approved mortgages levels fall, plus unsecured debt up..

chucky

Generali wrote: »

The point that a lot of posters seem to be missing (and apparently many Governments too) is that debt isn't falling because people don't want to borrow, it's because the banks don't have the money to lend.

In this case it doesn't matter what the media and Government say about people going out to spend, spend, spend. If the banks don't have the money to lend then it can't be spent.

you're right not all have money to lend but many that suffered write downs due to CDO's will be improving - there has been increase in CDO activity that will provide them with write-ups which will provide additional liquidity for them.

More than $6 billion of collateralized loan obligations, a form of CDO that pools high-yield, high-risk loans, have traded publicly since May, according to JPMorgan. High-yield, high-risk debt is rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

Morgan Stanley analysts, who in January called the secondary market for CDOs of corporate credit-default swaps “a $300 billion distressed opportunity,” estimate $5 billion of the CDO securities have traded this year.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a5KbYLsaKQhU

lemonjelly

Generali wrote: »

Well the most amazing thing about selling on debt (I think at least and I only just thought about this tonight so I may be wrong) is this.

You have 2 scenarios.

Scenario 1: Bank lends money to people using deposits to do so. Bank holds 8% of deposits in reserve so £1,000,000 increase in money stock becomes £12,500,000 increase in money supply due to fractional reserve banking.

Scenario 2: Bank lends money to people using deposits to do so and then sells on the debt via CDOs. The highest tranche of the CDO is bought by another bank and used as reserves so more money can be lent.

This is a neat way of circumventing the reserve rules set by regulators in a manner agreed to by the regulators. If you keep the debt asset on your own books you need to hold reserves against the debt. If you sell the debt on then the debt not only goes off your books but can also be used as an asset in reserve to lend against!

I probably didn't explain that so well as I only just realised it.

Crickey.

Here's what I don't get about all this sold on debt. Bearing in mind I work in advice, I've debated it with many colleagues, some of whom have a better understanding than me. They re-assure me as to the legal implications, that said, to me it still doesn't appear right:

I borrow £15,000 unsecured from ABANK

ABANK then proceeds to "sell" this debt to ADEBTCOLLECTOR.

ADEBTCOLLECTOR then comes after me for the money.

Now, (& I appreciate I am oversimplifying here) if ABANK have recieved a payment in settlement (by the selling of the debt) to ADEBTCOLLECTOR, then the original contract has been settled. I didn't enter into any form of credit agreement with ADEBTCOLLECTOR. Further, a debt is non-transferrable (ie a spouse can't be liable for their partners sole debts). So how is it proportional that ABANK can transfer the debt, but I cannot? Surely the original agreement is ended by ADEBTCOLLECTOR buying the debt. In doing this, ABANK no longer collects monies owed.

Given that ADEBTCOLLECTOR has bought the debt, I don't understand how they can legally enforce it. They send out letters stating they are they agents acting on behalf of ABANK, but they're not you know! They don't act for ABANK, as that agreement was settled some time ago.

So why can't I borrow loads unsecured, & then tell ADEBTCOLLECTOR to fcuk off when they approach me for payments, given that I have never entered into a credit agreement with them?

Like I say, people have explained legal nuances before, & whilst (at the time) I get it, it still doesn't stand up for me, ethically as well as legally.

Hope I've explained this ok....

Cleaver

Demanufacture wrote: »

TBH I think the way things are going I may just stay out of the market altogether whether I was going to buy with cash or small mortgage, my reasoning is a house is such an illiquid asset that if you need to downsize, move county or more realistic for me, get out of the UK altogether it's not easy to realize that money.

I honestly believe the UK is in for a terrible time over the decades ahead, we produce virtually nothing anyone wants, yet we will be at the beck and call of likes of Russia and unfriendly countries regarding energy and other commodties.

Obviously you are very risk averse in terms of being worried about selling a house and the impact of other countries on us and are energy woes etc. You've also mentioned either buying cash or having a very small mortgage which suggests that you have a lot of worries and concerns about purchasing, so it probably does sound that not buying a house is for you. Depends on your outlook I guess and no one knows what will happen in the future. Just out of cursiousity, do you never think to yourself that there's loads of factors out there you can't control and if you're making rational, sensible decisions in life then there will always be an aspect of risk that you can't do anything about? I think if you analysed everything financial decision you make to infinate detail you'd probably never do anything in life.

I kinda think life is too short to worry about it all. If we run out of energy, Russia takes us over or houses become impossible to sell then I'll probably have bigger worries than my mortgage payments. And I've always just had the feeling that if I lost my job, house and life I'd have a bit of a cry, dust myself down, pull myself together and start all over again. It's only money after all. I'll just learn Russian and go and work for Gazprom. Maybe buy myself a dacha.

Generali

lemonjelly wrote: »

Here's what I don't get about all this sold on debt. Bearing in mind I work in advice, I've debated it with many colleagues, some of whom have a better understanding than me. They re-assure me as to the legal implications, that said, to me it still doesn't appear right:

I borrow £15,000 unsecured from ABANK

ABANK then proceeds to "sell" this debt to ADEBTCOLLECTOR.

ADEBTCOLLECTOR then comes after me for the money.

Now, (& I appreciate I am oversimplifying here) if ABANK have recieved a payment in settlement (by the selling of the debt) to ADEBTCOLLECTOR, then the original contract has been settled. I didn't enter into any form of credit agreement with ADEBTCOLLECTOR. Further, a debt is non-transferrable (ie a spouse can't be liable for their partners sole debts). So how is it proportional that ABANK can transfer the debt, but I cannot? Surely the original agreement is ended by ADEBTCOLLECTOR buying the debt. In doing this, ABANK no longer collects monies owed.

Given that ADEBTCOLLECTOR has bought the debt, I don't understand how they can legally enforce it. They send out letters stating they are they agents acting on behalf of ABANK, but they're not you know! They don't act for ABANK, as that agreement was settled some time ago.

So why can't I borrow loads unsecured, & then tell ADEBTCOLLECTOR to fcuk off when they approach me for payments, given that I have never entered into a credit agreement with them?

Like I say, people have explained legal nuances before, & whilst (at the time) I get it, it still doesn't stand up for me, ethically as well as legally.

Hope I've explained this ok....

I'm pretty sure I get what you're trying to say and the reason why ADEBTCOLLECTOR can come after you for the debt is that the loan is transferable between the owners of the debt but not between debtors.

For example, if I owe you twenty quid then you can reasonably ask me to pay kennyboy66 the money instead if you owe him £20 too. However you could not reasonably chase Mrs Generali for my debt to you unless both she and I agreed to her also being liable for the debt when I borrowed the money.

Now the scenario you show is causing some problems in the US. Some of the paperwork relating to the selling on of the debt was sloppily drafted and as a result, it is very unclear who owns the debt. This makes it impossible to foreclose on the mortgage as it is up to the forecloser to show they are owed the money, not for the homeowner to show who they owe money to.

lemonjelly

Generali wrote: »

I'm pretty sure I get what you're trying to say and the reason why ADEBTCOLLECTOR can come after you for the debt is that the loan is transferable between the owners of the debt but not between debtors.

For example, if I owe you twenty quid then you can reasonably ask me to pay kennyboy66 the money instead if you owe him £20 too. However you could not reasonably chase Mrs Generali for my debt to you unless both she and I agreed to her also being liable for the debt when I borrowed the money.

Now the scenario you show is causing some problems in the US. Some of the paperwork relating to the selling on of the debt was sloppily drafted and as a result, it is very unclear who owns the debt. This makes it impossible to foreclose on the mortgage as it is up to the forecloser to show they are owed the money, not for the homeowner to show who they owe money to.

Thanks Gen, you've summed it up well.

Interesting they're having those problems in the US. I'd be very interested to see if they appear this side of the pond...

Generali

lemonjelly wrote: »

Thanks Gen, you've summed it up well.

Interesting they're having those problems in the US. I'd be very interested to see if they appear this side of the pond...

I guess the potential is there as, from what I've read at least, the problems enforcing debt are related to sloppy paperwork.

It's not necessarily good news for the homeowner either. If it's unclear who owns your debt, how can you prove you're discharging your mortgage when you sell?

There is a minefield out there, potentially at least.

lemonjelly

Generali wrote: »

I guess the potential is there as, from what I've read at least, the problems enforcing debt are related to sloppy paperwork.

It's not necessarily good news for the homeowner either. If it's unclear who owns your debt, how can you prove you're discharging your mortgage when you sell?

There is a minefield out there, potentially at least.

It could also be a problem for the Courts service.
It is surprising, but in giving debt advice, one of the first questions I ask a creditor is for a copy of the agreement. Most of these debt companies can't find the credit agreement, & this tails into a dispute about whether the debt is owed.

From an advisers perspective, the onus is on the creditor to prove the debt is owed. The debtor fears escalated charges, & I do advise clients that if they challenge the debt & lose, they will be liable for costs.

The creditor will threaten court action, & the debtor then has to face the risk of losing the case & increasing the amount of the debt. That's the risk you take I guess...

But this still confuses me:

I'm pretty sure I get what you're trying to say and the reason why ADEBTCOLLECTOR can come after you for the debt is that the loan is transferable between the owners of the debt but not between debtors.

The bit in bold is disproportionate. Why can a creditor transfer a debt, but not a creditor?

Does it not Contradict the principles of consumer contracts having to be proportional under the Unfair terms in consumer contracts regulations?

My understanding of it is the debt collectors allege they are acting on behalf of the creditor. But if they've bought the debt how can this be?

Generali

lemonjelly wrote: »

Why can a creditor transfer a debt, but not a creditor?

Because I could lend you money as a fine and upstanding member of the jelly community at a rate of interest commensurate with you reliability and you could transfer your debt on to slimyslugjelly, a notorious Welsher on debts to who I would otherwise charge a far higher rate of interest.

You can sell an asset but not (in most cases) a liability.

The problem with this comes when a bank takes over another bank - depositors have lent money to the bank but the liability has changed hands yet that is completely legal. Anyone with funds on a term deposit should have instant access in that case IMO. They don't.

lemonjelly

Generali wrote: »

Because I could lend you money as a fine and upstanding member of the jelly community at a rate of interest commensurate with you reliability and you could transfer your debt on to slimyslugjelly, a notorious Welsher on debts to who I would otherwise charge a far higher rate of interest.

You can sell an asset but not (in most cases) a liability.

The problem with this comes when a bank takes over another bank - depositors have lent money to the bank but the liability has changed hands yet that is completely legal. Anyone with funds on a term deposit should have instant access in that case IMO. They don't.

:rotfl::rotfl::rotfl::D