Sub Prime Mortgages & Repossessions - How it Really Works

[TaffR]

Originally Posted by midge61

well I've just ventured into the loft and got my mortggages docs out.

Seems my broker was a tied broker.

My fixed rate was infact 6.74% and once out of fixed rate will become a variable rate which is 4.25 above Libor so I should now expect a letter stating that my rate will now go to 10.99

I have also found a section titled "Transfer of the company's rights" just as you said Taff giving them the right to pass it on and on again!

Have also found some references to "packager"

Honestly, you can now start taking real control of this.

Good for you and everyone should do this. Don't see ghosts where there are none...this plays into their hands....but....never, NEVER...trust them ever again. They cannot be trusted they are the opposite (all through this process) of what we assumed and know.

Sorry.

TaffR

[JonCris]

Where's Taff gone??

[TaffR]

Here I am The moderators will hopefully fix this and transfer all the responses too otherwise I look like a raving/ranting lunatic talking to myself. I am learning about forums and how they work and not here to create problems for others in fact quite the contrary.

[TaffR]

Daily Mail...

70,000 buyers could lose their homes in mortgage crisis | the Daily Mail

People should start adding their comments/complaints to the Daily Mail consdiering the info learnt on this forum.(see bottom of the page on this link)

70,000 buyers could lose their homes in mortgage crisis

By SEAN POULTER - More by this author » Last updated at 22:37pm on 22nd October 2007

Comments (27)

Experts are warning people to expect the repossession rate to be four times higher than last year

As many as 70,000 homes could be repossessed next year as owners struggle to meet mortgage repayments, an expert warned yesterday.

The quadrupling in the number repossessed last year would take the figure close to the peak seen during the property market collapse of the early 1990s.

The alarm has been sounded by respected housing market commentator Ray Boulger.
Mr Boulger, of mortgage brokers John Charcol, warned that the repossessions will be part of a wider property market reverse that could see prices fall by 10 per cent in some areas.

He said five interest rate rises in the past year have pushed thousands of homebuyers to the brink of financial oblivion.

He believes that even if the Bank of England cuts the 5.75 per cent base rate in the next few months, this will be too late to stem the tide of homelessness.

Mr Boulger said the problem has been exacerbated by the crisis in sub-prime mortgages, which are taken out by those with a patchy credit history.

Thousands of buyers who have chosen to self-certify their income, rather than have to prove it, have taken out this type of expensive mortgage.

However, they are now struggling to make repayments and could find they are soon paying interest rates of more than 10 per cent.

The total number of homes repossessed in 2006 was 17,000. Mr Boulger predicts that will rise to more than 40,000 this year and as high as 70,000 in 2008. That would be close to the all-time high of 76,000 seen in 1991 when a property bust followed the 1980s boom.

The crisis was triggered by rising unemployment and interest rates, which meant many could not afford to meet repayments. A resulting flood of cheap repossessed homes on to the market fuelled a price crash which left thousands of young buyers owing more on their homes than they were worth.

Mr Boulger said: "I think repossessions are going to be a big problem next year. I think there is going to be quite a big jump. Even if the bank rate starts to fall quite soon, the impact of the rate rises we had over the last year will continue to come through."

He said the rate rise effect alone would cause 55,000 repossessions in 2008.

But he expects the figure will now be much higher because of the problems around sub-prime mortgages.

Many such borrowers are due to come off low-cost fixed-rate deals in the next six months. Mr Boulger fears that banks and building societies will refuse to offer them cheap alternatives, forcing them on to rates of more than 10 per cent.

I think there will be a quite a problem next year with sub-prime borrowers getting repossessed," he said.

It is quite likely that we will see repossessions next year up to about 70,000, which is not far short of the peak."

On house prices in 2008, Mr Boulger said: "We will probably see prices fluctuating between plus 5 per cent and minus 10 per cent in different parts of the country."

A study by Alliance & Leicester found that mortgage holders have cut back on the amount they are saving. The average is around 3.1 per cent of income, which is half the ten-year average of 6 per cent.

Separately, retailers and manufacturers fear orders and sales will be savaged in the crucial Christmas trading period.

The Bank of England is under pressure to hand consumers and the economy a lifeline by cutting interest rates. Economists believe two quarter point cuts, bringing the base rate down to 5.25 per cent, are likely for the first half of next year.

The rates prediction comes from Ernst & Young's influential Item Club of economists. Barclays Capital said it expects rates to hit 5.25 per cent by May.


Add your comment | View all Comments (27)

27 people have commented on this story so far. Tell us what you think below. [/font]

Here's a sample of the latest comments published. You can click view all to read all comments that readers have sent in.

I've just come out of a two year fixed mortgage and seen my mortgage payment rise by £48 per month on £66000 borrowed on a £100000 property. Not too bad, but what is annoying me to the point of despair is the literal bombardment of high street and sleazy mortgage firms, brokers, loan companies, buy-your-house-for-sod-all-and-boot-you-out-in-six-months creeps, and a plethora of unbelievable vultures offering to lend me £10000 secured on my home for the next ten years ( total repayment - £54000!!).

So where is the financial responsibility from this sector we are all hearing about.
My home is for my children - so go away!


Tony Barratt, Rotherham, England
With respect to Carol, respossessions are a necessary downside to maintaining a banking system that enables people to take out a mortgage. People have to take responsibility for their own finances. A market crash is highly likely and is needed to ged rid of the property speculation that has priced future generations out of the market.


Michael Pinhorn, United Kingdom
And no doubt they'll all be stupid enough to vote McBroon and Co back in, again, when the opportunity arises!

[TaffR]

People need to comment/complain on the daily mail site too...and tell them the truth about the subprime SPV's and their real abilities.

[TaffR]

BBC NEWS | Business | Q&A: Sub-prime lending

[TaffR]

From: TAFFR (changed)
Sent: 17 May 2008 10:49
To: XXXXXX- BBC (changed)
Cc: 'XXXXX (changed)
Subject: Subprime - A growth market

Dear XXXXX (changed),

You asked me about the growth of the subprime market and the increase in new entrants over the last 5 years or more.

However it is the way it is set up creating a new mortgage tier(s) in this market where the general public are oblivious to the new set up and structures, lured in through deceitful tactics, acting on people’s natural perceptions of a mortgage market and as traditional lenders.

http://www.money.scotsman.com/scotsman/articles/articledisplay.jsp?sectio n=Loans&article_id=378237 6

The CML/FSA have permitted this new tier to act in this way as it would fail if the true facts were to become or made public.

Why should this matter?

1. People entering (pushed/lured/advised) into this growing market have natural expectation of being protected at the same level of the traditional mortgage market. Indeed, they are made to continue to believe this from cradle to grave.
2. Terminology, such as: Originator, Packager, SPV, Servicing Only, Administration Only, Sale/Transfer of Mortgage, Securitisation, Whole Loan sales, Bonds market, Intermediaries and so on are not general terms known or used/employed in most respects in the traditionally known mortgage market
3. People expect that a ‘lender’ who is FSA authorised as a lender actually be a ‘lender’ and not an SPV financial instrument entity without structure
4. Originators, Packagers & SPV’s advertise as being no different to any high street bank/building society lenders to attract borrowers to the market only to sell their mortgage within days/weeks to obscure entities, deny borrowers choice, option and assessment of personal risk
5. To comply at the minimum to CML/FSA rules and guidelines of managing arrears and defaults require the ‘lender’ to employ FSA Authorised Mortgage Advisors and the ability/facility to modify the contract and without which the mortgage becomes a secured debt only. The public (borrowers) are not aware that their contract is an administration only type of contract.
6. Unlike traditional mortgages, subprime mortgages are securitised and sold to an SPV entity which in effect ‘locks’ the contract for any further modifications
7. Securitisation has been predominantly used (in the background) for credit cards and car finance for example but fully complies with all consumer laws and FSA rules in respect of managing arrears and front line banks and others are able to discuss, consider and change the contract to accommodate a change in the borrowers circumstances and this recognises that within the term of the contract that unexpected life problems will occur in life. The MBS instrument does not.
8. The courts do not consider if these ‘lenders’ have complied with CML/FSA rules and guidelines in respect of whether they have attempted to consider or agree to new arrangements with the borrowers.
9. There is no benefit to the borrower in this market of advising/informing your ‘lender’ of possible problems.
10. The relationship is totally balanced in favour of the ‘lender’ without any true recourse or exit plan for undetermined periods of time (6+ years at least)
11. Subprime lenders ONLY aim is to protect the value of the portfolio and is transparently structured not to provide borrowers with even the minimum of service that is expected in the mortgage market.
12. It is a myth that the only those with bad credit are in this market and that the adverse borrower not repaying their mortgage is to blame for this economic climate as this only distracts from the root of the real problem and that being it the [permissible]new type structures in this market with deliberate intention not to inform the public or potential borrowers and as such denies them essential knowledge to make an informed choice when considering what can only be construed as the most important investment of their lives.

The minimum I would like to see, considering all the fact and evidence before us is:

1. The Government to take on real responsibility and accountability for this mess
2. That their ‘spin’ of helping borrowers in difficulty and facing repossession become a reality
3. That intervention NOW in the court processes today in regard to subprime (or any) be made and independent advise and scrutiny be applied (paid for by the Government) to each and every case
4. That the courts be provided with emergency powers and new guidance and rules in processing these dubious and scandalous claims (case by case)
5. If it is found (and it will be) that these mortgage ‘lenders’ (SPV’s etc) do not have the facilities, ability, willingness to assist these borrowers then overpowering (emergency law) should be approved to release these people out of the strangleholds they are in today due to this set up.
6. Allow these people control back on their lives as they have none so far
7. Their mortgages have already doubled in the last few months ( it is now a vicious circle)
8. Release them from these early resettlement fees that place an overriding amount of hold on these borrowers above and beyond the profits already made.
9. Get rid of these International/European SPV’s (pretending to be mortgage companies and deceiving each and every borrower who are now being totally bullied with very aggressive debt collection tactics and extortionate additional charges are being incurred) where the money earned through the income of these mortgages is being siphoned off to the Cayman Island and other Offshore accounts

If the Government really do wish to help….then let’s see the action where it counts before any more families continue to be destroyed through a bad decision in entering (lured in the greater amount) into this ill thought out and selfishly created market.

Regards,

TaffR (changed)

[TaffR]

Why your contract cannot be modified to accomodate any facility to you when you experience a problem with your mortgage payment. The whole structure has NEVER and CANNOT be set up to provide these services and as such they CANNOT comply even with the basic CML/FSA rules of treating borrowers fairly and sympatheticaly and why they repossess instantly there is a problem or a perceived problem even.

The subprime mortgages does not resemble in any way to traditional mortgages but you were led to believe it does and they intentional led you to believe this otherwise the market could not exist and it would fail.

"...The downside for loan modifications is that they could lead to adverse selection, as borrowers are made aware that difficulties may lead to potential concessions, though these risks are limited.

For securitised transactions, loan modifications are a new concept, as rating agencies are usually critical of any changes that can be/are made to a collateral pool after issuance. It is normal to see legal clauses where only a certain number of conversions, or product switches, are allowed in a transaction. The rating agencies want to be confident that the collateral pool rated at issue will remain throughout the transaction, and if not, they would have already sized for the additional risk. These loan modifications will do just that, affecting loss given default assumptions, excess spread and pre-payment rates, thereby changing the pay-down profile of the notes".

See Barclays Research (secret) uploaded previously on how they really act and think of you!!

[TaffR]

The Parrot....is DEAD

Kensignton Mortgages scarpers......the orginal 'subprime' loan shark' who influenced the FSA.....runs way and lurks in the background ready to pounce again.

The careers of the directors can be traced back to the 1980's too where the then Tory Government routed them out of the UK for their predatory and extortinate lending practices, only to return under a different mask...

Kensington halts loans to higher-risk borrowers - Telegraph

The writing was on the wall long before the media got hold of this and before the announced credit crunch.....did they forget to tell their customers?

[JonCris]

The Mail site is down for maintenance

[TaffR]

Hi JonCris...how are you?

It worked earlier this morning.

[JonCris]

I'm Fine thanks

Tried it 10 mins ago & got an apology saying it's down temporarily

[TaffR]

From: TaffR (changed)
Sent: 17 May 2008 12:13
To: XXXX - BBC (changed)
Cc: XXXX (changed)
Subject: CML & Subprime Repossessions

Dear XXXX (changed)

We discussed the repossession figures and that CML do not accurately record these.

They use sampling anyway and if you look at this link and the date, you can construed, that to date they have generally been ignoring subprime repossessions statistics so really could easily add a further 20% to reported figures today and specifically considering that subprime lenders repossessions have dramatically been increasing for the last 4 to 5 years (unreported) and the significant difference in their structures and the lip service being paid the CML/FSA rules due to their now admittance that subprime lenders do not have the ability to modify contracts or indeed employ mortgage advisors to assist, consider or make agreements with borrowers in (mostly) very short term payment problems.


They have lent to the self employed and of course anticipated problems will incur with this typical profile of borrower. Kensington (and others) used to advertise how they helped these types of borrowers but when questioned further was really found to be a blatant lie and refused to provide proof. It was an advertisement on their site to ‘lure’ only.

http://www.economicsuk.com/blog/000543.html

They also advertised they were traditional mortgage companies but found only to be originators and packagers again misleading potential borrowers into a false sense of security whereupon they find they are sold and in an administration only type mortgage as it has been securitised and therefore ‘locked’.

Friday, August 03, 2007
Insolvencies drop, repossessions rise
Posted by David Smith at 09:45 AM
Category: Thoughts and responses

New figures out today revealed a mixed picture on the extent of the squeeze on the personal sector, admittedly before the full effects of recent rate rises have had time to show through. The number of people becoming insolvent in England and Wales was 26,956 in the second quarter, a drop of 8.1% on the previous quarter but a rise of 4.2% on the corresponding quarter of 2006. The number of Individual Voluntary Arrangements (IVAs) fell 15% between the first and second quarters.

But the Council of Mortgage Lenders has uncovered some new information on repossessions, and estimates that 14,000 properties were taken into possession in the first half of the year, a rise of 18% compared with the second half of last year and 30% compared with the first six months of 2006. The CML's wider sample now includes more UK sub-prime lending, where the repossession problem is thought to be concentrated.[/font]

This may explain why the rise in arrears was more modest. The number of mortgages three months or more in arrears at the end of June was 125,100, 4% up on December 2006 but 3% down on June a year ago.

http://www.economicsuk.com/blog/000543.html

TaffR (changed)

[TaffR]

JonCris...working now!