Sub Prime Mortgages & Repossessions - How it Really Works

May 16, 2008

Why are subprime borrowers provided with less facilities and continued and ongoing mortgage advice after completion?

Why has the FSA and CML not ensured that the practices and faciltities in the prime market have not been transferred to the new subprime market?

By setting up SPV's they are aware that this provides financial and commercial protection to investors but they are also aware that SPV's are not permitted to employ directly, why therefore do they think this is acceptable to borrowers in this market but not acceptable in the prime market?

Edited May 16, 2008 by TaffR

May 16, 2008

'lenders' Grrr! = Me saying that I am totally unhappy of speaking about any of these as lenders!! The FSA need to justfiy why they have obscured this definantion.

May 16, 2008

From:TAFFR (changed)

Sent:16 May 2008 13:44

To: ITN (name held back)

Cc: xxxxx

[subject:RE: Expert witness

Hi XXXX (changed)

I hope you are well?

Yes, it is actually dynamite really when considering that this type of information has not been made openly available until now.

Honestly, it is only when you look at the whole picture from a commercial perspective, including systems, processes, rules, regulations employed and the timeframes of who and when different entities are involved throughout the process and the CML/FSA transparent and obvious negligence to allow commercial advantage to be taken in this market.

CAB – ‘Set up to fail’ documents have still not yet caught on to the remarkable differences and the level of discrimination being employed in this market as compared to the traditional prime mortgage, in which they utilised to attract these borrowers in the first place.

CAB/Shelter are being weak too but I mean that in a very understandable and appreciative way. They are not yet taking on board the reality of the immense change in the mortgage market and the deceit it has to employ and depend upon to succeed but also sanctioned by the FSA and others who should know better.

People need the real facts and the FSA rules (heavily influenced by these sharks from the 1980’s) do not touch how far they should go to protect the average consumer/borrower.

What a bloody mess and [i am being non-political] but doesn’t this match and fit in well with today’s Government and other short term economic strategies?

Courts are not obliged to ensure that ‘lenders have abided in any way with CML/FSA rules and guidelines (WEAK)

Mortgage companies set up and created to protect ‘off-balance sheet’ accounting investors and able to act as ‘lenders’ totally distorting the real and understood definition of lender?

Please send any economist of stature to me and interrogate me and I confirm that ‘egg on their faces’ will not even cover their embarrassment.

When was it acceptable to treat the UK public in this way?

Please forget about these statements that it is the adverse (the low life) that is the cause of today’s misery. Most of them are law abiding, decent, family people who have been duped into a market that has gone out of control and being used a commodity.

Regards,

TaffR (changed)

From: ITN (changed)

Sent:16 May 2008 13:19

To: TAFFR

Subject: RE: Expert witness

TAFFR (changed)

The Barclays capital research is very interesting

XXXXX

XXXXX (changed)

SPECIALIST EDITOR, ITV NEWS

200 GRAY'S INN ROAD

LONDON

WC1X 8XZ

UNITED KINGDOM

T +44 (0)20 7430 4347

Fax

Edited May 16, 2008 by TaffR

May 16, 2008

From: TaffR (changed)

Sent:16 May 2008 14:22

To: ITN (changed)

Cc: 'XXXXX

Subject: RE: Expert witness

Hi XXXX (changed)

Don’t worry…you have not woken the gorgon!!

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.

I’ll go back to sleep now.

TaffR (changed)

May 16, 2008

Thanks Taff

You are very welcome.

For the record...no one here are minions or any less better than anyone else regrdless of what market we are in. It is the system that is wrong.

It will take time to catch up and understand....sheesh....4 years to explore this and my head still hurts but the jigsaws do fall into place.

I am very confident of what I am saying because of the last 4 years and I have debated and argued all of this from the H M Treasury to brokers and other likewise borrowers and most people from all walks of life.

There is yet more to learn and I am very open to be wrong at anytime but as you can see, I will take this further to anyone that will listen and we must fight the right fight and stop this nonesense now.

I hope this information is helpful that is all. It is never intended to eb anything else.

My thoughts anyway:)

May 16, 2008

the subprime 'parrot' has expired....and for good reason!

May 16, 2008

Okay bit by bit and my thinking only (not an expert)

Hi

Our mortgages have been bundled together and sold as portfolios.

Yes, most probably.

The profit is secure because of the equity in our properties (if I have got this right) so what happens now with property prices falling?

Not quite right, the profit is gained really on you continuing to pay and the stranglehold contract agreement and hence the really agresssive debt collection type actions seen today.

When property prices go down in this market it hurts them badly and as equity goes down then the portfolio value goes down too (just like shares on the stock market). The LTV would be circa 80% +. on application but it is now 120% over and above the return on the investment if they had to repossess.

Hence in the Barclays research document [that you should not see] one of the methods Capstone suggest is only to help people if the value of the property is less than what they could resell it for!! DISPICABLE!!!

Will this mean that they will calculate what our interest rate should now be (once out of fixed term) to maintain the profit and not in accordance with Libor as they claim?

God!! This one is a burning ember. Already I believe they are stealing from borrowers accounts all the time. HML (on behalf of their clients) send out letters advising of changes of interest. These are standard system letters. I told them that I wanted (just like any other lender in the financial market) detailed explantion of the reasons behind the increase/decrease. They refused.

Ok, my remarks on theft. On two occassions they took more monies than were warrented. They are not high street retail oiutlets where you can show publically your outrage. They live annomoulsy in a bunker in Skipton. No supervision and no come back from borrowers. lets say they add £20 per month to every account and only deal with the 2% that notice and complain. This runs into millions and with minimal recourse. Think about this. Challenge them every day!

As prices keep falling will they keep putting rates up and try to con us that this is because of the Libor rate changing and hope that non of us have the savvy to understand what they are on about?

As above. Again, one of the 'consistents' throughout the whole process from cradle to grave is the minimum amount of information they provide so as to keep their options open, before (and I mean this as NO scare tactic) they run off with your money to the Cayman Islands, for example if the pressure got too much. Look at the Northern Rock sitiuation and the SPV created there.

Also how many times do these portfolios get sold? Are they continually traded?

Great question....you signed (like me) that they can sell or transfer your mortgage to anyone at anytime.....tell me what other markest that hold so much of value can act on a flimsy clause like that. SEE FSA MCOB RULES on this one.

May 16, 2008

Precisely midge this is a major part of the problem of securitized loans. These debts/bonds have been sold as being triple A investments the highest rating & supposedly the least risky of all other investments.

Therefore they must maintain their value at all costs & if property prices look like dropping below their equity level the they will repossess at the drop of a hat.

If they don't maintain their value the buyer of the bond can sue the seller of the bond (including the listing agency) as some are already looking to do in the States

yes and now the in-fighting has started...each now trying to give back the risk they purchased....accountants working by candle light looking for that one little thing that requires the seller (if they still exist) to repurchase the loan book (portfolio)!

May 16, 2008

Fromxxxx ITN (changed)

Sent: 16 May 2008 14:59

To: TaffR (changed)

Subject: RE: Expert witness

TaffR (changed)

Do not take my quiet as indication I am not working on all this. it is very complex and I need to get it right. I am reading "Impact of securitisations and loan transfers activity on M4 lending" (!) and talking to some insiders

Will not give up

XXXX (changed)

May 16, 2008

....and the FSA said the public would not understand and it would confuse them and we should not worry them with all this....(formation of the FSA in consultation with 'lenders' Grrr!)

People are not as stupid as they have been condensedingly thinking!!

It just takes a little time...but there again....they could have explained this more in simple terms so as to ensure we had all the facts.

Now, I am sure you will all know why my glass eye has gone blind and is blinking every second!!! But like me you will get there too.

I hope by now you are seeing I am a man of my word. My intention is to provoke debate and educate where needed and move this market forward where the public has a right to know what new markets are coming in and what the real ramifications are.

My best wishes to everyone.

TaffR

Edited May 16, 2008 by TaffR

May 16, 2008

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 · May 17, 2008

Where's Taff gone??

May 17, 2008

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.

May 17, 2008

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!

Edited May 17, 2008 by TaffR

May 17, 2008

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.

Edited May 17, 2008 by TaffR

May 17, 2008

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

May 17, 2008

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?section=Loans&article_id=3782376

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.