Wednesday, March 14, 2012

The new sub prime

FSA warns on new buy-to-let fraud

The Financial Services Authority (FSA) is worried about the fraudulent use of buy-to-let mortgages by some people who cannot obtain an ordinary residential mortgage... "We are seeing anecdotal evidence of unregulated buy-to-let mortgages being used fraudulently as a replacement for regulated residential mortgage contracts, as borrowers and intermediaries seek to circumvent more stringent income and affordability checks," the FSA said. The regulator pointed out that this problem might grow because some potential borrowers had been shut out by the much greater restrictions now in place on risky mortgage lending.

Posted by mark wadsworth @ 03:11 PM (1709 views)
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10 thoughts on “The new sub prime

  • If this is such a problem why are the FSA being so coy? What use, exactly, is “Warning” us? They should be getting their size 12 jackboots into this stuff with all the power they have. I know from volunteering to do the books of a small friendly society that the FSA can be a right pain in the Khyber. Threatening all sorts of evil retributions over minor errors. So why the gentle warning tone here? Gits. They are choosing light touch regulation again it seems.

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  • sibley's b'stard child says:

    I don’t get this, figures have consistently suggested (certainly over the previous year) that the average LTV for BTL is lower than residential (70% vs 85%) indicating that the former are hard to come by than the latter, so what gives?

    On an unrelated note:

    ‘However, the report pointed out that more than a million mortgages are due to be repaid in the next eight years which are interest-only.’

    Tick tock tick tock.

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  • [email protected] I am starting to feel like I’m being followed by the crocodile in Peter Pan there are so many things going tick-tock-tick-tock at the moment. None of them ever seem to go Ka-boom. Unfortunately.

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  • mark wadsworth says:

    SBC, you’re right, on that level it doesn’t make sense, however we do know that the Homey’s were a-boastin’ recently that BTL purchasers outnumbered FTBs (or possibly they outnumbered all other purchasers?) so perhaps it is true that some people find it easy to get a BTL mortgage and then live there than to get a normal resi mortgage (i.e. with a BTL, the lender will take the rental income into account, with resi, they won’t because the owner-occupier consumes the rental income himself). So they’ve turned the logic on its head of ten of fifteen yuears ago where it was easier/cheaper to get a resi mortgage and BTLs pretended to buying places to live in.

    Fub, it won’t go ka-boom, but it’s quietly hissing away losing air.

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  • I am sorry. What does FSA mean by “NEW” fraud? Since when BTL was ever NOT a fraud?

    Is there even one BTL that is not fraud? Can anyone tell me if they know even one BTL is completely honest on income, rental, valuation, repayment plan, MEW and tax?

    Anyone?

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  • sibley's b'stard child says:

    Fubar, we’ll see. I’m not sure how much further they can keep kicking this particular can.

    MW, good point I hadn’t considered that side of the equation.

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  • jack c,
    I hope you’re right. And at the same time it makes me nervous – exploding systems can go in unpredictable ways.

    SBC,
    Same, Hope you’re right and the can is nearing the end of the road.

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  • What Mark W says @ 4. It’s not going ka-boom, it’s gently hissing, deflating. Recently I’ve seen a number of new developments of the type that previously would have been snapped up in no time; now they’re sitting on the market, gathering dust and being marketed ever more aggressively. (This is outside London; within London it’s still a different story, though not sure for how much longer.)

    SBC,
    “more than a million mortgages are due to be repaid in the next eight years which are interest-only”
    If they have eight years to run, the owners bought the properties 12 or 17 years ago. The properties will have doubled or tripled in value, they’ll be able to remortgage easily (unless they’ve been MEWing like cats, which isn’t that widespread).

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  • sibley's b'stard child says:

    Good point Drewster, for the sake of being contrarian, given that we’re already back to c. 2004 prices, who knows where we’ll be by then.

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