Sunday, August 26, 2007

No subprime crisis in the UK ….. NOT!

Brokers 'urge buyers to lie for home loans'

Mortgage brokers are encouraging prospective homeowners to lie about their income in a bid to secure massive loans, it is claimed. Sandra Ashcroft, 59, said she was advised by brokers to lie about her salary to secure a £102,000 loan in 2003. Two years later she increased that loan to £122,000 after claiming she was a £35,000-a-year senior midwife. In fact, she received an annual wage of between £3,000 and £5,500.

Posted by uncle chris @ 07:43 AM (1546 views)
Please complete the required fields.



17 thoughts on “No subprime crisis in the UK ….. NOT!

  • You can probably define everyone in the UK who has took out an interest only mortgage ‘because thats all we could afford’, or ‘we will downsize later and use the profit to buy a place outright’ as sub-prime.

    The culture of lying and not checking was and is entirely encouraged by the banking/lending industry, what we are seeing is probably the start of the biggest banking industry scandal the UK has ever suffered.

    20 years ago you had to prove your income and ‘interest only mortgages’ were not available or even known about to the general public, the entire HPI debacle has been entireley encouraged and funded by Banks, Building Societies, Estate Agents, Government, Second Salaries and Peoples Inate Greed.

    Reply
    Please complete the required fields.



  • An Bearin Bui says:

    I agree on the issue of IO mortgages – they seem to be commonplace now and yet there was an entire scandal around endowment mortgages that were sold in the 1980s. As far as I understood it, an endowment mortgages basically allows you to pay only the interest on a loan while investing a sum in an investment vehicle that is then supposed to pay off the capital on the mortgage at the end of the term. These kinds of mortgages were the scandal of the last house price boom and it all came out in the wash in the 1990s. Now, the banks are essentially handing out endowment mortgages all over again but without the investment vechicle to go with them – how can we regard an endowmnet mortgage as fraudulent and scandalous when IO mortgages are considered as acceptable market alternatives to a repayment mortgage? It’s not just the mis-selling issue that makes the difference either – I would bet that many IO mortgages are equally mis-sold with those who sign up to them not fully understanding that they’re making no dent into the capital whatsoever. Many take them out just because they’re cheaper and have no thought to the implications of only paying off the interest, not the capital on their mortgage. And I doubt the brokers are making them aware of the implications either.

    Reply
    Please complete the required fields.



  • Pretty obvious that they’ll be te first people to suffer when they can’t repay their loans and the first to complain that they were mis-sold. It’s immoral behaviour which punishes everyone else in the form of higher house prices as their greed is constantly pushing up the bottom line. Good to read that a lot of sub prime lenders are closing their doors to new mortgages because of their own dubious practices. Starting to look like it’s pay back time for the cheats and liars.

    Reply
    Please complete the required fields.



  • captain sensible says:

    Lots more prison places needed soon. BTL investors lying and saying the mortgage is for a residential property (fraud), borrowers lying about income (fraud), brokers encouraging them to lie (conspiracy to defraud on a multiple scale). I just hope that all of that extra cash rolling into the lawyers’ pockets doesn’t create another mini-property boom!

    Reply
    Please complete the required fields.



  • Why can’t people just earn more? Self employment, extra hours, errands, favours, prostitution, drugs, smuggling, extortion, fraud, take your pick. Under our new global economy, all of this is apparently okay, and also recession proof so Royston and the other finance geeks can’t complain. Business is business.

    Reply
    Please complete the required fields.



  • I know somebody who made pots of cash doing this a few years ago; they lied about their income to get an interest only residential mortgage then brought in lots of tenants (almost all immigrants) and didn’t pay any income tax on the rent by classifying the lodgers as B&B.

    As long as house prices are seen to be rising, nobody seems to care about repayments or risk or honesty.

    There are lots of people out there happy to tell a few porkies to flip a property and borrow against tomorrow’s house price rise. I get the impression that most people think house prices will keep on rising steadily.

    Reply
    Please complete the required fields.



  • planning4acrash says:

    Fraud? It can’t be? Most of these liars are white professions, they could’t possibly be hounded by a middle-class police force with institutional racism at the heart of its philosophy!

    Joking aside, for some reason this has not been seen as crime, but some serious questions should be asked. Primarily, mortgage companies have been complicit because they found a way to sell the risk onto others, so they thought. Who is going to take legal action if the mortgage companies don’t? Maybe this should be seen as a criminal offence rather than a civil one (maybe it is already, I’m assuming that itscivil) because of the effect it has on society, basically, by lying, you get ahead in the property market above decent families who don’t lie, and a home is a fundamental human right.

    Reply
    Please complete the required fields.



  • 1/lying on a loan application is a serious criminal offence.

    2/80% of uk mortgages have been PACKAGED by brokers.

    3/internet is a source of fraudulent p60s and wage slips

    Reply
    Please complete the required fields.



  • Two years ago I was going to upgrade to a three bed house. I was told by my mortgage broker to lie about my income, as if he lied he would be punished by the FSA. But if I lied that was alright. So I thought about it checked the repayments with a modist interest rate rise of 1.5%, and thought NO CHANCE.
    So I sold up and now rent a 3 Bed and I’m better off with money in the bank.( four banks better safe than sorry)
    So we do not have a big sub-prime market, we have a lot of people who 24K saying they earn 50K but they are not sub-prime. Oh when this goes tits up it’s going big time.

    Reply
    Please complete the required fields.



  • If this is repeated I’m sorry mis-spelt my e-mail address.
    A while ago I was going to upgrade to a three bed house but when my mortgage broker came around he tried to get me to lie about my income. I said I think about and get in touch, took the interest only payments and increased them by 1.5% this took me upto payments over 1K a month. So I said NO CHANCE and decided to rent. £650 a month.
    So we may not have an official sub-prime market. But there are a lot of liar mortgages out there. But they are not counted as sub prime.

    Reply
    Please complete the required fields.



  • planning4acrash says:

    Thanks Taffee, I have a few question then, which probably don’t have answers: A) Why hasn’t action been taken? Is it so widespread that the Police don’t have the resource to cover it? Or have politicians not allocated resources to deal with it because they fear unpopularity? B) Will mortgage brokers begin to take action if defaults rise, because reposessions will be much easier in the courts on the back of it or will they not bother to take action but present evidence of fraud to ease foreclosures that may otherwise be difficult to get through the system? Maybe this fraud has been supported because it is a great way to make a quick buck, sell on the risk, plus, easy to foreclose and get your money back if times get rough.

    Reply
    Please complete the required fields.



  • Probably the reason is that “just” a few lies were told. If nobody is losing out ~ so what?

    The problem only arises if the interest rates get jacked up quickly or the bottom falls out of the housing market ~ both almost impossible to imagine (for most folk in the UK) last Christmas.

    Reply
    Please complete the required fields.



  • stillthinking says:

    There are no prison cells available, remember the news, a new early release programme was put in place a month ago. Despite a vociferous campaign by the Sun newspaper over 5 years to increase capacity nothing happened.
    Nobody is going to prison. The only slight snag that I see is the people who waited and saved up are going to lose out. They won’t be going to prison either of course.

    Reply
    Please complete the required fields.



  • Thetidewillturn says:

    Nobody is going to jail for this…(don’t get me wrong they should – this is deception as Taffee said a very serious criminal offence).
    “Yesterday Ashcroft, from Manchester, was given a six-month suspended prison sentence (read slap on the wrist) after admitting obtaining money transfers by deception”.
    A suspended sentence is about as harsh as it will get – we can’t even keep murderers and rapists in jail for half of their sentence so what chance do we have with this type of crime where the victim is a faceless bank (and indirectly all of us through rampant HPI). Maybe this Govt will get repeat offenders to sign a “Loan Form Filling Contract”….”I promise not to lie on my mortgage applications (note the plural)” and get it witnessed by a police officer. But then expecting the Govt to do something about it is probably expecting too much – wasn’t it in the early days of the Govt that Peter Mandelson was found out “being economical with the truth” on his loan application to the Britannia (albeit that was about him receiving an interest free loan of £373k from Geoffrey Robinson to top up the mortgage of £150k rather than lying about income but just the same would he have got his mortgage if the Britannia had known that his large “deposit” was just another loan? – we shall never know) – look what happened to him – no criminal action (because Britannia didn’t press charges) – dropped from Govt for a while and then let back in when the public forgot – corruption starts at the top if those “in power” can get away with it by so blatantly bending the rules then the people will ask (quite understandably) why shouldn’t they get a piece of the asset bubble?

    If or when the tide goes out on house prices and they start to fall because of affordability problems we will see many more cases like this (so many they probably won’t get reported) – that’s assuming they get to court – banks are unlikely to highlight their own shortcomings and lax lending criteria by pressing for legal action and from what I have seen judges are quick and very vocal in highlighting lax bank procedures.

    So to answer your questions planning4acrash:-

    A. Someone needs to make a complaint – banks are unlikely to do this as it will highlight their own shortcomings in not checking affordability more closely and if the asset price has risen the complainant (the bank) will be able to get their money back (at least they will for now – it will be interesting to see how things will develop if prices do fall).
    B. The police don’t have the resources for anything not even to cover up their own mistakes.
    C. Politicians are complicit and as we have seen above are not shy in “bending the rules” themselves. If there was at least one with Mandelson – you have to ask the question – are there any more?
    D. Mortgage brokers won’t do anything they merely introduce the liar (sorry the applicant) to the bank – the broker takes their fee from the bank or applicant and runs. Its the bank who relied on the honesty of the broker and the honesty of the applicant who will take the loss (and again there is yet to be a loss whilst prices keep going up – the trouble starts when the upwards spiral in prices stalls due to rate rises and starts to fall) . I suppose at some point you may see a bank try to pass back the pain to a broker by reporting them or making a complaint against the broker – difficult to see how though as they will be long gone – where are all those endowment salesmen and women who wrongly sold them from the late 80’s / early 90’s…hang on selling endowment policies to mortgage broking its not a massive change of career now is it? Maybe that’s where they are!!!

    Reply
    Please complete the required fields.



  • @planning4acrash

    “Thanks Taffee, I have a few question then, which probably don’t have answers: A) Why hasn’t action been taken? Is it so widespread that the Police don’t have the resource to cover it? Or have politicians not allocated resources to deal with it because they fear unpopularity?”

    It seems pretty obvious to me that our politicians have huge VI in keeping house prices high. If there is a HPC then
    1) Our MPs will lose money on their homes (I think I can safely say there are no FTB MPs)
    2) Our MPs will cower with fear at the blowback when property owners realise that they are becoming poorer – watch out for MPs arguing to help indebted house owners at your expense.

    Just think of Tony and his multi million pound mortgage for Connaught Square. Our politicians will all personally suffer in their pockets and at the polls if there is a HPC.

    Reply
    Please complete the required fields.



  • captain sensible says:

    the courts now make quite alot of use of suspended sentences, same criminal record as going to prison but don’t actually clog up a cell. Still frightening for otherwise law abiding citizens. I still think that the courts may make an example of one or more brokers if they get the chance. Police don’t have the resources to investigate, but will take action if lenders present them with a ready made case. May be in their interests to do this if they can get brokers on the hook. Brokers may then be encouraged to cooperate by giving up individual borrowers, and this gives lenders leverage for speedy repossessions. Also may be a way in to extract compensation via brokers’ insurers. None of this will happen if borrowers continue to pay, as lenders have no incentive to rock the boat. However, if the market begins to unravel this may all change!

    Reply
    Please complete the required fields.



  • planning4acrash says:

    I think this all just shows that the system should be more upfront. With the risk of being totally unpopular, why not have to provide audited borrower’s packs? Evidence of income and deposit independently varified and guaranteed for x months when you go to a broker or bank for a mortgage. Yer, it would cost more, but the honest guy won’t get gazumped by an idiot taking 10x salary so will be better off. Maybe mortgage companies can charge less for arrangement fees to partially compensate the cost, because there will be less risk for them. Maybe there’s another way of doing it, but I just feel that frontloading the system is the only way, because greed so often gets in the way with home buying. Maybe then people would focus more on saving a deposit and getting a promotion than finding the best way to spin a yarn!

    Reply
    Please complete the required fields.



Add a comment

  • Your email address is required so we can verify that the comment is genuine. It will not be posted anywhere on the site, will be stored confidentially by us and never given out to any third party.
  • Please note that any viewpoints published here as comments are user´s views and not the views of HousePriceCrash.co.uk.
  • Please adhere to the Guidelines

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>