Sub Prime lenders

homer_j_3

HML are a third party administrator and provide various levels of service to their clients, This level of service can be as little as the use of their IT systems to the full back office mortgage processing.

HML do not have to employ mortgage adviser because they do not provide advice. Nor are they debt collectors either. They may operate the arrears and littigation processes for some of their clients, however, in any process that they do that specifically relates to the handling and dealing with mortgage accounts, they must do so in line with the FSA rules and regulations. The same rules and regulations that apply to both prime and subprime lenders.

Sub prime lenders do have their purpose within the mortgage market place and I do not deny that these should be avoided at all costs where possible and these products should only be given as part of the advice process should it be the only option, i.e. not a product available from the prime market place.

It always annoys me that people assume that people use subprime lenders because they are bad with money or have had previous credit problems. The fact is that the subprime market serves a purpose for a wider range of people than that. For example people whose incomes are made up of commission or newly self employed people that do not have the relevant number of years accounts to get a mortgage with a prime market/high street lender. They may have the best credit ratings in the world but still have no option other than to go to a subprime lender.

The other fact is that a lot of subprime lenders are actually owned by prime lenders and have been seen as a way of commercially allowing to cater to all sections of the mortgage market. Example of this would be The Mortgage Business who are a subsiduary of the Halifax.

With regards to reposessions, I accept that different lenders will have different levels of service standards, however, they should all be operating within the regulated environment for those who completed on or after 31/10/2004. If they completed prior to this then the mortgage code will have had minimum service levels.

Please do not confuse the above paragraph with a full on defence of what companies do but as a balance to the argument as ALL companies now operate in the same regulated environment and this should mean more accountability to the FSA and the Customer should a company be seen as operating unfairly.

When I last viewed the forum, you seemed to have the support of somebody who worked for KMC/HML but left due to their own ethics being comprimised? I find it difficult to accept that this is a balanced view and their posts do not demonstrate a full understanding of the role played by HML. I believe from memory that the same person tried working out a daily rate of interest and worked it out completely wrong, maybe this is why he left and felt a bit aggrieved?

With regards to securitisation of accounts, I dont understand why people should be concerned about this because it does not effect the terms and conditions of the mortgage or their rights, it will only effect the name on the DD and the people that they call to discuss the account. If they have used a mortgage broker to source this product then that product should be a) affordable, b) the best suited to their needs & c)one that has been fully explained. So how can a mortgage suddenly become the worse mortgage ever ? If the service level is that poor then their is always the FOS scheme to fallback on.

If you can tell me why there would be any other reasons for not being happy with the person that owns the mortgage after securitisation, I will glady review and respond.

Maybe you should get people to ensure that they use a mortgage broker, preferably whole of market or a broker who can select from a number of different lenders. By doing this, your registered forum users should avoid getting put with the wrong product as a result of a one product provider issue. As you say, TML may only sell KMC products, but in todays world their Initial Disclosure Documents should tell people this so it is educating people to understand this and know what to look out for.

I can clearly say that I will not be posting on your forum now or in the future. I think that the tone and posts so far will determine that you will only get people that have a problem with the companies you have named and shamed. I do not think that it is very clear/well designed either and as Ian W says, why have you got adverts advertising gambling when your message you are trying to promote is people who are committing suicude due to reposession and the companies that are taking advantage of peoples lack of knowledge and awareness?

emmaHarris_2

Thank you for your valuable time and considered views and opinions. We have the highest respect for your comments and feedback. With your permission and of course retaining your anonymity we would like to publish these accordingly on our forum and also we respect your comments in regard to the current tone of the forum and your lack of direct participation, this is something we will fully consider and again thank you for your honest feedback.

We would like however an opportunity to revert to you towards ensuring a balanced debate and allow visitors, readers and indeed consumers to fully appreciate and understand what could be their biggest investment in their lives.

We do not presume an argumentative approach but an intelligent debate and I hope you will consider furthering this unselfishly and unbiased as we would aim ourselves?

Your views are constructive and there is much we agree together upon and some that we do not yet.

Again, our thanks for your continued contribution to this very important topic.

homer_j_3

Thank you for respecting my views and I agree that any topic discussed should be well balanced and I have no problems with you using these comments. I would prefer to remain anonymous and would not want you to refer to where I regularly post. I do so on here for the good of consumers and the general public and would not want the integrity of this forum to be affected by people who disagree with my views.

I would like to add that anything I have said are my personal opinions and are not that of the MSE forum users or owners.

I do not represent views from any company mentioned within my post either and do not permit you to use my views with regards to gaining comments from the companies mentioned.

emmaHarris_2

Hi Homer_J and everyone. We would like to provide a response one paragraph at a time.

HML are a third party administrator and provide various levels of service to their clients, This level of service can be as little as the use of their IT systems to the full back office mortgage processing.

Yes, we agree. The IT systems & software provided are an integral component to the whole of securitisation & whole loan process. When a company enter into the securitisation business it can be very expensive and they should not just enter into this market for a one off sale of their mortgage book or part thereof . It is essential that they negotiate a continuation of generating new business of a cost effective portfolio size (£100m or circa 500-800 properties). This provided the impetuous therefore for company's such as HML to manage the whole process.

What 'lenders' do not tell consumers/borrowers is this is what their business actually is. Compare for example only of many: TML/Kensington Mortgages (KMC) web sites. They provide an impression that they are a mortgage lender similar to traditional mortgage lenders in the high street.

There is a high expectation and natural preconception that once the mortgage is placed with KMC that they will remain with this company for the duration of the mortgage or until the borrower decides to change. All due diligence is carried out on the lender and the borrower is pleased to find that they will be in the company of hundreds of thousands of other 'satisfied' borrowers.

They do not know and sub prime lenders are reluctant to inform them up front that they will indeed be sold on for a quick profit and meet their quota and targets negotiated with 'partners'. Originating loans is not a familiar term to consumers/borrowers.

At the verbal acceptance stage the 'lender' or 'originator' are fully aware of where and who this mortgage is going to be with and HML are also part of this 'group' within the business planning process.

There are instances where borrowers have received KMC letters written on MAS6 letter headed paper (Britannia subsidiary, created only to administer the now smaller mortgage portfolio purchased) and vice versa.

The borrower is now not in the safe and secure company of hundreds of thousands of other borrowers but is now part of a smaller 'batch' administered by HML on behalf of Britannia (MAS6 Ltd).

MAS6 ( and there now hundreds of these smaller limited entities being created to 'manage the increasing volume of portfolio purchases on behalf of prime lenders but not fronted by them) do NOT employ Mortgage Advisors from the outset. They are FSA regulated and authorised 'lenders' but do NOT lend or provide further advances. They cannot as there is no financial income via Savings accounts or other investments to sustain lending or to generate new money. They are authorised only to provide the misconception to borrowers that they remain in a mortgage company. They are a legal entity in their own rights and managing the portfolio performance. The mere fact that concluding the purchase of the portfolio that they do NOT employ Mortgage Advisors demonstrates that there are mainly 2 aims for the future of these mortgages: (1) Borrowers maintain payments for 3 years or repossess quickly after 1 or 2 months default and are alerted by the CML advice to borrowers to speak to your 'lender' immediately if you perceive a problem but they are unable to provide any advice as there are NO mortgage advisors. Even if the borrower has plans to overcome a temporary problem there is no one there to listen. There is no grace period or new monies that could actually aid the borrower. The new mortgage owner (MAS6 in this example) has no reputation to lose either. It will be dissolved as soon as the portfoilo has run its natural course.

Without the borrowers knowledge they are now in the 'last chance saloon'. This is preconceived. The originators balance sheet is positive and the profit gained and there is no recourse for the borrower to revert to the originator for further advice and assistance.

HML are only as good (or bad) as their clients instruct and it is the clients that set the service standards.

There are 2 main parts to the relationship of any mortgage company and the borrower: (1) Administration of the mortgage (i.e. collection of monies, sending out letters etc) & (2) Providing on going Mortgage advice and certainly to make sure that repossession action is actually the last resort. The sub prime market aided by HML does not pay any attention to the latter. Hence, the reality is HML become on behalf of their clients a ‘debt collection’ agency only type service.

HML provide the services from inception to repossession and managing the on going sale of the property concluding eviction on behalf of their clients.

They are also very aware that as SPV's or subsidiary companies their evictions and repossession statistics are not being recorded, despite the fact that they are holding mortgage accounts, FSA authorised 'lenders' albeit they do not originate loans and these are not recorded under the parent prime lenders name either.

Perceptions and expectations are all changed at the very last minute when the borrower starts to realise they are not with a mortgage company despite the contra being presented throughout the process and the good credit the borrower has at this time is now really at risk as well as losing thier home.

emmaHarris_2

HML do not have to employ mortgage adviser because they do not provide advice. Nor are they debt collectors either. They may operate the arrears and litigation processes for some of their clients, however, in any process that they do that specifically relates to the handling and dealing with mortgage accounts, they must do so in line with the FSA rules and regulations. The same rules and regulations that apply to both prime and sub prime lenders.

We agree as stated above. HML do NOT employ Mortgage Advisors. But the client should.

We also agree with you that they do operate in line with FSA rules and regulations.

It is these rules and regulations that do not go far enough (yet) to protect borrowers in this changing sector. It actually allows the 'lenders' to further gain. There is an imbalance in the relationship based on technical deceit throughout the process.

There is evidence gained from the HM Treasury through the Freedom of Information Act where sub prime lenders being participants in the consultations leading up to the FSA regulations being introduced in October 2004 where they have influenced The HM Treasury not to incorporate certain aspects raised where commercial interests would be affected.

For example 'they do not believe it s in the consumers interest to have knowledge of securitisation, whole loan sales (the business profile) as this would confuse them. The results therefore speak for themselves.

emmaHarris_2

Sub prime lenders do have their purpose within the mortgage market place and I do not deny that these should be avoided at all costs where possible and these products should only be given as part of the advice process should it be the only option, i.e. not a product available from the prime market place.

We agree again that sub prime lenders do have a place within the mortgage market.

Prime market lending is not as profitable at it used to be. It is now more competitive and certainly since building societies became banks too.

It does amaze us why the prime market allows this growing sub prime market to prosper and there are new entrants coming on board in this industry all the time. A sign of the times. It is a growth market and prime lenders do not want the high-risk profile borrowers on the books for obvious reasons. Reputations are stake, people could picket outside their high street 'shops' if they were or indeed needed to take the severe actions that sub prime lenders believe they need too. For a lot of reasons prime market lenders do not want to front openly this market but will do so via the back door. Create a subsidiary company to be the mortgage company that hold the mortgage portfolio, ensure sufficient distance between their high street name and the actions taken when dealing with potential high-risk problem borrowers, safeguarding their reputation throughout.

The high street or prime lenders continue to lend based on the 3x, 3.5 x an 4 x the base salaries of the borrowers and will underwrite accordingly.


These 'products' are not available from the prime markets. Now sub prime have entered into the lending for business purposes so not always sub prime borrowers with severe adverse credit or even near prime and are enticing borrowers away from the prime market and then these people find themselves in a different and alien environment as described above.

An example will be: where a borrower falls on hard times maybe temporary they are able to walk into the bank or building society and speak to a mortgage advisor and depending on the relationship (and reputation of the lender) will provide and will be more willing to provide further support to overcome these set backs that everyone experience at some or another in their lives.

Not so with Sub prime lenders. Decent & financially responsible people and families are being drawn into this sector on misconceived advertising and technical deceit, ignorance of the sub prime markets and business profiles, which are not covered, by FSA rules and regulations.

emmaHarris_2

It always annoys me that people assume that people use sub prime lenders because they are bad with money or have had previous credit problems. The fact is that the sub prime market serves a purpose for a wider range of people than that. For example people whose incomes are made up of commission or newly self employed people that do not have the relevant number of years accounts to get a mortgage with a prime market/high street lender. They may have the best credit ratings in the world but still have no option other than to go to a sub prime lender.

We agree again and touched upon this above.

There is a huge difference between those with adverse credit, bankruptcy and many CCJ's. You will be aware there is a sliding scale when profiling a borrower.

At one time borrowing for business purposes relied on the borrower to provide 3 years of accounts etc to prove income. The responsibility therefore was on the lender and not the borrower. Fraudulent applications could be sifted out more easily.

Now sub prime lenders have transferred this responsibility to the borrower through self-certification. This opens up the markets for them so in reality they can now lend to just about anyone. Even for start up business without accounts. People who have just been made redundant and have available cash. We know there is ageism in the work place and people 40+ find it difficult to get back on the career ladder and 'believe' they have the entrepreneurial skills to run their own business. Most new start up business or a high percentage of the fail within the first 3 years and lenders are also aware of this. Unemployment and redundancies have increased over the last 10 + years and again is a growing market in its own right.

These borrowers will not always be considered for a loan or a remortgage in the prime market due to their more that stricter lending criteria.

Yes they will have the best credit in the world and wehn entering into a sub prime market with the perception that their chosen mortgage provider will be there in times of difficulties but then find themselves with an SPV operation as described above, everything is lost.

Despite the 'example' where KMC & TML advertise providing further support to these types of borrowers the actual missing component is they do not tell customers that they will be sold more or less immediately they have signed. It is these lenders that are placing different types of borrowers in the same bucket so as to speak and the treatment is the same regardless of the reasons you have borrowed. Concluding the transfer of the mortgage account these people are treated with distain by HML administrators and are beneath contempt. They are made to feel like they should be lucky and fortunate to even have a mortgage as the original reasons for borrowing are not realised. The last chance saloon and no one there to provide considered advice and support.

emmaHarris_2

The other fact is that a lot of sub prime lenders are actually owned by prime lenders and have been seen as a way of commercially allowing catering to all sections of the mortgage market. Example of this would be The Mortgage Business who are a subsidiary of the Halifax.

Again, we agree and again we have touched upon this before. Ian Beech may have fallen victim to this. We believe when reading Ian’s profile & story he may already have been with a sub prime lender owned by the Halifax and it is only the Daily Mail that has raised this as it makes a better story than one naming and shaming an obscure and unknown company, such as The Mortgage Business. We don’t know this for a fact but it can be true of any of these situations but one thing is for certain is that the readiness to repossess is completely different between the two markets.

At court however it will be lesser well known The Mortgage Business repossessing and NOT the Halifax thus ensuring the Halifax reputation is safe guarded. No record is then made on the volumes of the Halifax (in this example) repossession rates.

A letter as you will see on the forum has been sent to the FSA, Treasury, CML and County Court Services UK in this respect.

emmaHarris_2

The other fact is that a lot of sub prime lenders are actually owned by prime lenders and have been seen as a way of commercially allowing catering to all sections of the mortgage market. Example of this would be The Mortgage Business who are a subsidiary of the Halifax.

Again, we agree and again we have touched upon this before. Ian Beech may have fallen victim to this. We believe when reading Ian’s profile & story he may already have been with a sub prime lender owned by the Halifax and it is only the Daily Mail that has raised this as it makes a better story than one naming and shaming an obscure and unknown company, such as The Mortgage Business. We don’t know this for a fact but it can be true of any of these situations but one thing is for certain is that the readiness to repossess is completely different to between the two markets.

At court however it will be lesser well known The Mortgage Business repossessing and NOT the Halifax thus ensuring the Halifax reputation is safe guarded. No record is then made on the volumes of the Halifax (in this example) repossession rates.

A letter as you will see on the forum has been sent to the FSA, Treasury, CML and County Court Services UK in this respect.

With regards to repossessions, I accept that different lenders will have different levels of service standards, however, they should all be operating within the regulated environment for those who completed on or after 31/10/2004. If they completed prior to this then the mortgage code will have had minimum service levels.

We agree but it is only when you join all the dots and look from a business perspective that you start to realise the enormous difference not so much between lenders but between markets and the unawareness factor of many borrowers of the dangers of entering into the sub prime markets.

Regulated mortgages (post FSA) again do not go far enough. Ask yourself why would a sub prime lender or a subsidiary specially created to service a small mortgage portfolio with a limited life of 3 years (when redemption penalties end) need to employ mortgage advisors. You cannot obtain any help without them. They are not designed to generate new business from the current borrowers as new business is generated through further securitisation and/or whole loan sales.


BY the fact that they lend to borrowers who have previous history of less than good financial management should require a more enhanced and responsible after care service, do you not think? Otherwise they can be seen as taking advantage of the vulnerable and a growing market in this respect for a quick and easy profit through not being more open about their business aims and objectives and how they operate compared to traditional mortgage lenders and leaving them at further risk in the future.

The borrower is paying a higher interest rates, has redemption penalties and the profit is already made by the originator. It is now the fact that the purchaser has 3 years to obtain a high ROI on these mortgages as quickly as possible. They know a high percentage will default in this period and the performance (Fitch Rating, Standards & Poor) will lower.

There is a huge imbalance in the relationship.

emmaHarris_2

With regards to securitisation of accounts, I don’t understand why people should be concerned about this because it does not effect the terms and conditions of the mortgage or their rights, it will only effect the name on the DD and the people that they call to discuss the account. If they have used a mortgage broker to source this product then that product should be a) affordable, b) the best suited to their needs & c)one that has been fully explained. So how can a mortgage suddenly become the worse mortgage ever ? If the service level is that poor then their is always the FOS scheme to fallback on.

If you can tell me why there would be any other reasons for not being happy with the person that owns the mortgage after securitisation, I will gladly review and respond.

I think this has been covered above but it should matter. Choosing a mortgage company is the rights of the borrower. He/she can compare them all and be able to be satisfied they have chosen a company that they think have the best products, rates and company profile to look after them in them in good times as well as bad. Its a real world.

This choice is taken out of their hands as soon as its sold. Based on the minimal clause of "we may sell or transfer your mortgage etc..." When a borrower asks about this (provided at the very last minute) he/she will be told that if the company was sold for example or a takeover occurs then the mortgage deed will need to be transferred. In general, solicitors do not understand securitisation and again they are not FSA authorised. They do not wish to become responsible for advising people NOT to proceed on this basis for obvious litigation reasons.

The Consumer Association (Which) legal advisors DO NOT know or understand securitisation of whole loan sales or the ramifications of such!

This minimal term reflect there 'may' be a possibility of this occurring. However, it has already been determined at this point who will be your mortgage 'administrator' and owner (but not lender in the real sense of the terminology) so why would they not advise customers of this fact before they proceed and sign?

The company they have been sold or transferred to be a different company than they thought they were going to be with as described above. The services and attitudes have now changed. The company is only concerned with portfolio management and not supporting he borrower through the life term of the mortgage.

Most brokers will endorse and recommend sub prime lenders based not just on the products but also on the profile of the borrower. Maybe also on the commission rates they receive through different lenders. In the real world self interest is apparent throughout each of the processes that the borrower must encounter when determining the biggest investment they will make.

That is the point it is not fully explained. It works on the what the borrower knows and does not know at each step.