Sub Prime Mortgages & Repossessions - How it Really Works

[TaffR]

The bottom line here...

Anything that; upsets and anger and gives so many people the feeling that they have been duped, conned, fleeced, treated unfairly and at times when they least understand why or expect and at a time when there are already problems such as illness or loss of employment, and

Anything that; has to be cloaked in deciet and use stealth practices and pretend to be something that they are not but profits greatly from those above...cannot succeed and desitined to fail.

Something needs fixing.

I cannot count (including myself) the volume of people who:

took out a mortgage in this market that firmly believed they were with a bona-fida mortgage company

who really didn't understand why they were with one lender one day then another the next (what other market/sector does this)?

who feel a little stupid for accepting that their mortgage could be 'sold or transferred to 'anyone' at 'anytime'....this could mean to jack next door...it is too flimsy and open a clause for something so serious as a mortgage and was intentional designed to be, so not to 'worry' the potential borrower at the time of accpetance (utter rubbish).

When contacting their 'lender' to inform them of a 'possible' problem and to further discuss their mortgage needs, only to be ignored

To suddenly find that the 'company' acts like nothing more than a debt collection agency who prefers to wait for the first missed payment than to employ someone that could advise and assist. As you see by the last document I uploaded it is only now they are 'discussing' posible ways of introducing 'contract modification' in this sector but only because of the media attention, which will die away soon and anyway it can be seen already they protect themselves first and it is only lip service solutions that are created to fail the borrower.

To further find that they will litigate from day 1 of the first missed payment and there is no real recourse

To read that these same lenders have convinced themselves and others that there will be more repossessions in this market as it is the adverse they have lent too as an excuse for their lack of structure and hidden information on their actual status and intent.

To find that you feel disenfranchised from mainstream society and other type of homeowners when it suits them, after they have profited from you

To find that they already charge the adverse up to 6% above the high street rates for profit, place early ressetlement fees to esnure a level of return for x period and then set up in such a way that they do not provide any facilities to advise or assist borrowers facing short term problems

They sell to the self employed on the same basis of the advers and then treat them the same

That it was decided back in the 1990's when this market commenced and further agreed with the FSA...not to tell potential borrowers of these decitful practices, as by doing so most people would reject the mortgage and there would not be any market if they knew what the final conclusion of their mortgage would be

....debt collection agency only, no advisors, cannot release further equity, the company would be an SPV pretending to be a mortgage company, authorised as a 'lender' but is not, who cant even employ people direct, their mortgage would be mixed with 40+ other mortgage clients, your mortgage will be an adminstration ONLT type mortgage, there will be 'real' compliance to CML/FSA rules and guidance on managing customers facing dificulties, will litigate on first missed payment and that county court judges have no real option but to sanction repossessions

Too Risky! Borders on loan sharking. The balance of the relationhsip is totally one sided and this includes the total dismissive and disparaging attitudes, deciet, lies and bullying, all succeeding only and based on what the borrower does not know.

That they can operate generally unsupervised in the market and actually can steal monies from you without any real recourse

Actual repossessions will continue to increase greatly now and still Shelter, CAB, Legal entities and others still have not considered any of the above or the practices adopted in this market. Consumer law does not cover or protect borrowers adaqautly in this sector...as they are classed as below par and it is their own fault anyway.

This is a disgrace and unacceptable and in my mind crminal as they continue to defraud people out of their homes without any social conscience and with intent of theft of equity. This is nothing more than daylight robbery and the industry bodies and government all turn a blind eye.

A loan shark lures and deceives in the same way.

[TaffR]

Originally Posted by midge61

Northern Rock ends sub-prime deal with SPML

Tanya Powley - 10-Mar-2008



Northern Rock has confirmed it will be withdrawing its near-prime and sub-prime mortgages on behalf of SPML from close of play today.The lender had set up a deal with SPML in April 2007 which saw it originate these loans in return for a fee income.
The arrangement worked on the basis that Northern Rock would attract applications via its existing distribution channels, then process them through to completion, whilst SPML would fund the mortgages.
Northern Rock has stressed that these mortgages were never written to the company's balance sheet.
It says that all previously submitted applications currently in the pipeline will be unaffected, provided there are no subsequent, material changes to the original application details.
Northern Rock’s standard, prime range of residential fixed rate and tracker mortgages, Buy to Let mortgages and Lifetime mortgages remains unchanged and there will be no major impact on company operations.

never written to the comany's balance sheet....this is all off balance sheet accounting as NR in this case lure...originate...sell the mortgage on...spv company created (off balance sheet) so as not effect core business or reputation and hide the fact of their participation in this sector.

[TaffR]

The Issuer today received notification from Southern Pacific Mortgage Limited
('SPML') that SPML intends and is required to (acting in its capacity as seller
of the original mortgage loans to the Issuer and pursuant to and in accordance
with the terms of the mortgage sale agreement dated 30 May 2006 between, inter
alios, the Issuer and SPML (the 'Mortgage Sale Agreement')) repurchase 85
mortgage loans from the Issuer in an aggregate amount equal to approximately
£13,603,094 (the 'Mortgage Loans').

Pursuant to the terms of the Mortgage Sale Agreement, SPML is required to
repurchase the Mortgage Loans as it has become aware that a warranty in respect
of the loan to value ratio for such Mortgage Loans was not satisfied at the time
that the Mortgage Loans were originally sold to the Issuer and as a result a
warranty breach has occurred. The loan to value ratios ('LTV') for such Mortgage
Loans were not satisfied due to inaccurate information that was provided to SPML
by certain third parties in relation to the purchase price of the properties
securing such Mortgage Loans.

In securitisation there is a clause that really states that if the seller 'lies' then they have to repurchase the portfolio back...portfolio noramlly circa 1000 properties but could be much bigger.

In this case the 'seller' missold this portfolio as it looks like the LTV (Loan to Value ratio was not what they said it was. Normally the mortgage loan is circa 80% of the value of the property, they deceived the 'buyer of the portfolio' and this was recognised, that they loaned more than they should to borrowers and oversold mortgages to the agreed ratio.

Proof really of overselling in this market just to get the business.

[TaffR]

Originally Posted by midge61

In Northern Rocks case would this be what Granite was used for ....an spv?

I'm just trying to make sure I am getting to grips with all of this.

If you dont mind me saying I think your getting there very well.

I dont know...do you have any information on Granite? Look at companies house or fsa site

SPV's are (were) being created all the time (hard to keep up with them all) to hold portfolios and company status is given to them but really they a transaction or portfolio identifier, that is all. SPV's are a financial instrument and used in business all the time but has different ramifications. Never have I seen them pretend to be something they are not.

Taff R

[TaffR]

Are you with an SPV? Redstone (HVBEurope) for example...same kind of thing...set up etc...

Hard facts
What is Granite?
Granite is a company set up in 1999 by Northern Rock in the offshore tax haven of Jersey. Its technical name is a special purpose vehicle. Granite was used by the Rock to make extra cash from the mortgages that the bank had sold to UK homeowners. Northern Rock transfers mortgages to Granite, which packages them together to make a financial instrument called a security. Investors buy these securities, which provide them with regular interest payments.
How does Granite operate?
Granite uses the interest payments made by the mortgages that it obtained from Northern Rock to cover its payments to the investors. Some of the money that the investors paid for the securities is passed from Granite to the Rock. As people pay off their mortgages regularly, the Rock must keep supplying Granite with new mortgages so that Granite has enough cash to cover its interest payments to investors.
Do other banks have these companies?
Many other banks have these vehicles, including Halifax, Bank of Scotland and Barclays. It is particularly common in the US, where almost all mortgages are held within special-purpose vehicles such as Granite. Northern Rock has two other offshore companies, called Dollarite, which holds some of the loans that the Rock has sold to businesses, and Whinstone, a much smaller vehicle.
Who owns Granite?
Although the Rock has a legal responsibility to provide Granite with regular infusions of mortgages, it does not own or run the vehicle. They are separate legal entities. In theory the vehicle is owned by a charitible trust that was set up to raise money for a Down’s syndrome charity in the North East.
Why is it causing such concern?
There are fears that Northern Rock has moved its least-risky mortgages to Granite, leaving the most risky lending on its own balance sheet. Because Granite is a separate company, if the Rock defaulted on its estimated £25 billion government loan, the Government would not be able to access Granite’s mortgages to sell to pay off the debt. If no new mortgages are put into Granite, the bondholders will have to be repaid.

[TaffR]

A. The Subprime Mortgage Business
Subprime lending consists of three principal businesses: loan origination, loan sales (or
securitization), and loan servicing. Each presents its own challenges to the restructuring of
subprime lenders.

1. Loan Origination

Subprime lenders, acting as originators, originate mortgage loans through both wholesale
and retail channels. Wholesale channels involve the originator acting as lender for loans
originated by independent mortgage brokers. Retail channels involve the originator providing
direct loans to individual borrowers through branch offices and networks of affiliated mortgage brokers.

Originating mortgage loans, whether through wholesale or retail operations, requires
huge sums of capital. In the industry, originators satisfy these capital requirements in two ways.
First, they look to financial institutions for the temporary capital necessary to originate mortgage
loans. Second, they sell originated mortgage loans into the secondary market to liquidate the
value of those loans.

a. Warehouse Lines

Temporary funding for origination is generally obtained through revolving loan
relationships with financial institutions, commonly referred to as “warehouse” arrangements. In
some cases, warehouse arrangements take the form of credit facilities that are basically secured
revolving credit facilities in which the lender advances funds secured by an interest in the loans
originated with those funds.

b. Repurchase Agreements

Another common arrangement through which originators obtain temporary funding for
origination are “repurchase” arrangements. Repurchase arrangements, generally governed by a
document referred to as a Master Repurchase Agreement, provide for originators to enter into
transactions, from time to time, in which the originator agrees to transfer mortgage loans to a
financial institution against the transfer of funds by the buyer. These funds are used, in part, to
originate mortgage loans.
In repurchase arrangements, the financial institution is obligated to transfer the mortgage
loans back to the originator against the transfer of funds by the originator at a specified time in
the future. While these relationships have many characteristics of warehouse lines, and are at
times discussed in terms suggesting they are also secured loans, in fact these repurchase
arrangements are documented as buy-sell arrangements, which has important implications for
how the loans originated through repurchase arrangements are treated in reorganizations,
workouts and bankruptcies.

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68700-001\DOCS_LA:168969.1
c. Margin Calls

As a condition to most warehouse lines and repurchase agreements, the lenders or
repurchase participants have the right to periodically mark to market the value of the loans
funded by the warehouse line or repurchase facility. To the extent warehouse lenders or
repurchase participants identify a deficiency in the value of the mortgage loans on the facility,
the warehouse lenders or repurchase participants may issue a margin call and demand additional
funds be posted by the originator to augment the value of the property on the facility.
Originators typically post cash to meet such margin call requests.

2. Securitizations and Loan Sales

The second mechanism for raising capital is selling originated mortgage loans into the
secondary market through securitizations.

a. Securitizations
Originators in the subprime mortgage industry expect that most of the loans they
originate will be securitized, i.e., the mortgage loans will be transferred to special purpose
vehicles and the equity of those special purpose vehicles will be sold to diverse investors in the
public markets. In some cases, the originators securitize the loans themselves, and in other
cases, the originators sell the mortgage loans to third party buyers, known as Loan Purchasers,
who then securitize the loans. In either event, the end result is that most of loans originated by
subprime mortgage lenders are held in such securitized arrangements.

b. Loan Sales
Generally, within 90 days following the origination of a mortgage loans, and prior to
securitization, originators sell most contemporaneously originated loans to financial institutions.
In some cases, the originators are unable to sell the originated mortgage loans promptly, and are
forced to retain the mortgage loans. Such retained loans are known in the industry as “scratch
and dent” loans.
In the case of mortgage loans originated under a line of credit, the mortgage loan would
be sold and the lender repaid. In the case of mortgage loans originated under a repurchase
arrangement, the mortgage loans would be repurchased by the originator and then sold. The
terms of these sales of mortgage loans were generally governed by agreements with the Loan
Purchasers called, creatively, Loan Purchase Agreements.

c. Repurchase Obligations Under Loan Purchase Agreements

In connection with sales to Loan Purchasers and securitizations, subprime mortgage
lenders make certain representations and warranties relating to the quality of the mortgage loans
sold. These representations and warranties include representations and warranties that the
mortgage borrowers under the mortgage loans will make the initial payments under the mortgage
loans. Failure by the mortgage borrowers to make such initial payments is referred to as an
“Early Payment Default” or “EPD”.
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68700-001\DOCS_LA:168969.1

If EPD provisions are breached due to early defaults by mortgage borrowers, as was the
case with many of the subprime mortgage loans originated and sold by the now-bankrupt
originators, the Loan Purchase Agreements required the originators to repurchase loans subject
to such Early Payment Defaults. The originators repurchased many of these EPD mortgage
loans as required by these Loan Purchase Agreements, which loans became owned by the
originator. The originators were unable to satisfy other EPD obligations, giving rise to
unsecured claims against the originators in favor of the Loan Purchasers.

3. Servicing
In addition to origination and mortgage loan sales, subprime mortgage lenders perform a
servicing function, which included the collection, consolidation and remittance of monthly
principal, interest and impound payments for taxes and insurance on mortgaged properties. Most
all subprime lenders service the mortgage loans held on their warehouse lines and repurchase
facilities on an interim basis, from the origination date to approximately 90 days after the sale to
third party loan purchasers.
In addition to interim servicing, some subprime lenders continue to service loans they
originated once the loans are sold or securitized. In either case, the subprime mortgage lenders
are compensated for their servicing function.
http://www.abanet.org/buslaw/newsletter/0063/materials/pp1a.pdf

[TaffR]

Subprime lenders, acting as originators, originate mortgage loans through both wholesale
and retail channels. Wholesale channels involve the originator acting as lender for loans
originated by independent mortgage brokers. Retail channels involve the originator providing
direct loans to individual borrowers through branch offices and networks of affiliated mortgage brokers.

Securitisation is a major frontier of global FinancialCapital. Firms and other market entities are constantly looking for more and more ways to raise finance. Investors are looking for more and more investment opportunities. In short, there is an unceasing drive to open up new FinancialMarkets. This means - making more things tradeable, or able to be represented by 'securities'. Securitisation is just that - turning formerly untradeable assets, flows, promises, into securities.
In general the new securities are called 'AssetBackedSecurities'. Conventional bonds are IOU's issued by states, corporates, banks. When investors buy such bonds they are making an assessment of the issuer's ability to repay. They will need to consider the issuer's likely future business prospects, commitments, cashflows, etc., or less tangible properties such as the investor's good name and reputation. Behind these the issuer may have some assets or collateral that ultimately secures the bonds - in the last resort, is the issuer goes bust and defaults, bond holders may have first call on carving up its property and assets.

Asset backed securities are also bonds, but (the general idea is that) they are backed not by the issuer as a whole, but by particular assets. For example, a corporate may have some strong and some weak business lines. As a whole, the corporate has a low credit rating based on an assessment of all its business lines and assets. But it may have one strong business line or set of assets. If you can issue a bond that is backed just by these high-grade assets, then it will have a higher credit rating than the business as a whole.

There is an increasingly vast array of securitisation models and techniques. Basic to all of them is the creation of a new kind of financial entity - usually called a 'special purpose vehicle' (SPV). In general, the idea is that lenders don't want to expose themselves to all of the borrower's activities - they want to pick and choose.

The SPV plays the key role of separating off the assets that are to be securitised from the other activities.

The most basic way to do this is though what is called a 'true sale' securitisation. The borrower transfers ('sells') the assets to be securitised to the SPV.

(Note though that the SPV is just a paper entity, probably registered in Jersey or the Cayman Islands. It doesn't actually do anything with these assets - the borrower carries on its business as before, 'using' the assets as normal.) The role of the SPV is then purely to act as a bond issuer: it issues bonds, which are ultimately backed by the assets that have been transferred to it. The SPV passes the money it gets from selling the bonds back to the borrower.

This model then basically introduces a new kind of intermediary agent into the market.

This can make terminology more confusing, but essentially you could think of:

Borrower = eg. corporate, state, bank etc.

Issuer = SPV
Lender = bond buyer

What do we mean here when we talk about an 'asset'? An asset is just anything (the borrower owns) that has value - that can be converted to money, or used to bring in money. It may be something tangible - like property or machinery. But more often we are talking about promises or obligations again. In fact, most commonly, the assets are loans.

For example: in securitisation, one major 'asset class' is the mortgage. This is so big, particularly in the US, that 'MortgageBackedSecurities?' (MBS) are often considered as wholely separate to asset backed securities (ABS). In MBS, the assets transferred to the SPV are not physical properties, but the debts (mortgages) of property-owners held by banks. In the US (I think), in fact most residential mortages are securitised - sold on to SPVs - in this way. CMBS (commercial MBS) is less widespread and more complicated, but also big. In MBS:

Borrower = bank or mortgage-lender, transfers mortgages to SPV.

SPV = owns transferred mortgages. Sells MBS bonds. Passes money raised back to borrower.
Lender = buys MBS bonds.
Some important securitisation asset types are:
Mortgage Backed Securities? - both residential (RMBS) and commercial (CMBS). CMBS is becoming big in the public sector eg. social housing, government property portfolios such as hospitals, prisons, military bases outsourced on a 'SaleAndLeaseback?' basis.
CollateralisedLoanObligat ions? (CLOs) - non-mortgage loans made by banks, usually to corporates.
Swathes of consumer bank loans: credit card repayments, car loans
ProjectFinance? - securitisation increasingly used by states or corporates to fund big projects, eg. infrastructure schemes.
ExoticSecuritisations? - eg. IntellectualProperty deals - DavidBowie? securitised rights to some of his album sales.
FutureFlows? - these are securitisations not of 'existing assets' (such as outstanding mortgages or other loans) but of anticipated future income. This is particuarly big in 'DevelopingCountries?' where local banks securitise TradeReceivables? and HardCurrency? income flows.
WholeBusinessSecuritisati ons - an interesting hybrid between securitisation and more standard corporate bonds.

Synthetic Securitisations
As opposed to 'pure sale' securitisations.

Here the SPV does not actually own the assets. It acts as an intermediary in a derivatives contract (see DerivativesMarkets?).
Synthetic securitisations are becoming increasingly common - partly because banks have less need to transfer assets under the new BaselTwo? banking regime. (See history below). In a synthetic CLO, for example:

'Protection buyer' = bank. Bank wants to transfer away risk on some of its loans. To do this it makes a CreditDerivative? contract called a Credit Default Swap (CDS) with the SPV. It agrees to make fixed payments to the SPV in return for a promise: if a specified 'credit event' occurs (eg. a proportion of loans in a given pool of loans default), the SPV will make it a large given payment to bail it out.

Issuer = SPV. The SPV issues a type of bond called a 'credit linked note' (CLN). Like any other note, investors pay the par value and receive coupons and eventual repayment of the par value. The SPV holds onto the initial proceeds of the bond sale and the regular payments in from the bank. It pays out the coupons. Eg - suppose the regular payments in from the bank cover the coupons out. Then there is a reserve held in the SPV from the initial sale of the bonds. If the credit event doesn't happen, eventually the investors get this back on maturity. But if the credit event does occur, the SPV uses this sum to pay the bank.

Protection seller' = investors. They take the coupon payments (and principal repayments). In return, they take on the risk: if the credit event occurs, they will lose their principal. This risk is priced into the coupon payments.

The bank does not (in general) sell all the risk on a pool of loans. What usually happens is it retains the 'first loss risk' - it will take the losses from the first however many millions of dollars of defaults. It then securitises tranches of risk:

eg.
defaults totalling $0 to $20 million - bank retains (first loss risk)
$20 to $40 million - B rated bond holders (tranche c) - coupon: euribor + 300 bps
$40 to $60 million - BBB rated bond holders (tranche b)- coupon: euribor + 160 bps [/font]
$60 to $80 million - AAA rated bond holders (tranche a) - coupon: euribor + 40 bps
As in a more standard bond, the lower tranches are 'subordinated' to senior tranches. It may be that senior tranches are repaid but junior ones are not.

History of securitisation

Securitisation, with MBS leading the way, was pioneered by (US) banks in the 1980's. The reason is this: fundamentally banks' assets just are all the loans they make (to corporates, individuals, governments, homeowners etc.) To make money they want to lend as much as possible. But they have limits. They act as intermediaries, borrowing money which they then lend on. But they need to hold a certain amount in reserve against all their lending (this is their capital) in case borrowers default and they don't have enough coming back to repay their creditors.

To ensure the banking system doesn't collapse, governments (or government appointed regulators) tell banks how much capital they have to hold against their assets. This is called 'regulatory capital'. But banks think they know better - in general banks always believe they need to hold less capital than the regulator tells them. Securitisation was originally motivated to a large extent by banks trying to get around regulatory capital constraints ('regulatroy capital arbitrage'). When they transferred their assets to SPVs, these assets were 'taken off balance sheet' - and they no longer had to hold regulatory capital against them. (This has got a lot more complex recently with a new international banking regulation system called BaselTwo? coming in - I will come to that later.)

Securitisation thus allowed banks to lend out lots more money than before. Basically, they lend out lots through mortgages, then borrow it back through securitisation. Each time getting their cut off the mortgage-borrowers, but effectively passing the risk on to the ABS/MBS bond holders. If the mortgages default, it is the income going in to the SPV that suffers, and thus the payments (coupons and principal repayments) to the MBS holders.

With BaselTwoII regulatory capital arbitrage is becoming less important. However, the techniques that have been developed are found to be useful in new ranges of situations. Because they don't sell assets into the SPV, SyntheticSecuritisations? generally involve less legal and administrative costs, and so with regulatory capital concerns disappearing synthetics become more prevalent. The two main motivations for securitisation are then: funding, i.e., using securitisation to create new and cheaper ways to borrow; risk transfer, banks in particular can use synthetic deals to get rid of the risk on their loans.

Though they may no longer have to manage 'regulatory capital' so closely, the focus shifts to 'economic capital' - what their own risk models tell them they need to hod against assets. Securitisation is thus an important part of the dynamics and counter-dyanamics of 'DisIntermedition?' in the financial markets and the changing role of banks.

[TaffR]

now that the subprime market is deteriating and at a very fast pace....many 'brokers' who relied heavily on promoting this market are suffereing too if not going bust.

we need some whistleblowers...brokers, intermediatatories all knew more than they shared and profited from this (you and I).

The BBC asked if I knew any and I do....I am talking to 'some' in and ex HML and others in other entities....

Some should complain very heavily to their brokers for this mess.

[TaffR]

now that the subprime market is deteriating and at a very fast pace....many 'brokers' who relied heavily on promoting this market are suffereing too if not going bust.

we need some whistleblowers...brokers, intermediatatories all knew more than they shared and profited from this (you and I).

The BBC asked if I knew any and I do....I am talking to 'some' in and ex HML and others in other entities....

Some should complain very heavily to their brokers for this mess.

[TaffR]

From:TAFFR
Sent: 15 May 2008 18:36
To: Catherine_Grannum@shelter .org.uk
Cc:
Subject: Subprime - The Credit Crunch and The real story

Dear Catherine,

I hope you are well. It has been some time since we last talked and of course I do not expect you to remember. It was in 2005 and 2006. I have made some recommendations below in consideration of today’s economic crisis. I make no apologies for the length of this email and ask for your indulgence and patients in the knowledge of my continued and serious attempts to improve others lives and evolve this forward to a more balanced, open and visible subprime sector that can be respected but more importantly and essential to stop these absurd, wholly unnecessary, destructive & escalating repossessions.

When we first talked I was at the start of a long road looking into this spurred on only by the new incredible findings each day and since this time and as previously discussed with you, I had grave concerns in regard to the set up of the subprime market and how these deceitful practices have been to their own ruin to some extent. We further discussed the high rise and escalation of repossessions through these periods and how the FSA allowed these structures to operate.

Very few people listened then but now everyone is standing back and blaming each other, from Gordon Brown, the FSA, CML and worst of all the subprime lenders themselves blaming their own customer base (the adverse) for the economic crisis we are witnessing today and the worst is yet to come.

Shelter, like other charities are being inundated today and I am sure you are busier than ever before. CAB too, with the CEO recently remarking on this topic only to be accused of scaremongering and sensationalising the situation by the Chief Executive of the CML and others.

I warned back then this was a short lived economic strategy by the Government and after investigating the sector, I found (via the Freedom of Information Act Act) what the FSA agreed to allow potential borrowers to know and what they should not tell them and as a direct result of this the new market thrived, commercial opportunism grew and vast profits made on the backs of the vulnerable and those they professed to be in business to help improve/repair their credit and move forward into home ownership.

Nothing about this sector has shown it accomplishes any of this but to the contrary, totally balances, at every single stage in favour of the ‘lender’ resulting in discriminatory practices that are shrouded in deceit, adopting stealth practices to lure, attract, profit upon and dump at the first sign of any problem and indeed, they have practices implemented that entice borrowers to advise of problems so that they can act swiftly in protection of the portfolio value.

The devil is always in the detail and once the jigsaw is pieced together and understood from a commercial viewpoint from the ‘cradle to grave’ the real gravity and extent of the long term damage it incurs can be observed.

Repossessions were escalating in this relatively new market since early 2000. Shelter, CAB and others, in my mind have been extraordinary lazy in their pursuance of attaining an appreciation and understanding of this growing market with new entrants increasing by the day, to get on this cash cow bandwagon. Many, if not most in the legal profession and those outside the financial industry do not understand the diverse nature of this new secondary market thrust upon the UK public, as being on par with traditional mortgage lending, but could not be more different in so many ways.

When did it become acceptable to portray to potential borrowers of being a traditional mortgage company only to find that they were ‘originators’ or packagers’ (terminology not heard outside the industry)?

When did it become acceptable that obscure clauses could be used without definition or reason for the above to sell or transfer your mortgage?

When was ok to create Special Purpose Vehicles (SPV’s) and authorise these as ‘lenders’ as if to provide confidence to the general public and potential borrowers of the same status of high street banks and building societies?

When was it ok to authorise the originators, packagers and SPV’s as ‘lenders’ when in actual fact they do not ‘lend’ other than too each other?

When was it ok for these SPV operations to pretend to be mortgage companies when indeed they are financial instruments and transactional entities only?

When was it okay to allow these to set up and ‘administrate’ only these now securitised mortgages without employing the basic requirement of an FSA Authorised Mortgage Advisor to cater at the minimum for those who just may have very short term issues?

When was it approved by the FSA and CML that these entities do not have to follow the guidance rules of treating their borrowers with fairness and sympathy during critical times in their mortgage life?

At what point in following the CML advice that borrowers should inform their lenders as quickly as possible of any changes in circumstances does this benefit the borrower in any way?

There is so many more questions to be asked and after 4 years of research into this market I am now able to see every single element that is designed only for the profit and greed.

Did someone forget to tell to the public of this newly created 2nd, 3rd and 4th tier mortgage market that with sometimes gullibility borrowers entered into and deprived of real choice and options by the sheer lack of being denied essential information and denied them the options that would make a real difference in their lives. H M Treasury advised me that securitisation is not the problem and that the MBS market helps the economy, well we can now see that is very true today but however, it is the incredible deceitful practices in which this market has to operate to succeed that is to blame. Without any inference of being rude, they have treated the general public like pawns in their profitable games and at worst, mugged them into a false sense of security towards their dream of home ownership.

Shelter will now see the true cost of this while the fat cats run back to Cayman other Off shore Islands with the bonuses they have really earned. IT has been very difficult few years for them hiding behind closed doors, deceiving borrowers and taking their homes and destroying lives and relationships. I make no exaggeration or apologies for really reemphasising again the true cost of this market has had on the UK and society as a whole.

The H M Treasury, Gordon Brown and The Labour Government are the author of this mess and not the adverse borrowers, as by the way, I now have admissions direct from this sector of this.

The Prime Minister spins that he is doing everything he is can to help those people stave off repossessions. He further ‘spins’ that he has had meetings with the major banks with subsequent conclusions that they will not pass down the interest rate cuts despite the injection of £500b or so into the system. What they do not tell the public it is the LIBOR rates that the subprime borrow against and as the banks are making great losses and write downs today they are not in a position to commence interbank lending anyway and as such the ‘parrot is dead’… for now.

One sided and struck in a stranglehold mortgage with high increases in outlay!

The Government today can help. They must pass immediate legislation to allow these people, mostly duped into this market with higher expectations of being treated like normal mortgage holders in traditional style markets to get out of their stranglehold mortgages by omitting now the early redemption fees.

The courts must now be told immediately that the subprime lenders do not have the ability or the facilities (or willingness) due to the nature and uniqueness of their mortgage, in that it is now locked following securitisation in a larger portfolio, without hope of reversing, to provide any assistance and as such this becomes discriminatory in reality and unfair wholly. It makes a mockery of informing your lender of possible issues where they can only provide a lip service to these guiding rules whilst simultaneously starting immediate litigation action from just one month’s missed payment without the decency to be set up to listen to the borrower. The whole process is set up to duped.

These mortgages must now be unlocked and independent mortgage advise and help should be provided to these borrowers before any rubber stamping of repossessions ensue. Today.

Had they been told or had they been informed of the real and true scenario of their mortgage being locked and will be with an outsourced debt collection agency only for the next 6+ years and that their equity will also be locked then I am convinced that this market would not and could not thrive. As did the consultation group comprising of these subprime entities, in the formation of the FSA fully knew and demanded that information be withheld from the general public.

My evidence is complete in regard to this market and I have attached a report that the general public should not see.

When did become acceptable to treat people only as a commodity with systems and practices set up that only ‘psychologist studying human behaviour could conjure up?

In this report you will see for the first time many admissions of how this market thinks, how it operates and its aggressive and very proactive repossession actions and their true aims of course, that only now due to the media coverage they will start to think of ways that these mortgage contracts can be modified in the future but again, when reading this correctly actually plays more lip services to the rules and will not benefit the borrower what the last moment has found him/herself with these debt collector only type operations with high expectations of being treated with dignity and respect.

Not all borrowers in this market are the lowest of the low. Most are decent people who have slipped up and not unlike those in the prime market. The subprime lenders extended their remits to the self employed and other with teaser rates and the prime market tightened up their underwriting to push more people into this market so that they could be purchased by the back door attaining a better return and higher margins that they would achieve in the sales of their own very competitive products deriving lower margins.

1. Considering the reality and the facts of this market from cradle to grave, I firmly believe now that all borrowers going through repossessions today from within this market should be and deserved to be provided with independent advice on their mortgage and an opportunity to leave mortgage without further damage or penalty and allow people choice and option again on their lives.

2. As a second step this should be extended to all these in this market and release them from the stronghold they have really been and proved to have duped into.

3. If this means that the Government or other investment/insurance entity cover the losses then this is far better than dumping these people on the street with no hope of recovering.

4. The third step today is to set up a new consultation group of experts to further determine how the subprime could succeed but this time ensuring that there is a real voice on behalf of the borrower. For certain it cannot go back to the status quo.

Thank you for your time and please do contact me again if you feel I can be of any future assistance.

For your information I am copying this email to the BBC and ITN and other groups that I presently in consultation with.

I live and work in London mainly with a home in XXXX and I would welcome a meeting to discuss further ways this situation today can be helped and if only one aspect I say makes a real difference then it will be worth the chat.

With kind regards,