What if bank adds 60k to borrowers salary on loan application?

[usernameinuse]

You want the bank to do financial modelling for customers? They might apply a stress test

Not financial modelling but just a basic calculation,for themselves if not for the customer, to see what monthly capital and interest repayments would be. If they done that, they would have seen that the nurse could not afford the loan, not by a long shot. The borrower paid a sizeable deposit, and the best part of a few hundred thousand in interest only. Of course the bank should see if the borrower can afford the mortgage.

Was talking to a relation recently who is a banker, he said he never saw in his bank loan reports showing borrowers salary inflated by over €60,000, compared to P60, payslips etc. Or a valuation with such basic facts untrue. So it did not happen in all banks.

What is the difference between a bank employee who defrauds his superiors (and the bank shareholders) by a misleading loan report or valuation, for personal gain (commission, bonus, promotion or whatever) and a supermarket shop employee who steals a single bar of chocolate while working, from his employer? The shop employee gets sacked, as has happened.

 

[Leo]

Of course the bank should see if the borrower can afford the mortgage.

The borrower has the greater responsibility in determining whether they can afford it. It's not the bank's responsibility

You still haven't answered why your friend seems to have put her life on hold as soon as she took out the mortgage, despite being on a 10 year interest only rate. This suggests she was well aware she could not afford the mortgage from day 1.

What is the difference between a bank employee who defrauds his superiors (and the bank shareholders) by a misleading loan report or valuation, for personal gain (commission, bonus, promotion or whatever) and a supermarket shop employee who steals a single bar of chocolate while working, from his employer?

There are a number differences between these two scenarios, but a key similarity in the context of this thread is that in both cases, a customer has no rights whatsoever to any details from the internal disciplinary procedures.

In your friend's bank example, they got the loan they requested at the rate advertised. In the shop's case, if the theft was ongoing and of significant proportions, then customers may have been paying slightly more for goods to offset the shop's losses, but they still had all the pricing information to hand prior to making a decision to purchase.

 

[LDFerguson]

What is the difference between a bank employee who defrauds his superiors (and the bank shareholders) by a misleading loan report or valuation, for personal gain (commission, bonus, promotion or whatever) and a supermarket shop employee who steals a single bar of chocolate while working, from his employer? The shop employee gets sacked, as has happened.

That's not a valid comparison. If you want to talk in parables, try this one: -

Liam walks into a Mercedes showroom and sees a lovely recent-model S-class for sale for €100,000. Liam works in his local supermarket and earns about €30,000 per year. "No problem" says the car salesman to his finance guy. "Sure we'll write it up that Liam's on a salary of €100,000 and we'll give him a discount on the first year repayments on the car finance agreement so that the repayments in the first year will be affordable." Liam drives away in his lovely Merc.

 

[Leo]

And.... Liam knows he is getting a deeply discounted rate, and can barely afford that!

 

[usernameinuse]

It's not the bank's responsibility

Why then for example do banks advertise otherwise eg what they look for, and I quote from them "is proof that you have the earnings and self-discipline to repay your mortgage not just for the first year but long into the future."?

You still haven't answered why your friend seems to have put her life on hold as soon as she took out the mortgage, despite being on a 10 year interest only rate. This suggests she was well aware she could not afford the mortgage from day 1.

She could afford the interest only from day one, and did pay it from day 1. However as I said she has not married or had kids or even socialised much in the past 11 years. You say that is the same as putting her life on hold. Other would say she has a track record of acting responsibly, to the best of her ability, given finance was not her area of expertise. However the banker must have know she could not afford the capital and interest repayments, they said they were the experts and she could afford the repayments. And possibly roll over for another 10 years interest only.

That's not a valid comparison.

It is a valid comparison, because in both cases the employee defrauded his or her employer.

In the banks case, the banker misled or defrauded those further up the bank, and the shareholders, by having a false loan report / valuation, for his selfish gain (promotion, bonus, commission or whatever). The victim was the bank, the shareholder, the borrower...they all paid.

In Tesco's case, the hungry employee who stole the bar of chocolate and was sacked also misled or defrauded his employer, for his selfish gain. Albeit for a much lesser amount. He was still sacked though.

If you want to talk in parables, try this one: -

Liam walks into a Mercedes showroom and sees a lovely recent-model S-class for sale for €100,000. Liam works in his local supermarket and earns about €30,000 per year. "No problem" says the car salesman to his finance guy. "Sure we'll write it up that Liam's on a salary of €100,000 and we'll give him a discount on the first year repayments on the car finance agreement so that the repayments in the first year will be affordable." Liam drives away in his lovely Merc.

The finance guy would not last long in that job, if he took the borrowers payslips / P60, added 60k to his salary unknown to the borrower, and misled the finance company the security was much better than it really was ( a 5 litre engine instead of 3 litre, different spec etc) having had his relation a motor assessor describe and value the car.

And.... Liam knows he is getting a deeply discounted rate, and can barely afford that!

You are trying to fudge the waters again. The borrower for the house did not get a deeply discounted rate, unlike some bank employees, it was variable rate.

 

[usernameinuse]

Why then for example do banks advertise otherwise eg what they look for, and I quote from them "is proof that you have the earnings and self-discipline to repay your mortgage not just for the first year but long into the future."?


She could afford the interest only from day one, and did pay it from day 1. However as I said she has not married or had kids or even socialised much in the past 11 years. You say that is the same as putting her life on hold. Other would say she has a track record of acting responsibly, to the best of her ability, given finance was not her area of expertise. However the banker must have know she could not afford the capital and interest repayments, they said they were the experts and she could afford the repayments. And possibly roll over for another 10 years interest only.



It is a valid comparison, because in both cases the employee defrauded his or her employer.

In the banks case, the banker misled or defrauded those further up the bank, and the shareholders, by having a false loan report / valuation, for his selfish gain (promotion, bonus, commission or whatever). The victim was the bank, the shareholder, the borrower...they all paid.

In Tesco's case, the hungry employee who stole the bar of chocolate and was sacked also misled or defrauded his employer, for his selfish gain. Albeit for a much lesser amount. He was still sacked though.


The finance guy would not last long in that job, if he took the borrowers payslips / P60, added 60k to his salary unknown to the borrower, and misled the finance company the security was much better than it really was ( a 5 litre engine instead of 3 litre, different spec etc) having had his relation a motor assessor describe and value the car.


You are trying to fudge the waters again. The borrower for the house did not get a deeply discounted rate, unlike some bank employees, it was variable rate.

Leo, you claim to have knowledge wrongdoing or fraud in the banks was common. If so, and you work in one, I would encourage you to become a whistleblower or report it. The truth will out eventually.

 

[LDFerguson]

She could afford the interest only from day one, and did pay it from day 1. However as I said she has not married or had kids or even socialised much in the past 11 years. You say that is the same as putting her life on hold.

So are you saying that she accepted an offer of a loan where the repayments on an interest-only basis were such that she could not afford to get married, have kids or socialise much?

It is a valid comparison, because in both cases the employee defrauded his or her employer.

It's at best only partially valid as it only compares the aspect of this story in which the employee acts dishonestly for his own gain. It is not valid in that it makes no reference to any customer of the shop applying for a loan and accepting the offer of a loan.

 

[Buddyboy]

6 pages of leading a horse to water.
I've given up reading at this stage.

 

[usernameinuse]

So are you saying that she accepted an offer of a loan where the repayments on an interest-only basis were such that she could not afford to get married, have kids or socialise much?

In the downturn her take home pay was reduced, and the value of the house dropped considerably. It dawned on her the bankers reassurances were incorrect, even though he was the mortgage expert who said he examined her figures, with decades of experience. When years later she obtained the file from the bank, showing the incorrect loan report and valuation, she saw a clearer picture.

It's at best only partially valid as it only compares the aspect of this story in which the employee acts dishonestly for his own gain.

So the employees actions were comparable and equally valid, the only difference being the scale?
(the banker who misled or defrauded those further up the bank, and the shareholders, by having a false loan report / valuation, for his selfish gain, and the hungry supermarket employee who also misled or defrauded his employer by stealing the bar of chocolate and was sacked).

 

[LDFerguson]

In the downturn her take home pay was reduced, and the value of the house dropped considerably. It dawned on her the bankers reassurances were incorrect, even though he was the mortgage expert who said he examined her figures, with decades of experience. When years later she obtained the file from the bank, showing the incorrect loan report and valuation, she saw a clearer picture.

She also saw a clear picture of the monthly repayments before she chose to accept the offer of a loan because they were written on the formal loan offer, which she signed before she got the loan. Her loan offer also made it clear that it was an interest-only loan.

So the employees actions were comparable and equally valid, the only difference being the scale?
(the banker who misled or defrauded those further up the bank, and the shareholders, by having a false loan report / valuation, for his selfish gain, and the hungry supermarket employee who also misled or defrauded his employer by stealing the bar of chocolate and was sacked).

That's correct. As I said, the comparison is only partially valid. The part where the employee acts dishonestly and works against his employer. But that comparison completely misses the part where the customer applies for a loan, gets offered a loan and takes the loan.

 

[Leo]

Why then for example do banks advertise otherwise eg what they look for, and I quote from them "is proof that you have the earnings and self-discipline to repay your mortgage not just for the first year but long into the future."?

Perhaps this is the core of what you are struggling with. The banks do this in order to protect their own interests, not the borrower's. The borrower has a personal responsibility in this and every financial and other transaction they enter into.

It is a valid comparison, because in both cases the employee defrauded his or her employer.

The bank weren't defrauded, they gave out a loan, 10+ years on it's still performing earning them interest, and the still have the asset as security. There is currently no loss recorded on their books in relation to this loan.

 

[usernameinuse]

She also saw a clear picture of the monthly repayments before she chose to accept the offer of a loan because they were written on the formal loan offer, which she signed before she got the loan.

Untrue, you did not read all the previous posts. The borrower was never informed of what her monthly capital and interest repayments would be until many many years in to the loan.

The banks do this in order to protect their own interests, not the borrower's.

First you said its not the banks responsibility. When I point out it is, you say
the banks do this, look for ability to repay mortgage long term, in order to protect their own interests, not the borrower's. They obviously did not "do this" in this case because the borrower cannot repay capital and interest repayments, not by a long shot.

The bank weren't defrauded, they gave out a loan, 10+ years on it's still performing...

The borrower is unable to repay capital and interest, it is more than her nurses salary. So it is not performing. And yes the banker defrauded those higher up in the bank if he got P60, payslips etc and misled those higher up in the bank by adding over 60k to the nurses salary on the loan report, as well as submitting the false valuation etc. The bank is at a loss as it will not recover the full amount it lent as a result of the bankers actions. The shareholder is at a loss as a result of wrongdoing in banks too. The borrower lost her sizeable deposit and almost a few hundred thousand in interest.
The actions of a rogue banker, who is in a position of trust and who assures his client that they are the mortgage experts, can be a lot more serious than a rogue hungry shop employee who defrauded his employer of a bar of chocolate, and who was sacked as a result.

 

[Leo]

First you said its not the banks responsibility. When I point out it is, you say
the banks do this, look for ability to repay mortgage long term, in order to protect their own interests, not the borrower's. They obviously did not "do this" in this case because the borrower cannot repay capital and interest repayments, not by a long shot.

You're still caught up with trying to pin blame on the bank for giving your friend the mortgage she asked for.

Fundamentally, they should never have asked for a mortgage they could not afford, or bought a house beyond their means. There is no recourse for such poor decision making.

 

[LDFerguson]

Untrue, you did not read all the previous posts. The borrower was never informed of what her monthly capital and interest repayments would be until many many years in to the loan.

She was told what the interest-only repayments are and, while I admit I haven't read all six pages of this, my understanding is that she's been paying interest-only for the past 11 years. So when she accepted the loan, she knew what her repayments would be.

The borrower lost her sizeable deposit and almost a few hundred thousand in interest.

How did she "lose" her deposit? Because the value of the property went down? The value of ALL properties in Ireland went down at the same time.

She didn't "lose" hundreds of thousands in interest either. She paid the interest on the loan as per the agreement she signed up to. She also got to live in the house for the past eleven years. How on earth can you claim that she "lost" the interest?

 

[usernameinuse]

Fundamentally, they should never have asked for a mortgage they could not afford, or bought a house beyond their means. There is no recourse for such poor decision making.

You are ignoring the actions of the banker, not surprisingly. However if we focus on the borrower, she was assured by the mortgage experts she could afford it. If she was allowed roll over the 10 year interest only period, as she was led to believe she could, she would not be in arrears now. If she was on the salary the banker told his superiors she was on in the loan report, then she could afford it. Sure the borrower should take some pain (she lost a sizable deposit and paid almost 200k in interest so far) but she would not be in this position but for the wrongdoing of the rogue banker and his relation the valuer, both now resigned or left the bank.

To use an analogy, suppose homeless Liam walked in to a Mercedes showroom and saw a good condition secondhand Mercedes for €100,000. Would a banker try to get commission on the sale of a loan by increasing his income details by over €60,000 and changing the documentation of the type and specification of car so it could lend him €100,000 ?

She was told what the interest-only repayments are and, while I admit I haven't read all six pages of this, my understanding is that she's been paying interest-only for the past 11 years. So when she accepted the loan, she knew what her repayments would be.

She was told what her interest only repayment would be. She was never told what the capital and interest repayments would be, or her repayments after the 10 year interest only period, only that she could roll over the interest only period for another 10 years.

How did she "lose" her deposit?

Because she paid that money (the sizeable deposit on the house), plus the best part of €200,000 in interest, and the bank wants her to surrender the property soon.

The banks advertise that they look for "proof that you have the earnings and self-discipline to repay your mortgage not just for the first year but long into the future.". They did not do that in this case and the file (obtained under the data act) shows that the banker misled his superiors about the borrowers repayment ability and the valuation of the property. No excuse for that, given the borrower furnished the bank with proof of income ie P60, payslips etc.

Nobody can excuse a fraudulent act by a bank employee by saying "everyone was at it" just as you cannot excuse a supermarket employee who stole a bar of chocolate by claiming everyone working in the supermarket was helping themselves to the odd snack too.

 

[LDFerguson]

She paid a deposit on a property. She took an interest-only loan. The value of the property went down. How many people in Ireland who bought property at the same time were faced with the same situation? Are you saying that the drop in property value wiping out her deposit is the fault of her bank also?

Regarding the interest, she applied for a loan, she was accepted for the loan, she took the loan. She paid interest on the loan she took. She also got to live in the house for the past 10 or 11 years. She had to live somewhere and that generally costs money. So she didn't "lose" €200,000 in interest. She paid what she owed.

By the way, I repeat what I said in my earlier posts on this thread. If what you say is true about the bank employee lying to his colleagues to get her approved for a larger loan than the bank's criteria would have allowed, then I'm not condoning this at all. That's simply wrong.

 

[Bronte]

'Tis far from dissing the peasants I am. You are the one who wrote "She didn't bother to ask the nearest person capable of using a website to bang the numbers into a mortgage calculator." In December 2006 Ireland had only 430,000 broadband subscribers, and those were mostly subscribers in cities like Dublin. With respect, I do not think you understood rural Ireland in 2007, dub_nerd, if you think most people then knew what a mortgage calcalutor was never mind had broadband. Sure the mortgage experts should have had mortgage calculators then, but I'd suggest most other people had not broadband never mind had a mortgage calculator, or ever used a mortgage calculator.

Did she have the back of an envelope and a biro? I’m amazed she qualified as a nurse. She never had a credit card? Didn't understand mortgages, didn’t understand borrowing. Managed to borrow 400,000 on a three bed house in rural Ireland that seems to have cost 600,000 with monthly repayments of 1,800 on a salary of 30,000.

Have I got those figures right?

How did she manage to find a house at all. That’s a mystery to me. What possessed her to be looking at houses in a price range that most people wouldn’t dream of looking at.

 

[Bronte]

It gets worse. She purchased a very expensive property in rural Ireland. It has no double glazing. A very bad roof and an old boiler. She could just afford the interest only. She is single and thought a three bedroom house in that condition was a good idea. Why did she purchase that house?

Especially as just the interest only took all her disposable income.

Something not adding up here. Always is when the poster is not revealing any figures.

 

[Black Sheep]

And it gets even worse. Surely this lady (who was not money savvy) had some friends/family whom she discussed her purchase with.
As a nurse she probably had many colleagues in similar situations. Back then, as now, house purchase was a daily topic of conversation and almost impossible to avoid. Even those of us who had no intention of purchasing property got caught up in those conversations.

This story baffles me.

 

[usernameinuse]

She never had a credit card?

What makes you think that? What relevance is it to the banker lending money he knows the borrower can never pay back? Or a bank which does not tell the borrower what capital and interest repayments will be? Times have changed, I think they always do nowadays.

Have I got those figures right?

No, but the exact figures are not relevant anyway. Of course many people overpaid for property during the credit bubble 11 years and more ago. Fraudulent activity did not happen in all banks though. As said earlier, I was talking to a relation recently who is a banker, he said he never saw in his bank loan reports showing borrowers salary inflated by over €60,000, compared to P60, payslips etc. Or a valuation with such basic facts untrue.

If what you say is true about the bank employee lying to his colleagues to get her approved for a larger loan than the bank's criteria would have allowed, then I'm not condoning this at all. That's simply wrong.

It is more than just wrong. As asked before, what is the difference between a bank employee who while working defrauds his superiors (and the bank shareholders) by a misleading loan report or valuation, for personal gain (commission, bonus, promotion or whatever) and a supermarket shop employee who steals a single bar of chocolate while working, for personal gain, from his employer? The supermarket employee got fired, even though the sum involved was very small, say a euro.