Lloyds Checking IO Mortgages for Fraud and other stories

A._Badger

Thrugelmir wrote: »

Obviously you don't.

And you do?

Answers on the bank of a blank cheque to Mervyn King....

dopester

michaels wrote: »

And spin it as being responsible and there are people who will be taken in even on house price forums like this. GD would like me and RenoMan to go IO. We have 40% equity in our houses to cushion the banks for any risk so how would a repayment of 50 quid a month make any material difference to the the lenders risk?

40% equity and how much debt outstanding? £270,000 for our friend RenoMan.

That's a lot of money. He could have probably bought the place twice over for £270K going back 10 years, and we're seeing challenging economic conditions for many people.

Date............Valuation.....Mortgage.....Equity. .......Overpaid.....Ownership
May/2010......£450,000......£300,995......£149,005.... ..£0...............33.11%
Current..........£450,000......£270,000......£180, 000......£30,995........40%

Banks are not customers' cuddly friends, just there to lend you the nice credit in the boom, and be so understanding in the bust when people struggle with their repayments. That might be what some people call the "real world" but when it's going on all around, another "real world" begins to emerge.

RenovationMan

dopester wrote: »

40% equity and how much debt outstanding? £270,000 for our friend RenoMan.

That's a lot of money. He could have probably bought the place twice over for £270K going back 10 years, and we're seeing challenging economic conditions for many people.

I seriously doubt that I could have bought a 5 bed stone farm house for just £135k in 2000. However, as I dont have a time machine in order to go back 10 years the point is academic. I dare say that the house was much cheaper 20 years ago too. In fact, when it was built in 1750 it probably cost the equivalent of a mountain bike today.

I therefore dont understand the point your trying to make using me as an example?

dopester

RenovationMan wrote: »

I therefore dont understand the point your trying to make using me as an example?

I think it was Michaels point about 40% equity as a "cushion" for the banks. From what I can tell, you're on an interest only mortgage, and so is he.

With mortgage debt in the hundreds of thousands to service, in a challenging economy.... if I were a lender, in this economy, I'd want to see an element of repayment solution involved.

Even if it's only partial. Not relying on the "unbreakable" 40% equity cushion but something in the here-and-now, every month, showing the borrowers commitment to satisfying their long term debt obligation. Not some promise on the never never about an inheritance or winning the lotto.

michaels wrote: »

And spin it as being responsible and there are people who will be taken in even on house price forums like this. GD would like me and RenoMan to go IO. We have 40% equity in our houses to cushion the banks for any risk so how would a repayment of 50 quid a month make any material difference to the the lenders risk?

Kenny4315

I think that the banks are missing the point. Just loan to people who can afford to deal with the debt, and I not talking about just number crunching the details into a computer like some brain dead blotter jotters, 3 times salary check blah blah blah check, I'm on about properly looking at income and expenditure and affordability, (for example, I have BTL income they don't take into account because their calculator uses an interest rate that is 4% more than I'm actually ever going to pay, that's just plain lazy). While maintaining a sensible attitude to exposure in both the short and long term. Whether that product is interest only or not it makes no real difference if the correct elements are in place.

In the longer term the security is the house itself. It is the short term deposit that they should have controlled. If the minimum deposit had been maintained at 15% rather than zero or even situation where 100% plus mortgages were given it would have controlled the boom and would have reduced risk. It is a cast iron certainty that an average house in 25 years time is going to be worth considerably more than when it was purchased no matter where abouts it is purchased on the housing cycle.

The problem is the banks are now just being plain stupid about there approach and have gone from one extreme to the other. Why didn't they just maintain a reasonable level of on-going sensible control in the first place.

RenovationMan

dopester wrote: »

I think it was Michaels point about 40% equity as a "cushion" for the banks. From what I can tell, you're on an interest only mortgage, and so is he.

With mortgage debt in the hundreds of thousands to service, in a challenging economy.... if I were a lender, in this economy, I'd want to see an element of repayment solution involved.

Even if it's only partial. Not relying on the "unbreakable" 40% equity cushion but something in the here-and-now, every month, showing the borrowers commitment to satisfying their long term debt obligation. Not some promise on the never never about an inheritance or winning the lotto.

In the league of who is the greater financial risk to the bank, I would have thought that people with 40% equity are very low down the list. The banks are therefore better advised to look at the finances of those with little or negative equity than those with nearly £200k of equity.

I would imagine that I have more equity in my house than many mortgage free people have in theirs.

Graham_Devon

michaels wrote: »

GD would like me and RenoMan to go IO. We have 40% equity in our houses to cushion the banks for any risk so how would a repayment of 50 quid a month make any material difference to the the lenders risk?

When did I say that?

I was merely asking what the lenders could do. I can't see them spending time and money looking into whether people have a repayment vehicle, only to do nothing.

One of the instant remedies, is to put borrowers on a repayment mortgage. But not sure how the banks could do this.

There may be other options, which is why I was asking what they may be.

Generali

Thrugelmir wrote: »

Which banks bought securitised debt?

Most of them.

Merrills, Citibank and UBS had the biggest exposures I believe.

RenovationMan

Graham_Devon wrote: »

One of the instant remedies, is to put borrowers on a repayment mortgage. But not sure how the banks could do this.

I think the whole point of the exercise would be to do this. The banks dont like the fact that they have lots of customers on low SVRs, they want the steady income from arrangement fees, so a good way to generate these would be to force people onto new mortgages. To be fair, if they have said they have a repayment vehicle and they haven't then they have breached the contract of the mortgage and will have to do what the bank says. Luckily, my lender didnt ask me for a vehicle so they cant moan that I havent got one.

Thrugelmir

Generali wrote: »

Most of them.

Merrills, Citibank and UBS had the biggest exposures I believe.

I believe the original post was made in the context of UK mortgage lenders. Hence my question.