Saturday, October 20, 2007

Credit running out for the borrowers

Lenders pulling mortgages at last minute

Homebuyers are losing deposits worth thousands of pounds as lenders try to wriggle out of mortgage offers between exchange and completion. Convex claimed 10% of property deals in the past month had experienced problems with the lender between exchange and completion. The firm said it had never before experienced such widespread problems.

Posted by uncle chris @ 09:54 AM (976 views)
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8 thoughts on “Credit running out for the borrowers

  • Let them bleed.

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  • It is far from fair for a bank to say yes to a mortgage and then change its mind after a deposit has been paid.

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  • “It is far from fair for a bank to say yes to a mortgage and then change its mind after a deposit has been paid.”

    I am with new order: let them bleed!

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  • David Smith's Sub Prime. . . says:

    If there aren’t any skeletons in the cupboard they can always sue or complain to the ombudsman so therefore there is more to this than just changing of minds, I suspect the mortgagees are looking more carefully and finding dishonest representations….

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  • A lot of sensible people are being upset by these panic induced reactions by lenders. It is not a fair business practise by banks!

    I have a great deal of sympathy with straightforward people who are trying to organise honest transactions (like my boss at work).

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  • This is an appalling development, unless actual fraud by the borrower is discovered.

    Mortgage companies are required to inform borrowers that “you home may be at risk if you do not keep up repayments on a mortgage secured on it”, but none of them inform borrowers that they may not get the loan at all and may lose their 10% deposit. I have taken out two mortgages in the past and I never thought about the possibility of this happening, and the conveyancer (who should have reviewed the small print in the mortgage offer) has never advised me that this risk exists. If they don’t disclose the risk, then if the mortgage company does not provide the mortgage they offered, then they should be responsible for making good the lost deposits. If they did disclose the risk, then few customers would accept the offers – they would demand that it is either offered or not.

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  • autopilotengage says:

    Lets put this in perspective, the mortgage falling through is just the eventual potential outcome of this practise. The lenders are probably just dotting their “i”s and crossing their “t”s a lot more now that the spotlight is on their lending standards. With default rates widely expected to rise then any mistakes when processing the mortgage are more likely to be examined later.

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  • auto,

    If this was just about “tightening up on their lending standards” then they could decide to not offer the mortgage in the first place rather than offer and withdraw it. Who made the “mistake when processing the mortgage”? Even if it was the buyer, losing £20000 is a stiff penalty – courts rarely impose fines of that sort of amount on private individuals.

    Suppose the mistake was discovered just after completion. Then the seller would have their money, and can complete on their next purchase (which may be essential to a long chain). Presumably the buyers would not be able to move in, but at least when the house is sold they will have a chance of getting their deposit money back (less the lenders costs). This would seem a better outcome than what is referred to in the article which will result in lost deposits for the buyers and everyone else in the chain. So I think it would be better if the get out clauses were outlawed and mortgage offers once made, were firm.

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