the LTV was such that I stood to lose out by lying as my own CASH was in the deal. The issue with self-cert came about with high LTV or 100%+ mortgages, which are the root of the problem as far as I can see. The mortgagee must have some skin in the game in order to treat the loan with some respect.

It's fine for you, assuming you can afford to repay the loan. It's not fine for the lender, because a certain percentage of borrowers will not be able to repay the loan, and without verified income information they have absolutely no way of estimating what that percentage will be and how much to hold onto in reserves to cover potential losses.

Then house prices fall and/or incomes drop, mortgages stop being repaid, the losses on self-cert loans greatly exceed what the banks "expected" and could cover with reserves, the banks go bust, the government bails them out, your taxes go up, your standard of living goes down...

Still, no issues whatsoever really.

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Really? If so - excellent!

Are you sure? I thought it will apply to the Eurozone only.

I'm pretty sure it's EU legislation, i.e. applicable to the whole Union, as opposed to a financial rule for the Eurozone.

It says in the original story quoted in the OP "If a deal is reached, the draft rules will need to be rubber-stamped by the full parliament and EU governments before entering force in mid-2015."

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I'm pretty sure it's EU legislation, i.e. applicable to the whole Union, as opposed to a financial rule for the Eurozone.

It says in the original story quoted in the OP "If a deal is reached, the draft rules will need to be rubber-stamped by the full parliament and EU governments before entering force in mid-2015."

You are quite right. If you see my post earlier, the EU directives already applied to UK mortgage brokers back in 2006.

Under the exisiting rules, compliance regulations, there should not have been any liar loans since then . . but the FSA did not really enforce the rules, or if they did, only on the middlemen.

Really, all this is stable, horse, bolted. The 'liar lenders' all pulled out of the market yonks ago. Banks are now terrified of lending . . even if they had the money. Mortgage brokers are frightened by the new legislation.

This ties in with the other thread on Osborne's insane bid to kick start the housing market. It just won't happen. No one wants to borrow. No one wants to lend. And there is now enough legislation in place already, in the case of mortgage brokers, to make sure any irresponsible lending can't happen.

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Self cert may be applicable in the following case

A friend of many has a large portfolio of assets which are valuable and grow each year but produce a small income

He could adopt a policy of selling a certain number each year to give an "income" to fund his mortgage commitments. Therefore he could in my opinion declare a projected "income" greater than the income he currently receives.

It may also have a place amongst certain professions where income can be expected to grow with a high level of. Ertainty possibly backed by a guarantor.

Self certification has a place for high net worth individuals who fully understand what risk is about. It all went wrong when it was used incorrectly by mortgage salesmen

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You are quite right. If you see my post earlier, the EU directives already applied to UK mortgage brokers back in 2006.

Under the exisiting rules, compliance regulations, there should not have been any liar loans since then . . but the FSA did not really enforce the rules, or if they did, only on the middlemen.

Really, all this is stable, horse, bolted. The 'liar lenders' all pulled out of the market yonks ago. Banks are now terrified of lending . . even if they had the money. Mortgage brokers are frightened by the new legislation.

This ties in with the other thread on Osborne's insane bid to kick start the housing market. It just won't happen. No one wants to borrow. No one wants to lend. And there is now enough legislation in place already, in the case of mortgage brokers, to make sure any irresponsible lending can't happen.

Just need the idiots holding out for 2007 prices to cop themselves on and it is crash time.

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I'm pretty sure it's EU legislation, i.e. applicable to the whole Union, as opposed to a financial rule for the Eurozone.

It says in the original story quoted in the OP "If a deal is reached, the draft rules will need to be rubber-stamped by the full parliament and EU governments before entering force in mid-2015."

You are quite right. If you see my post earlier, the EU directives already applied to UK mortgage brokers back in 2006.

Excellent news! Thanks.

Under the exisiting rules, compliance regulations, there should not have been any liar loans since then . . but the FSA did not really enforce the rules

Oh, I see...

, or if they did, only on the middlemen.

Really, all this is stable, horse, bolted. The 'liar lenders' all pulled out of the market yonks ago. Banks are now terrified of lending . . even if they had the money. Mortgage brokers are frightened by the new legislation.

This ties in with the other thread on Osborne's insane bid to kick start the housing market. It just won't happen. No one wants to borrow. No one wants to lend. And there is now enough legislation in place already, in the case of mortgage brokers, to make sure any irresponsible lending can't happen.

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  • 261 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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