UK Government to Underwrite New Mortgage Lending

crash123

HAMISH_MCTAVISH wrote: »

My parents borrowed significantly more than that in the 1960's.

Funnily enough, there is no record of a 1960's housing bubble.:cool:

The people I know could not borrow like this in the 60`s and only one wage was taken in to consideration and then they had to jump through hoops to get it.
Your parents were not the norm.

Dan:_4

This has got to be good news for everyone, whether your a FTB or a home owner

Percy1983

HAMISH_MCTAVISH wrote: »

Banks are cherry picking only the very best, so they can ration limited funds. This means they have to exclude the majority of ordinary families and most of the younger generation.

We don't need to help the elite... they can already get a mortgage.

I do like the way you refer to me as elite (quite the opposite to reweird's title for me).

But I can assure you we are very ordinary young people about to become an ordinary family (if all goes to plan).

HAMISH_MCTAVISH

crash123 wrote: »

Your parents were not the norm.

Just as high loan-to-income ratio interest-only liar loans at 125% LTV were not the norm in 2007.

Funny that.:)

Graham_Devon

HAMISH_MCTAVISH wrote: »

What an absurd and ignorant statement.

My idea of normal lending is, in fact, normal lending.

Where a 5% deposit, a good payment history, and a stable job was enough to get you a mortgage without any difficulty, and certainly without the banks expecting a 4% margin above their funding costs.

That's your version of normal yes. For this thread.

But your version of normal changes as soon as you want to "have a go" at the younger generation. Then it's back to how hard you had it. How you had to go see the bank manager for your loan. How you were lucky if you got it etc etc.

You appear to be trying to have your cake, eat it, and then ask for more.

You simply cannot force banks to lend money - which it appears you are calling for. You are either for the free market, or you are not. I have to say, it seems you are not. You want regulation where it backs up your vested interest, but you abhor regulation that may go against your interests.

Now, I realise you probably won't disagree with the above, as you play pretty fairly, but it does make you argue against your own arguments a hell of a lot. This instance being one of them.

You say its all about supply and demand....so stop whinging bitterly about the supply.

HAMISH_MCTAVISH

Graham_Devon wrote: »

That's your version of normal yes. For this thread.

But your version of normal changes as soon as you want to "have a go" at the younger generation. Then it's back to how hard you had it. How you had to go see the bank manager for your loan. How you were lucky if you got it etc etc.

Nice try Graham, but you're completely distorting the facts.

I've never said loans were given out like sweeties in my day, but they were much easier to get than they are today.

And I challenge you to show me any post I've made which claims anything to the contrary.

You simply cannot force banks to lend money - which it appears you are calling for.

No, I'm calling for steps to be taken which address the market distorting new capital adequacy requirements. MIG would do that, ensuring higher LTV lending returns to historically normal, prudent and sensible levels.

You welcome the market distortion as you believe it will help to enforce cheaper prices.

You are either for the free market, or you are not. I have to say, it seems you are not. You want regulation where it backs up your vested interest, but you abhor regulation that may go against your interests.

The current mortgage market is broken and dysfunctional.

The job of the regulator is to ensure the proper functioning of markets.

There is obviously then a role for the regulating authorities, ie the government, to ensure that markets work as they should, and are not broken and dysfunctional.

Now, I realise you probably won't disagree with the above, as you play pretty fairly, but it does make you argue against your own arguments a hell of a lot. This instance being one of them.

As you know, I have no problem admitting I argue for my own vested interests.

But in this instance, my interests and the interests of a million or more potential FTB-s forced into enriching their landlords happen to coincide.

You say its all about supply and demand....so stop whinging bitterly about the supply.

I "whinge bitterly" about the lack of new house building as well. An equally dysfunctional situation, caused by the dysfunctional mortgage market.

The simple truth is that we didn't have a bubble in UK house prices, we maybe had 10% of froth on top of a very big supply shortage.

But if the lack of house building is not addressed, which it can't be as long as the mortgage market is broken, then we WILL have a potentially destructive monster bubble in the future. Think Northern Ireland levels of HPI, with prices doubling in little over a year. That's where we're headed if we don't fix these problems.

And that's a situation that would be good for nobody, bears and bulls alike.

Graham_Devon

As I say, you either want regulation or you don't.

If your wish for regulation was actually in process, you wouldn't have done quite so well up to 2007. And to be honest, you wouldn't do too well now.

Basel III is regulation. You bitterly dislike it. But it's regulation to make steps towards what we witnessed not happening quite so easily. Not saying it would stop banks falling, but it's a start. One which I believe you to have called "ridiculous".

We've seen proposed regulation on BTL. You don't like the taste.

We've seen proposed regulation on mortgages, making them actually harder to obtain, you don't like it.

The only regulation you DO like, is the regulation YOU suggest. I.e. forcing banks to lend more. There is no other way of describing it, as you want the banks regulated into taking decisions on who they lend to, and how much they lend, out of their hands, and for the government to tell them how much to lend.

With that comes cons. The pro's from your perspective are obvioius. But you cannot have one sided regulation, without having regulation the other side, such as Basel III.

You obviously don't want a free market. That's fine, thats your opinion. But I do wish you'd stop relying on that free market when it comes to anything that you feel you will prosper from. When it comes to lending to BTL's over FTB's, you are perfectly happy for this to happen.

All I am saying is you are tripping over your own arguments frequently.

the_flying_pig

HAMISH_MCTAVISH wrote: »

...But if the lack of house building is not addressed, which it can't be as long as the mortgage market is broken, then we WILL have a potentially destructive monster bubble in the future. Think Northern Ireland levels of HPI, with prices doubling in little over a year. That's where we're headed if we don't fix these problems...

H, that's the kind of [IMO ridiculous] statement that needs an awful lot of caveatting [e.g. 'my opinion only, very much a minority view I accept'] or some kind of evidence, e.g. a quote by someone else who shares these incredibly unorthodox opinions.

chewmylegoff

HAMISH_MCTAVISH wrote: »

We don't know what the proposal is, but it is entirely disengenious to suggest that anyone with a 10% deposit can access the market.

This is clearly not the case.

Banks are rationing high LTV lending because of the capital requirements, and AFAIK somewhere around 90% of mortgage applications with a 10% deposit are rejected.

And those that are accepted are usually at absurdly high interest rates, which has less to do with risk premiums and more to do with profiteering.

well, the banks don't publish figures showing how many mortgage applications they are rejecting, but we'll never know. however, if you have a 10% deposit, a clean credit history etc then seems to me you have a decent enough chance of getting a mortgage. i know a couple of people who done so recently anyway, but we can trade ancedotes all day, it doesn't mean anything.

Apparently you weren't close enough.....

The federal government late Friday filed lawsuits against 17 financial institutions, including some of the nation’s largest banks, alleging a pattern of fraud in their packaging and selling of roughly $200 billion worth of mortgage-linked securities. The suits amount to one of the most significant legal actions to emerge from the rubble of the financial crisis nearly three years ago.

The allegations by the Federal Housing Finance Agency, which is seeking unspecified compensation, penetrate the heart of Wall Street’s role in helping lead the economy to ruin. The FHFA claims these institutions knowingly peddled shoddy deals without informing investors.
http://www.huffingtonpost.com/2011/09/02/banks-sued-subprime-mortgage-deals_n_947349.html

at the heart of the point is the throwaway line in the middle of that article about whether fannie mae / freddie mac were willing victims or not being irrelevant. my view and understanding is that they were willing victims and didn't give a stuff about what they were securitising. further, the banks that were selling the mortgages were to a significant extent the end investors in the RMBs - they knew what they had been selling...

I didn't say there was.

I stated 99% of 60% LTV lending in the UK is already extremely low risk. Versus your comment that only the senior tranches would be low risk.

I didn't say that, I said that, in general, an MBS containing 60%LTV mortgages would be low risk. I am sure you are right - 99% of 60% LTV lending probably is low risk. I am not sure what relevance that has here though.

the danger of the govt securitising mortgages is that the govt's proposal appears to be to help FTBs who cannot get save "big deposits". the MBS would therefore be concentrated geographically and in LTV terms. the riskiest mortgages in the country would be the ones securitised by the government. therefore all your points about <1% repossession / default rate are pretty irrelevant, because to understand the risk you have to know what the default rate is at the sharp end. i think we can all agreee that the higher the LTV the more likely it is that there will be a default.

Or to help those who do have the deposits pay lower interest rates.

Or to help those that do have the deposits, but are rejected due to mortgage rationing.

well the press is specifically pointing to FTBs without big deposits.

Actually, I'd suggest there are tens of thousands of people sitting around with 25% deposits unable to get a mortgage. Conrad has often posted of people unable to get approved with high deposits due to job quirks, such as contract work, self employed, etc.

personally, i somehow doubt that. i am not sure conrad is the world authority on who it is appropriate to lend to either, he seems to have some strange ideas about how it is unfair that self employed people should have to declare all their income for tax in order to prove they are mortgage worthy. etc.

I rather suspect it's more like hundreds of thousands of people with 10% deposits unable to get a mortgage.

again, this seems pretty unlikely to me, especially in the current economic climate. there is no way it can be reliably demonstrated either way though. i'm sure there are hundreds of thousands of people who would get a mortgage if they could, but i am not convinced they are sitting on 10% deposits.

Underwriting is cheaper up front and cheaper down the line.

depends what you underwrite. clearly in the case of some of the sub-prime MBS that fell to bits in the credit crunch, it would have been cheaper to give away 10% of the value than to be on the hook for the whole loss that was incurred.

No sane person can suggest defaults would ever reach 10% to 15% of mortgage lending in the UK.

no, of course not. that is not relevant. what is relevant is the default rate of what is in the MBS which the govt is on the hook for. if all that that MBS contains is mortgages which the banks wouldn't have lent otherwise as they considered them to be outside their risk tolerance, then it is likely that the default rate will be much higher than the national average.

Jimmy_31

Jack_Johnson_the_acorn wrote: »

Sure you will when your out of work.......:rotfl:

I work in the construction industry.

Im in and out of work as it is.

Lads are walking away from our line of work because the wages it pays doesnt pay the bills.

People who build houses know how cheap they are to build, they know high house prices are just a greedy number plucked from the air.

I dont think its just me who would rather be out of work than see more propping up of house prices.