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Bbc File On 4, Tuesday 25 September 2007 At 2000 Bst,

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Borrowers told to lie about wages

A BBC investigation has found evidence of serious mis-selling in Britain's sub-prime mortgage market.

Industry insiders have described how people have been advised to lie about their incomes to take out loans far bigger than they can afford.

Half of all sub-prime mortgages in the UK are self-certification mortgages, where borrowers state their income and lenders do not necessarily check.

No-one from the Financial Services Authority was available for comment.

A former broker in the industry told BBC Radio 4's File On 4 that some advisors in the sector tell clients with low incomes to inflate their earnings on application forms to get outsize loans, which they often cannot afford.

'Inflated income'

Inflating the client's income is seen as an easy way for brokers to get the deal passed.

One borrower whose real income was £25,000 told the BBC he was advised to double that on his mortgage application.

He got a loan of more than eight times his salary.

His monthly re-payments take up most of the family's income and he has been threatened with re-possession.

It is impossible to tell how many other cases there are because few borrowers or mortgage brokers will admit to the practice, but campaigners fear it is widespread and have urged the Financial Services Authority to take action against the lenders and brokers involved.

You can hear more about this story on BBC File On 4, Tuesday 25 September 2007 at 2000 BST, repeated on Sunday 30 September 2007, 1700 BST.

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What a scoop!! When was that last BBc programme on this 2003?

One day the FSA and the BBc will figure out that this has been going on for years and do something about it

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The reporter has just been interviewed on Today. He said there are over 1 million self-cert mortgages.

One mortgage applicant was interviewed. He claims he was advised to enter on the form an income of around 43,000 pounds - his actual income was 23,000 pounds. He was granted a mortgage 8x his actual income.

A former Consumers' Association staffer, now running a think tank examining financial services for the less well-off, says that this has 'all the ingredients of a classic mis-selling scandal'. He said that regulation has been too light.

The FSA has refused to comment.

The 7.00 R4 news has just headlined their story on the matter 'people have been encouraged to lie when applying for mortgages'.

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Also, I notice the 'subprime' label is being used in the coverage of this story:

'Around half of Britain's subprime mortgages are self-certified...'

How are they defining subprime?

This term is not used much in the context of UK mortgages.

A figure of 1 million self-cert mortgages has been mentioned in this story - I am unclear whether that is a total number of self-cert in the entire UK market, or the BBC's estimate of the number of 'subprime self-cert'. If the latter then there is a suggestion that there are 2 million subprime British mortgages.

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Fat Declan trailling it on the breakfastnews......oh hes on to Facebook now

and now there's some motorists from nottingham whinging about why the taxpayer should subsidise their parking.

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Here we go. Yet another great mis-selling scandal. It was those nasty brokers wot made us do it, please, please I must get compensation!

I'll bet that right now, the ambulance chasers brokering endowment compensation are gearing up to launch their self-cert mis-selling compo businesses.

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What a scoop!! When was that last BBc programme on this 2003?

Yes I think it was 2003.

Hardly a scoop though, this has been going on every day since 2003. The FSA controls that were promised to stop this were either badly implemented or implemented to make sure that any controls could be easily circumvented. It was only a matter of months/weeks before preveious products were renamed/rebranded and the system of feeding liar loans to market continued.

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For those in the know, of course there is nothing new in this story.

The interesting thing is that BBC coverage of this type puts the issue on to the public agenda.

The timing also is interesting. Yesterday, the sub-prime minister was emphasizing his responsibility and old-fashioned values. This does not sit well with his having presided over a huge housing bubble founded on lies.

I think Gordon is vulnerable to political attack on house prices. He was not comfortable when being subjected to some questions on this on yesterday's Today programme. The questioning was hardly fierce but he was hesitant and had to fall back on claiming that mortgage payments now constitute a lower percentage of income than 'the early 1990s... when we had interest rates of 15 per cent... in the wake of the ERM debacle'. This was an admission that to make this comparison stand up he had to refer to a period of one day when interest rates were indeed at 15 per cent - as others on this forum have pointed out. The previous day Gordon had merely said that mortgage payments were now a lower percentage of income than 'in the early 90s'.

In this interview, Gordon said that home ownership had increased under New Labour (I think he said by either 1 million or 2 million) and that this was a good thing. He said this was the main reason for the 1.3 trillion pounds British personal debt.

These arguments are somewhat undermined if a large number of the mortgages are fraudulent or at the least imprudent. Yes - prudence, Gordon!

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Why on earth is this buried on a radio programme though? One would think that our sub-prime problem, that potentially has massive economic ramifications on UK PLC would merit a BBC2 slot at least.

Like the BTL landlords, they're gearing up for it. ;)

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FP,

You are right ot be annoyed.

This is a direct parallel with the appraiser market in the US where appraisers who were being honest were cut out of the loop becuase they refused to make appraisals to hit the numbers that mortgage brokers (and lending companies) needed to make the loans fit.

If you are a financial advisor you, like everybody else relies on clients. I you are honest, don't bend the rules, and don;t persuade clients to lie then you you likely to lose business to brokers and financial intermediaries that do.

Moreover it it is damaging to the whole industry in which you work, through no fault of your own.

You should also write to whatever group/membership scheme that you are part of, they should confront the FSA/govt themselves. It will be an intersting test to see which side their bread is buttered.

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Yes, I love :rolleyes: the "year zero" approach by the Today programme; no mention at all that this issue was blown wide open by the Money Programme five years ago. It's like TV is a different country. :lol:

We should go on their website and tell them it's very old news.

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For the sake of accuracy (I am not a mortgage broker) - I should clarify that on this BBC story the FSA was 'unavailable for comment'. That is what the BBC is actually saying. The BBC did not say that the FSA 'refused' to comment and I was wrong to suggest that.

It's a subtle distinction but important if people are now reaching for their Basildon Bond.

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Btw, where's the issue here? If someone wants to lend 10x income to a hopeless case - let them! That's a private transaction between two other parties (unless you're naive enough to think the lender was actually fooled by the deception. :rolleyes: )

The lenders know perfectly well what's happening. They knew when they introduced self-cert mortgages that it was a charter to lie, and get this, THEY DON'T CARE! They are willing "victims". After all it's not their money they are lending, well not for long, because they just offload the loan on the CDO market -- or they did. Why should they care? They've got the tiny figleaf of "we were lied to" to cover themselves, that's all they need.

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Btw, where's the issue here? If someone wants to lend 10x income to a hopeless case - let them! That's a private transaction between two other parties (unless you're naive enough to think the lender was actually fooled by the deception. :rolleyes: )

The lenders know perfectly well what's happening. They knew when they introduced self-cert mortgages that it was a charter to lie, and get this, THEY DON'T CARE! They are willing "victims". After all it's not their money they are lending, well not for long, because they just offload the loan on the CDO market -- or they did. Why should they care? They've got the tiny figleaf of "we were lied to" to cover themselves, that's all they need.

Where's the issue? Errr what about the stoking of a house price bubble? What about the deception of the public by claiming "No sub-prime here, here normal honest loans"

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The lenders know perfectly well what's happening. They knew when they introduced self-cert mortgages that it was a charter to lie, and get this, THEY DON'T CARE! They are willing "victims". After all it's not their money they are lending, well not for long, because they just offload the loan on the CDO market -- or they did. Why should they care? They've got the tiny figleaf of "we were lied to" to cover themselves, that's all they need.

This is spot on. The fact that lenders no longer hold their own risk means they don't view the risk as the same. They figure that as long as they only hold current pipeline loans it is a license to print money. And it has been.

What a great time to be a lawyer. The number of suits and counter-suits flying around will be astounding. Do you sue the lenders for being irresponsible? Do you sue the borrowers for lying? The ratings agencies for not realising what the composition of the CDO's were? The investment companies for not completing due diligence? The combinations are unlimited. The first class action law suit against Bear Stearns has just been filed in NY on behalf of investors. The first of many.

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This is spot on. The fact that lenders no longer hold their own risk means they don't view the risk as the same. They figure that as long as they only hold current pipeline loans it is a license to print money. And it has been.

What a great time to be a lawyer. The number of suits and counter-suits flying around will be astounding. Do you sue the lenders for being irresponsible? Do you sue the borrowers for lying? The ratings agencies for not realising what the composition of the CDO's were? The investment companies for not completing due diligence? The combinations are unlimited. The first class action law suit against Bear Stearns has just been filed in NY on behalf of investors. The first of many.

Recent stats on London grad salaries - Lawyers rising, financial falling.

Says it all, they are gearing up for this and they know exactly what has ben going on.

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Can we get a delegation together and, with press in tow, present the evidence to the FSA for the world to see?

I'd love to see that photo on the cover of the International Herlald Tribune or New York Times!!

Edited by nmarks

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Btw, where's the issue here? If someone wants to lend 10x income to a hopeless case - let them! That's a private transaction between two other parties (unless you're naive enough to think the lender was actually fooled by the deception. :rolleyes: )

The lenders know perfectly well what's happening. They knew when they introduced self-cert mortgages that it was a charter to lie, and get this, THEY DON'T CARE! They are willing "victims". After all it's not their money they are lending, well not for long, because they just offload the loan on the CDO market -- or they did. Why should they care? They've got the tiny figleaf of "we were lied to" to cover themselves, that's all they need.

I am under the impression that any financial advisor you go to has to do a complete interrogation of your financial position, your attitude to risk etc etc, surely if they can be seen to have not noticed the lie in the salary box on the mortgage APP, then they are at risk from compensation for mis-selling- however, I am not clear who here is most culpable- the advisor who looked the other way and falsified his interogation, the borrower who signed the APP, or the Bank that accepted the app.

The Bank is bound to say they beleived the FSA approved advisor would have done the checks, so it looks to me its back to the FSA for a reaction- I dont hold out much hope there as they seem to be saying all has been rosey for the last few years

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