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Fsa And The Sub Prime Market - Eek

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http://www.fsa.gov.uk/pages/Library/Commun.../2007/081.shtml

For Intermediaries:

In a third of the files reviewed there was an inadequate assessment of consumers' ability to afford the mortgage.

In almost half of the files there was an inadequate assessment of customers' suitability (e.g. needs and circumstances) for the mortgage.

In over half of the files customers had self certified their income but it was not clear in many cases why they had been advised to do this.

Significant numbers of consumers were advised to re-mortgage, thereby incurring early repayment charges, without the adviser being able to demonstrate that this was beneficial to the customer.

For Lenders the main weaknesses were found in their lending policies:

None of the lenders adequately covered all relevant responsible lending considerations in their policies. For example, some firms’ lending policies contained unclear affordability or self-certification requirements.

In many cases, lenders did not apply their own policies in practice. For example, some firms failed to check the plausibility of information, as required by their own lending policy.

There were also failings by lenders to monitor the application of their policies, which resulted in the approval of potentially unaffordable mortgages.

watch out lending criteria crunch coming

Edited by crown

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I missed this one earlier

Interest-only mortgages

The project reviewed the approach to interest-only lending by 11 sub-prime and nine prime mortgage providers. The review specifically looked at how lenders take account of consumers' repayment strategies for interest-only loans. The FSA concluded that many firms need to do more to ensure that their responsible lending policy provides a clear basis against which they can consider the plausibility of a borrower's repayment strategy. The FSA has published some good practice examples on the website to illustrate our findings.

Lenders will be getting very twitchy

I knew the regulator would come good and regulate with their usual hindsight. Wit for something to go wrong, watch it go wrong and then step in when it is too late and fine everyone to raise extra revenue for the Xmas knees up

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http://www.fsa.gov.uk/pages/Library/Commun.../2007/081.shtml

For Intermediaries:

In a third of the files reviewed there was an inadequate assessment of consumers' ability to afford the mortgage.

In almost half of the files there was an inadequate assessment of customers' suitability (e.g. needs and circumstances) for the mortgage.

In over half of the files customers had self certified their income but it was not clear in many cases why they had been advised to do this.

Significant numbers of consumers were advised to re-mortgage, thereby incurring early repayment charges, without the adviser being able to demonstrate that this was beneficial to the customer.

For Lenders the main weaknesses were found in their lending policies:

None of the lenders adequately covered all relevant responsible lending considerations in their policies. For example, some firms’ lending policies contained unclear affordability or self-certification requirements.

In many cases, lenders did not apply their own policies in practice. For example, some firms failed to check the plausibility of information, as required by their own lending policy.

There were also failings by lenders to monitor the application of their policies, which resulted in the approval of potentially unaffordable mortgages.

watch out lending criteria crunch coming

Ssshhhh... You'll wake Eric - he'll go ballistic! :lol:

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http://news.bbc.co.uk/1/hi/business/6268754.stm [ Wednesday, 4 July 2007, 09:39 GMT 10:39 ]

UK to act on sub-prime mortgages

The regulator has threatened action against five firms

Following a review of the market, it says some mortgage lenders and brokers offer the loans to people who should not be given them.

Sub-prime mortgages are those sold to people with poor credit histories and thus a greater chance of defaulting.

The FSA found examples of people being offered mortgage deals they might not be able to afford.

The regulator said it was very concerned about its findings.

"Consumers in the sub-prime market are vulnerable people who may have high debts or a bad credit history," said Clive Briault of the FSA.

"It is therefore important that they are properly assessed and advised.

"We will not hesitate to take action where we find bad practice," he warned.

----------------------------------------------------------------------------------------

I know at least 3 people who have self certificate mortgages which they got with a little bending of the truth!

This should get interesting.

Regards,

HD :unsure:

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self cert i.e. stating an incorrect income on an application form is mortgage fraud. It has the same criminal standing as shop lifting. Obtaining money or goods by deception I think is the phrase.

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I've already got my shades at the ready for when I glimpse the size 36 bold red writing. :lol:

Heh heh, bless. I really like Eric's posts - can't beat a bit of enthusiasm :)

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self cert i.e. stating an incorrect income on an application form is mortgage fraud. It has the same criminal standing as shop lifting. Obtaining money or goods by deception I think is the phrase.

Do you think both sides will get hammered? Surely both lenders and borrowers have been complicit in this fraudulent lending? Or does the FSA only "prosecute" the moneylenders?

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http://www.fsa.gov.uk/pages/Library/Commun.../2007/081.shtml

For Intermediaries:

In a third of the files reviewed there was an inadequate assessment of consumers' ability to afford the mortgage.

In almost half of the files there was an inadequate assessment of customers' suitability (e.g. needs and circumstances) for the mortgage.

In over half of the files customers had self certified their income but it was not clear in many cases why they had been advised to do this.

Significant numbers of consumers were advised to re-mortgage, thereby incurring early repayment charges, without the adviser being able to demonstrate that this was beneficial to the customer.

Anybody any idea whether this will entitle the consumer to compensation?

It seems to me that one way to stop/reduce HPC is to offer some form of help to these people.

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Anybody any idea whether this will entitle the consumer to compensation?

It seems to me that one way to stop/reduce HPC is to offer some form of help to these people.

That would be an awful lot of money to find... hmmmm....let me guess where from...

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Do you think both sides will get hammered? Surely both lenders and borrowers have been complicit in this fraudulent lending?

No. Obviously the banks will say they believed what the borrower said, and any 'nudge and a wink' from the lender will be impossible to prove; so when the borrower defaults they may be facing a criminal charge as well as bankruptcy.

Of course in reality the government would probably step in to ensure the banks only took action in the most serious cases, though the police might consider it a gold-mine of 'crime detection'; it should be easy to prove they lied, and they'll get a great conviction rate to make their crime figures look good.

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I didn't realise self-cert was 50% of the action.

That's staggering, exp when you consider all sef-certs are liars inflating their stated income so they can borrow more than they can afford.

As for it being a criminal fraud, well, "M'lud, it was an estimate of what I would earn in a year. I thought it was accurate at the time but events have over-taken me, that's not fraud, that's just unfortunate circumstances."

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self cert i.e. stating an incorrect income on an application form is mortgage fraud. It has the same criminal standing as shop lifting. Obtaining money or goods by deception I think is the phrase.

More like ram-raiding given the sums involved........

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No. Obviously the banks will say they believed what the borrower said, and any 'nudge and a wink' from the lender will be impossible to prove; so when the borrower defaults they may be facing a criminal charge as well as bankruptcy.

Of course in reality the government would probably step in to ensure the banks only took action in the most serious cases, though the police might consider it a gold-mine of 'crime detection'; it should be easy to prove they lied, and they'll get a great conviction rate to make their crime figures look good.

Rings very true, Mark. I know of a single hairdresser who has a self cert on a £250,000+ mortgage. It'll be interesting to see how credible the banks claiming all innocence will be when she hands the keys back.

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I didn't realise self-cert was 50% of the action.

How do you think people can continue to buy houses with real-world price to income multiples so high?

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I didn't realise self-cert was 50% of the action.

That's staggering, exp when you consider all sef-certs are liars inflating their stated income so they can borrow more than they can afford.

As for it being a criminal fraud, well, "M'lud, it was an estimate of what I would earn in a year. I thought it was accurate at the time but events have over-taken me, that's not fraud, that's just unfortunate circumstances."

You are not asked for an estimate of what you might earn. You fill out what you are earning i.e. basic salary/bonus/overtime/net profit etc.

easy to check up on

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I didn't realise self-cert was 50% of the action.

That's staggering, exp when you consider all sef-certs are liars inflating their stated income so they can borrow more than they can afford.

As for it being a criminal fraud, well, "M'lud, it was an estimate of what I would earn in a year. I thought it was accurate at the time but events have over-taken me, that's not fraud, that's just unfortunate circumstances."

If by "the action" you mean the mortgage market, then self cert is not 50%

Celf cert was 50% of the Sub-prime cases reviewed (less than 500)

Never-the-less the FSA are obviously getting twitchy.

Any guesses as to who the 5 lenders are?

I'll kick the ball off with Northern Rock

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Do you think both sides will get hammered? Surely both lenders and borrowers have been complicit in this fraudulent lending? Or does the FSA only "prosecute" the moneylenders?

both sides have a duty of care to the client.

If the income seemed reasonable for the occupation then that is OK.

But why should an employed person with no overtime or commission or second job self cert their income if not to make it up?

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Guest grumpy-old-man
Ssshhhh... You'll wake Eric - he'll go ballistic! :lol:

:D:D

but surely we don't have any subprime in the UK. :lol::lol::o

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If by "the action" you mean the mortgage market, then self cert is not 50%

Celf cert was 50% of the Sub-prime cases reviewed (less than 500)

Never-the-less the FSA are obviously getting twitchy.

Any guesses as to who the 5 lenders are?

I'll kick the ball off with Northern Rock

Northern Rock definitely

Birmingham Midshires

mortgage express

UCB?

and there is a huge market for 'fast track' where the lender does not check your income but it is not classed as self cert.

I remember the Halifax broker consultant phoning me and telling me they were not checking income up to 75% LTV so I could include whatever I wanted in the income figures to boost them up.

When I asked if that meant I could include non guaranteed payments like bonus and overtime and commission he said ' No but we won't check - some brokers just make the income up'

Bunch of bandits

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