Liar Loans Reborn

Generali

http://www.thisismoney.co.uk/money/mortgageshome/article-3322836/Return-liar-loans-UK-firms-setting-Eastern-Europe-offer-high-risk-mortgages-not-require-borrowers-prove-earn.html

Lenders are exploiting a legal loophole by offering high-risk mortgages that allow homebuyers to get a loan without having to prove what they earn. Money Mail can reveal how British businesses are setting up in Eastern European nations such as Estonia as a way of skirting around tough UK laws on lending money.

From January, Selfcert.co.uk, which has been founded by a British businessman in an unnamed Eastern European country, will offer self-certification mortgages to UK borrowers. These types of deals, where the homebuyer's income is not checked by a bank, were dubbed 'liar loans' following the banking crisis because borrowers fibbed about how much they earned in order to get a bigger mortgage.

What could possibly go wrong....?

michaels

Generali wrote: »

http://www.thisismoney.co.uk/money/mortgageshome/article-3322836/Return-liar-loans-UK-firms-setting-Eastern-Europe-offer-high-risk-mortgages-not-require-borrowers-prove-earn.html



What could possibly go wrong....?

Sorry to sound like Hamish - overall for the banks were liar loans with their higher interest rates more or less profitable for the lenders?

DiggerUK

Not so long ago I did research on P2P.....Boy oh boy, these really are credit swaps Jim, exactly as we knew them, and now we have a former [STRIKE]loan shark[/STRIKE] 'pay day lender' in a smart new suit.
Anyway back to my P2P research, which came up with platforms that were registered in east europe, doing business with mortgages.....this is not a new story, except to the daily mail.

Nothing can possibly go wrong..._

Thrugelmir

Old news.

Problem they have is that are not allowed to advertise in the UK for business. Difficult to see them gaining much traction.

kinger101

Heard this on Radio 4 earlier too. Apparently a Czech bank is supposed to be offering them.

Generali

michaels wrote: »

Sorry to sound like Hamish - overall for the banks were liar loans with their higher interest rates more or less profitable for the lenders?

It's probably impossible to say as the banks don't provide that degree of granularity about their loan book as a rule.

At the risk of sounding like a politician that's probably not quite the right question to ask. The question should be, 'What were the risk adjusted returns to liar loans versus the mortgage book as a whole'?

It makes no difference as I don't know the answer either way!

mystic_trev

kinger101 wrote: »

Apparently a Czech bank is supposed to be offering them.

Apparently some Banks are still offering cheques!

DiggerUK

From the DM article
"Some peer-to-peer lending firms, which act as middle men between savers and companies that want to borrow money, are already based in Estonia but offer deals here."

And from the p2p forum site
https://www.bondora.ee/en/about-us#about-us-news

mwpt

What sort of interest rates will these charge?

Generali

mwpt wrote: »

What sort of interest rates will these charge?

They claim to be launching today.

mwpt

Oh it says in the article:

Selfcert.co.uk interest will be two percentage points higher than the Bank of England base rate, now 0.5 per cent.
The maximum loan will be £500,000 and lenders must put down a 15 per cent deposit. There will be an administration fee, expected to be less than £1,000.

Very competitive. 2.5% rate on 15% deposit (I assume they meant borrowers must put down deposit above).

But it sounds a bit barmy from an investment perspective to me. That is unsecured lending, at ridiculously low rates to people for whom you have no risk profile. I think I'll avoid.