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Disguised Btl Fuelling Repossession Crisis

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Disguised BTL fuelling repossession crisis

Robert Thickett - 15-May-2007

By Rebecca Atkinson

The Financial Services Authority has found a high proportion of repossessions are on so-called disguised buy-to-let properties.

During the Council of Mortgage Lenders Conference on buy-to-let Rob Thomas, senior policy adviser at the CML, revealed that the regulator has compiled a database of properties sold at auction.

Its provisional data shows that on February 2006 8% of lots at auction were there because of rep orders from lenders.

However nine months later in December 2006 this figure had risen by a whopping 25%.

Almost 80% of repossession lots at auction were in postcodes dominated by buy-to-let properties.

On closer inspection of these figures the FSA noted suspicious activity such as buyers bulk buying properties for rental under the guise of owner occupiers without being caught by lenders.

It also found that purpose built flats dominated mortage repossession at auction, despite being only a proportion of the UK’s housing stock.

Thomas says the FSA concluded from these provisional figures that a high proportion of lenders mortgage losses came from disguised buy-to-let properties and the problem has got rapidly worse.

The data also directed the FSA’s attention to the brokers that originally advised clients to take up the mortgages on the repossessed properties.

Thomas says the FSA found some evidence that brokers were advising borrowers to take mainstream mortgages on buy-to-let properties.

When asked what the FSA’s motivation for compiling such a database was and what knock on impact the industry can expect from its creation, Thomas says: “This is part of the FSA’s general due diligence of the marketplace.

"The FSA is scratching its head on what the ramifications are and will need to cross check these figures with other data.”

“This is a moving situation and the FSA is cautious not to interpret these figures too much until more work can be done.”

Thomas says this trend is a reflection of some of the problems that lenders have reported with a lack of transparancy in new build valuations.

FROM : http://www.mortgagestrategy.co.uk

What do people think this means?

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I think that this is more common practice than one would think.

Who dares producing a percentage guess?

I'd say 50% (of the BTL brigade lie to the lender and say that they're the occupier)

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I'd say 50% (of the BTL brigade lie to the lender and say that they're the occupier)

Why would they want to pay more for a BTL mortgage on thier 'nice lilttle earner' when they can lie and get the same rates as an OO. Just shows how inept the lenders are for not running checks on these leeches.

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What do people think this means?

I think it means that you can expect to hear the sound of a stable door being firmly shut, while - in the distance - a horse can be seen galloping toward the horizon.

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Guest Yeahbutnocrash

It would be useful to see the actual numbers involved

What they are saying is repos increased in 9 months from 8% to 10% of the total properties being auctioned and 80% of that 10% were in areas of high BTL

The majority are new build flats and we have already sussed on previous threads that there is oversupply of this type of property in some areas and many have fallen in price

So it may be evidence that generally BTL is holding firm and there is no mass sell off

Edited by Yeahbutnocrash

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Why would they want to pay more for a BTL mortgage on thier 'nice lilttle earner' when they can lie and get the same rates as an OO. Just shows how inept the lenders are for not running checks on these leeches.

I spoke to a guy last year at a party who told me he had bought 6 properties by this method. I remember posting something about it on this site, but most people claimed it wasn'r possible as the lenders would cross check. It seems the lenders just don't care, or more likely have been turning a blind eye.

This is the sort of news that reveals that those nice mortgage backed securities a hedge fund just invested in are actually 50% toxic waste, BTL mortgages with only 5% loan to value, a low IR and no securely employed borrower to make the payments.

It seems impossible to think that there is not a large degree of collusion in these matters from the banks to the FSA and probably even the BoE. All in interests of maintaining our hot-rodded economy. It's starting to look like the equivalent of a boy racer's heavily modified Fiat Punto. Looks sporting, goes fast and the boy racer has been having fun. But the wise car buyer knows it's a thrashed out piece of crap which is eventually going to go on fire on the way to Tescos.

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It's starting to look like the equivalent of a boy racer's heavily modified Fiat Punto. Looks sporting, goes fast and the boy racer has been having fun. But the wise car buyer knows it's a thrashed out piece of crap which is eventually going to go on fire on the way to Tescos.

:lol:

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It would be useful to see the actual numbers involved

What they are saying is repos increased in 9 months from 8% to 10% of the total properties being auctioned and 80% of that 10% were in areas of high BTL

The majority are new build flats and we have already sussed on previous threads that there is oversupply of this type of property in some areas and many have fallen in price

So it may be evidence that generally BTL is holding firm and there is no mass sell off

how on earth do you fathom that? :blink:

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Why would they want to pay more for a BTL mortgage on thier 'nice lilttle earner' when they can lie and get the same rates as an OO. Just shows how inept the lenders are for not running checks on these leeches.

Also it may allow them to put down a smaller deposit than BTL rules normally require e.g. 5% on OO but 15% on BTL. Nothing less than mortgage fraud - criminal prosecutions please !

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Guest Yeahbutnocrash
how on earth do you fathom that? :blink:

OK, maybe I should have said they are holding firm in that they are not being subject to repos

(but yeah of course they could be selling in the general market)

Established BTLers will not own (or exclusively own) purpose built flats in their portfolios

Think of all the lower end BTL (House conversions, shared houses, student lets) as well as other houses that are rented out

- These type of properties don't seem to be forming much of the 10% of repos being auctioned

The OP stated:

"It also found that purpose built flats dominated mortage repossession at auction, despite being only a proportion of the UK’s housing stock."

Also, I read recently that city centre flats only account for about 1% of all BTL property

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Also it may allow them to put down a smaller deposit than BTL rules normally require e.g. 5% on OO but 15% on BTL. Nothing less than mortgage fraud - criminal prosecutions please !

The interesting thing how it could backfire with a quicker introduction to negative equity plus the tenant payments not covering the mortgage payments and X this by the number of BTL properties someone has. Interesting times ahead.

Average mortgage payment = 1000 pounds Average Rent = 500 pounds.

Not too mention on the borrowers who borrowed with no documentation 1% to 3 % above the current rate.

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Why is this coming out now? Could it be because lenders are looking for reasons to tighten lending?

It's because the institutions know that the game is up and they're getting their scapegoats ready.

This is a very good one.

"It wasn't us. We had our rules, but the borrowers lied to us."

The reason that the lenders didn't cross check is because it is convenient for them to have a small proportion of fraudsters on whom to pin the blame, when the cycle goes the other way and the lenders start picking up repossessed properties.

Politically, if they suddenly started hoovering up massive property portfolios, while familes were being thrown onto the street, they would be in for a nasty backlash, if there weren't a convenient club of 'greedy fraudsters' to blame, greedy fraudsters who have, coincidentally, been vilified for years by the underground house price crash movement.

We get vindicated. We become a moral authority. Our demonisation of the BTLers becomes the banks' alibi.

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Why would they want to pay more for a BTL mortgage on thier 'nice lilttle earner' when they can lie and get the same rates as an OO. Just shows how inept the lenders are for not running checks on these leeches.

I know one BTL'R who has 5 properties all on OO mortgages. I did suggest to her once she may be committing fraud, her response "everybody is doing it, why should i pay more..."

F

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I know one BTL'R who has 5 properties all on OO mortgages. I did suggest to her once she may be committing fraud, her response "everybody is doing it, why should i pay more..."

F

This has the same feel to me as insurance companies who like you to falsify your details, so that they can take your premia with absolutely every intention of voiding your policy, should you actually claim.

If the lenders ever have to take any of these people in front of a judge, they're absolutely laughing.

"You lied, Mrs. Greedybvgger?"

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I think that this is more common practice than one would think.

Who dares producing a percentage guess?

I'd say 50% (of the BTL brigade lie to the lender and say that they're the occupier)

I would guess closer to 90% . Occupier mortgages give much better rates than BTL mortgages. Many people who rent out their flats are not BTL landlords but people who are not currently living in their own property.

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All was quiet when disguised BTL was driving up prices.

We knew it was happening, they knew it was happening, but it was good money in commissions - both on the original loans and the trances sold off.

Have the pruchasers of MBS products ben told yet that what they thought they bought is not what they have actually bought?

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QUOTE(Smell the Fear @ May 15 2007, 05:08 PM)

It's starting to look like the equivalent of a boy racer's heavily modified Fiat Punto. Looks sporting, goes fast and the boy racer has been having fun. But the wise car buyer knows it's a thrashed out piece of crap which is eventually going to go on fire on the way to Tescos.

Yep,

The boy racer House Racer scene is being hit with heavy Insurance Mortage bills...

& everyones trying to downgrade :P

Many believe Pimp my Ride House type shows are responsible for the trend.

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I'd like to see a tenants database set-up and the banks can then cross check this with OO mortgages. :D

For the record I'm 99% sure my landlord has a regular OO mortgage. He's a nice guy, but fu*k 'im - bring on the fines!

Edited by OzzMosiz

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Disguised BTL fuelling repossession crisis

Robert Thickett - 15-May-2007

By Rebecca Atkinson

The Financial Services Authority has found a high proportion of repossessions are on so-called disguised buy-to-let properties.

During the Council of Mortgage Lenders Conference on buy-to-let Rob Thomas, senior policy adviser at the CML, revealed that the regulator has compiled a database of properties sold at auction.

Its provisional data shows that on February 2006 8% of lots at auction were there because of rep orders from lenders.

However nine months later in December 2006 this figure had risen by a whopping 25%.

Almost 80% of repossession lots at auction were in postcodes dominated by buy-to-let properties.

On closer inspection of these figures the FSA noted suspicious activity such as buyers bulk buying properties for rental under the guise of owner occupiers without being caught by lenders.

It also found that purpose built flats dominated mortage repossession at auction, despite being only a proportion of the UK’s housing stock.

Thomas says the FSA concluded from these provisional figures that a high proportion of lenders mortgage losses came from disguised buy-to-let properties and the problem has got rapidly worse.

The data also directed the FSA’s attention to the brokers that originally advised clients to take up the mortgages on the repossessed properties.

Thomas says the FSA found some evidence that brokers were advising borrowers to take mainstream mortgages on buy-to-let properties.

When asked what the FSA’s motivation for compiling such a database was and what knock on impact the industry can expect from its creation, Thomas says: “This is part of the FSA’s general due diligence of the marketplace.

"The FSA is scratching its head on what the ramifications are and will need to cross check these figures with other data.”

“This is a moving situation and the FSA is cautious not to interpret these figures too much until more work can be done.”

Thomas says this trend is a reflection of some of the problems that lenders have reported with a lack of transparancy in new build valuations.

FROM : http://www.mortgagestrategy.co.uk

What do people think this means?

Be funny if they lost their comfortable fixed rate mortgages and were put on variable rate mortgages... oh and had to pay back the outstanding payments.

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Surely such a practice would effectively make these mortgages sub-prime.

And there is no such thing as sub prime in the UK. So it can't be happening. QED.

Nurse, more Laudanum please...

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It would be useful to see the actual numbers involved

What they are saying is repos increased in 9 months from 8% to 10% of the total properties being auctioned and 80% of that 10% were in areas of high BTL

The majority are new build flats and we have already sussed on previous threads that there is oversupply of this type of property in some areas and many have fallen in price

So it may be evidence that generally BTL is holding firm and there is no mass sell off

(big breath):

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

Last crash, turnover fell, this is what happens in crashes. You don't need a mass sell off for a crash - market prices are set at the margin.

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I wonder how long it will be before modern flats that have previously been let out start to turn up at auction and then fail to reach their reserve?

I think I've just found one....

(I tried to put the link on here but it wouldn't work so I've just put the details).

Flat 1, Aspect 14, Elmwood Lane, Leeds

Photographs

Viewings

24 April 2007 - 10:00

01 May 2007 - 10:00

08 May 2007 - 10:00

Please check with the Eddisons office for availability before attending a viewing.

Interested?

Express interest in this lot

Request a Catalogue

Register for Updates

Details for Lot No. 130

Status: Available

Guide Price: £110000+

Reserve: £115,000

Category: Vacant Residential

Full Address:

Flat 1

Aspect 14

Elmwood Lane

United Kingdom

LS2 8WE

Category Heading:

Vacant modern style 2 bedroom apartment in purpose built block

Description:

Situated

Off Clay Pit Lane close to the junction with the Inner ring Road A58(M) in the city centre.

Ground Floor

Communal entrance hall, Private hall, bathroom, open plan living area with kitchen having built in appliances, two bedrooms, en suite shower room to one bedroom.

Outside

Communal grounds.

Note

* Double glazing

* We are informed that the flat was formerly let at £600 p.c.m.

* A service charge is payable.

Tenure

Leasehold for a term of 999 years from 1.1.2003 @ £150pa

Edited by Tatty Teddy

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I reckon this story is all about MEW.

Sheeple OO MEWS his own property. Self-cert. Sheeple OO buys new bigger house or flats. Self-cert or BTL.

Result is loads of remortgaging (fact), loads of self-cert (fact), loads of btl (fact), loads of adverse credit lending (fact). But when rates rise...

When this shakes out the number of second homes and btl will plummet. Everyone gets a house again ;)

Edited by Jekyll

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