Thursday, May 14, 2009

About a decade too late

Tougher rules to ban 'liar loans'

A startling fact about mortgage lending was highlighted by the Financial Services Authority (FSA) this week. In 2007, at the height of the lending boom, 45% of all mortgages were being granted without the lenders checking if the borrower's stated income was correct. Many people will be surprised that lenders had got into the habit of lending billions of pounds to people without, apparently, making basic checks on their ability to repay. A lot of the unchecked lending involved "fast track" and "self-certified" mortgages. In some quarters these have been dubbed "liar loans", giving the borrowers a convenient way of dodging sensible lending restrictions. "We have found substantive evidence of irresponsible lending and inadequate affordability assessment," said the FSA.

Posted by little professor @ 01:08 PM (1373 views)
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20 thoughts on “About a decade too late

  • little professor says:

    If you have a spare hour, it’s well worth watching this episode of The Money Programme, broadcast on BBC2 back in 2003. It unveiled massive widespread mortgage fraud involving brokers encouraging customers to take out liar loans, overstating their income by several multiples. The reporter stated at the end of the programme that he expected a clampdown on this practice, which would stem the flow of money into the market and cool house prices. Instead nothing was done.

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  • japanese uncle says:

    As I said time and again and again here for the last three years plus, incompetence defence is everywhere. We have predicted all these things not thanks to clairvoyance, but just 11th form common sense, haven’t we?.

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  • George Monsoon says:

    “Many people will be surprised that lenders had got into the habit of lending billions of pounds to people without, apparently, making basic checks on their ability to repay.”

    Im not surprised at all, the debts just got re-packaged and sold off to someone else before it became apparent that the money wasn’t there to pay back. The banks got greedy, as banks invariably do. They get away with out a mark and we fund their mistakes.

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  • How the hell can Jon Pain be put in charge of this? Until last year he was the MD of Cheltenham & Gloucester. This is what was reported in December 2003

    “Jon Pain, managing director of Cheltenham & Gloucester, has slammed mortgage regulation plans as “the worst thing for the industry”.
    Mr Pain spoke out over his concerns, warning the consumer will ultimately have to pay for regulation, as lenders pass on the associated expense. “

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  • Another example of why things won’t go back to what was considered normal.

    The collapse of the shadow banking system will see that this won’t happen again anytime soon – it was the ability of the loan originators to avoid the consequences of slack lending practices through securitising and selling the loans that allowed this to happen.

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  • jackas: The shadow banking system is alive and well. Fortunately, the SIV’s and monolines are largely inactive but the conduits and pension/funds funds are alive and kicking. It sounds ominous but the shadow banking system is just an intermediary between investors and people who want the money. It’s a useful service … UNLESS they take advantage of the lack of deposit requirements. Fortunately the bad boys who did this have been weeded out by the credit crunch and the new regs should prevent them returning

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  • Flashman

    If you didn’t want the problem sorting out because of your BTL empire then the perfect person to put in charge of sorting it out is someone else with the same interests as you.

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  • Flashman you talk about the criminals who caused this crisis and subsequent destruction of peoples pension funds, savings, livelihoods as if they are just little boys who need a good telling off. I understand you work within the financial services industry and as such have seen this criminality at close range, but I fail to see them as ‘bad boys’ but rather self serving parasites concerned only about their own personal improvement and bank balances without a single thought for those who eventually suffer. This marks them out as sociopaths in my book and their crimes should be punished by lengthy prison sentences and confiscation of all personal wealth. I have not seen a single example made of any one of the ‘fat cats’ or city whizzkids/ hedgies who littered the social pages of hello etc. and pronounced that greed was good. WHY?

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  • george monsoon says:

    Self serving parasites and sociopaths..

    That accounts for 99% of any person working in Finance or Marketing. Its greed all the way and no thought for the consequences to others. These sub humans only care about how to line their own pockets and sod everyone else.

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  • bystander: we ‘av got loadsa dosh so there is nufink you can do about it. city workers are cool and u r all shite.

    Is that what you wanted me to say?

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  • No, you misunderstand my comment. These criminals have behaved in a more destructive manner than a few ‘bad boys’ and yet they will be treated as such and get a light touch slap on the wrist from the FSA etc. and then swan away to either take up new over payed, over leveraged positions in other financial institutions chasing their bonus, or collect their grotesque pensions, while many around the globe suffer for their short termism. I felt I had to remark on your use of the term “bad boys” as it simplifies and exonerates, through levity, the enormity of the difficulties caused by this small band of sociopaths. I understand that, as with everything there are the few who make the whole look bad, but the financial services industry exists for one purpose only and that is to make money and that environment encourages the ” bad boys” to create short term gains for long term losses and it us rarely these ” bad boys” who are brought to book.

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  • bystander: to answer your question more seriously: Only Michael Douglas says ‘greed is good’. I have never actually heard anyone else saying it and I have never seen anyone commit a criminal act while working in the city. Has it occurred to you that hardly any examples have been set because hardly anyone has committed a crime?

    I am willing to bet that the average anti-financial services ranter couldn’t fill a coherent paragraph with their knowledge of the city and its workings. For example do you know what % of city workers are involved in risky derivatives and what % of city workers are involved in managing peoples pensions. Could you list all the activities of the financial sector?

    People borrowed too much money and consumed too much stuff. The public cried out for more, more, more. Throughout history this is how booms and busts happen. The only difference now is that we seem to live in a society where it is always someone else’s fault.

    WHO VOTED LABOUR. IT CERTAINLY WASN’T CITY WORKERS. WAS IT YOU?

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  • 10. flashman

    You are in a very provocative mood today. Careful what you wish for! lol

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  • bystander: looks like we posted simultaneously. Yes I understand your comment re ‘bad boys’ but I didn’t mean it in the ‘they’re just a bit naughty’ way. I literally meant that they were bad. There are always rotten eggs in every walk of life. For example the majority of tradesman I’ve used for the last ten years has tried to steal from me.

    I can say with absolute certainty that everything I have done in my career has been above board and the vast majority of my clients have been happy. Nothing I have done has been evenly remotely linked to the credit crunch or any other systemic risk. I pay all my taxes. I am far from alone in the city

    I answered your post because you have something to say. Did you read poor old George Monsoons post?

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  • @ Flashman: I am not against the city at all – and I like and agree with almost all you say – but I am willing to bet the best traders couldn’t fill a coherent paragraph on the meaning of a “sustainable and justifyable society in a market-driven democracy”.

    I don’t think they are criminals, but your line:

    “Has it occurred to you that hardly any examples have been set because hardly anyone has committed a crime? ”

    … would be similar to that currently uttered by our MPs re the expenses fiasco – before they realised that whilst they might not be criminals, what they do is plainly unjustifyable and antisocial.

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  • hello growler: I bet they could very convincingly fill several paragraphs …but they’ wouldn’t mean a word of it!

    I’m not sure about the MP analogy. Contrary to popular belief, most city workers get paid on verifiable results and do nothing that could cause systemic risk. They are also not paid from the public purse. Before anyone tells me that bailouts are from the public purse…..most firms have nothing to do with banks and/or bailouts. I suppose some of the AIG type stuff could be likened to the MP’s behaviour but I still think MP’s are worse because they have a direct duty to the public

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  • crunch @13: It’s all the short skirts walking around London at this time of year. Always makes me paw the ground a bit.

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  • flash, my first job was in the city. Threadneedle St. How long ago is another story, but I know exactly what you mean. Sunny days are the worse, lol…….. Oh the memories! : b

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  • peeping tom says:

    “At a conference on the future of the industry, a senior FSA official pointed out that by 2007, at the height of the lending boom, 45% of all mortgages were being granted without the lenders checking if the borrower’s stated income was correct”.

    As startling as learning that bears crap in the woods.

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