FSA backs down on tough lending rules

Emy1501

Lenders are doing their jobs properly now so no real reason for the FSA to come in with really tough rules so everyone can blame them for house prices not rising.

Read recently that Lloyds are no longer offering to IO mortgages to anyone with less than a 25% deposit. Also few lender if any will lend Self Cert or to anyone who wants a mortgage past 65 etc.

The reality is that something like 14% of the Self Cert Mortgages in 2008 defaulted or were close to default compared to something like 3% for prime 100% borrowers. Therefore lenders themselves are no longer going to take the risk with these types of lending.

Its about TCF now and a Cabbie with declared earnings of 15k who then wants to borrow saying he earns 50K simply does not work. The days where brokers simply asked a client how much they wanted to borrow rather than how much they could afford are over and the reality is the cowboys in the industry caused the problems by allowing people to try and borrow more than they could afford.

As for the over 55's aren't something like half of those receiving SMI help in this age group? If so no wonder few lenders if any want to touch people borrowing past 65.

Generali

chucky wrote: »

where can you buy a CDO, Collaterised Debt or even a CDO Squared on an ISA?

Lots of big bond funds hold CDOs. I'm not sure whether you can hold a bond fund in an ISA though. Are they limited to shares and share-type assets?

chucky

Generali wrote: »

Lots of big bond funds hold CDOs. I'm not sure whether you can hold a bond fund in an ISA though. Are they limited to shares and share-type assets?

i can't see how a mortgage backed security can be held in an ISA

You have mortgage brokers who maybe are flogging you dodgy associated products. Behind the scenes you have the 'clever' back-room boys 'securitising' your mortgage and selling them on for large commissions. Others buy them, add a few of their own, take their own commission, and sell them on again, and then you buy a bit of them in your ISA - ironically the vehicle you chose to pay back your mortgage!

Conrad

DervProf wrote: »

I do however suspect that a fair few use brokers for less honest reasons, and that's what I don't agree with.

Yes, this is true. Indeed a new breed of broker is emmerging now, thanks to overly zealous regulation, whereby hitherto FSA rgeulated brokers are de - registering from the FSA, and then offering a consultancy service whereby they tell clients how to get a mortgage by whatever means.

Whilst this irks me on one hand, on the other I do understand people's need to buy a home, and you should not underestimate the nhuge numbers that are excluded from getting a mortgage were they to 'follow the rules'.

In thier position you need to ask yourself a question. Do you play by the rules and end up being forced to rent for long periods, or do play the game and end up with a house, knowing the vast majority of your mates DO NOT GET REPOSSESSED?

Lets say one day your Daughter finds herself on a University fixed term employment contract. Lets say no lender will touch her because they cannot proove to the FSA that the contract will be renewed.
Now lets suppose she is perfectly capable and competent and feels her future prospects are good. What is she do to? Maybe she has a child and wnats them in a particualor school and this means having to buy a property.

All I'm saying is to merely class such people as out and out crooks, is very short sighted.

Conrad

geneer wrote: »

As far as interest only goes, I suspect the banks themselves will ensure that suitable repayment mechanisms are in place.

You think a safe savings plan offering an unknown future rate of return is better than making capital overpayments?
More regulatory nonsense.

Conrad

shortchanged wrote: »

If it is properly tied into the mortgage in that it cannot be accessed for anything else then fair enough.

Lenders do not assign ISA's. It's more tick box meaningless nonsense.

shortchanged_2

Conrad wrote: »

Lenders do not assign ISA's. It's more tick box meaningless nonsense.

Exactly, that's my point.

As I stated about capital overpayments aswell. They are too open to abuse on an IO mortgage. Because what happens when times get tough, people don't overpay, then the balance remains large over a shorter period of time then suddenly at the end of the mortgage term someone has £50K+ to find.

Thrugelmir

RenovationMan wrote: »

If the owner cannot pay off his mortgage by the end of the term, they will either have to remortgage or they will have to sell up. This is a problem that is at the owners door, not the banks.

The FSA is increasingly putting the onus onto lenders to ensure that borrowers are in a position to repay their mortgage debts prior to retirement age. As many people do suffer a drop in income, despite their best intentions. By doing so, the lenders will be seen to have fulfilled their duty and avoid the borrower having any recourse or complaint.