Wednesday, June 1, 2011

Honest Banking :-o

Banks accused of using mortgage debt leniency to flatter numbers

"Banks should be making much larger provisions because the current status is artificial," Danny Gabay, a Fathom director, said. "We have lower foreclosure rates than during the boom. It's just not plausible." UK banks are currently holding about £1.6bn in provisions against the country's total £1.2 trillion mortgage book.

Posted by happy mondays @ 07:11 AM (1424 views)
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6 thoughts on “Honest Banking :-o

  • That’s why they don’t want IRs to go up. It might cause a few reposessions among the reckless and stupid.

    It’s bent and twisted at the top. Maybe we should employ more honest guys …wait a minute, did you say Sepp Blatter was available?

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  • Does anyone know the number of interest only mortgages as a percentage of the total number of mortgages? Also in cash terms?

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  • mark wadsworth says:

    Mken, it says here that it’s about three million households, which is a quarter of all mortgages by number (no idea about amounts). The other figure touted recently was 300,000 but that relates to households who have switched to interest only in the last three years.

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  • ontheotherhand says:

    The American experience was that people in arrears were unable/unwilling to repay anything at all, so restructuring the monthly payment achieved very little. That was in an environment of falling prices and negative equity and jingle mail though. So we in the UK are storing up a big problem if we can’t keep prices going up. For now, reducing the monthly payments is enough to keep punters paying because they believe prices are about to go up again which solves all their problems. If prices fall for an extended period, all of these people will just give up, and a backlog of foreclosures will hit the market at the same time.

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  • ontheotherhand – yes the difference between the US and the UK is that in most US States you can walk away from a nequity mortgage – so why bother with restructuring. In theory this way Banks are punished for irresponsible lending. “The market” finds a new price for property quickly. It becomes a bit muddied when Governments intervene to prop up Banks with taxpayers money. Who is going to take the losses.

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  • general congreve says:

    @5 – Homeowners/Taxpayers (one and the same) can’t afford their mortgages, but the government borrows and prints the money on their behalf to pay the mortgages. What can possibly go wrong?

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