# Panorama 8/10/07 - UK sub-prime lending



## Sherman (9 Oct 2007)

Did anyone see Panorama last night on UK sub-prime mortgage lending?

Sad to see so many obviously good people taken in by what Panorama claimed were little more than scam artists and con-men. Just as in Ireland, the Financial Services Authority fiddled while the slick marketers and financial wizards in the private sector ran rings around them.

I think the message from programmes like this is that we must introduce mandatory personal finance classes in schools as a matter of priority. While we're at it we should beef up the likes of MABS and ensure that they offer widely-available free personal finance classes also. 

Most of these people could have avoided the dreadful plight in which they find themselves had they just had the most basic financial literacy and education.


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## dereko1969 (9 Oct 2007)

didn't see the programme but from what i heard about and this story here
http://www.rte.ie/news/2007/1009/legal.html
which basically points out how subprime lenders here are going after people with low arrears and then stuffing them with legal expenses in excess of the arrears! we're in the same boat here and i think we'll see a lot more repossessions in the next few months.


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## command (9 Oct 2007)

> how subprime lenders here are going after people with low arrears and then stuffing them with legal expenses


 
I doubt smart mortgages are making money on the legal fees. To do so would be illegal wouldn't it??

In relation to the borrower they had an outstanding loan of €8,255. When they were warned of the impending legal action if they did not repay the money they should have known that they faced possible legal expenses. 

I know that letters from solicitors warning of a creditors intention proceed with legal action usually contains the warning to the defaulter that they may face legal expenses if the case goes to court and they loose. 

That they were left with legals bills has nothing to do with their ability to pay a mortgage or that they may have been taken in by predatory lending on the part of the lender int he first place. 

While we might feel sympathy with borrowers who fall into arrears it is hard to extend it to someone who goes to the high court in such circumstances.


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## dereko1969 (9 Oct 2007)

i didn't think i had intimated that smart were padding their legal expenses, certainly didn't mean to. 
i was trying in my cackhanded way to support the OPs point about financial planning being included in schools, as the 'victims' here through ignoring the precarious position they were in have ended up with a bill of 20k where they originally only owed 8k. this could see the house being repossessed as if they couldn't afford 8k how will they afford 20k particularly as presumably by going to smart they weren't in the best financial position to begin with!
it is also a warning about how quickly some lenders will act as i'm presuming that an outstanding amount of just over 8k could be only about 6 months arrears perhaps less.


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## command (9 Oct 2007)

To an extent I agree with you, there should be a greater degree of education available. I agree that it should be included in the schools civics education but the problem would be that a teenager is not going to be too worried about pensions or sub prime lending. 

To an extent the regulator is letting the consumer down. Instead of a group of fools worrying about what a tracker mortgage is advert more akin to the road safety authority adds should be broadcast. The consequences of bad financial decision financial decisions are not effectviely communicated. 

The road safety authority don't tell us how a car goes 80kph or how alcohol gets into our blood but they so show what happens when a drunk runs over a child. 

Itsyourmoney adverts should show the preesure people who take out sub prime loans are under when rates go up or an older person who didn't take out a private sitting in a cold room because they are afraid to turn on the heating for fear of not having moeny to pay for gas or home heating oil. 

Telling a 15 year old what a tracker mortgage is won't stop him borrowing more than he can afford but showing him how arrears of €8,255 will land him €20k in debt


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## pernickety (9 Oct 2007)

I once commented to an accountant friend that I wished I had learned about money in school and she pointed out that I did do Bus Org to intercert and accounting to LC. I actually got fairly good results too. However I was able to repeat the stock answers and sort out my balance sheet without really understanding anything...... cause I just wasn't interested at the time!
Perhaps we need to revise these courses to make them more 'personal'. But companies could also offer an advisory service as a perk, I think I would have been more open to it when I was actually earning money.


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## shanegl (9 Oct 2007)

Why wasn't this (relatively) small amount dealt with in one of the lower courts? High Court requires Senior Counsel which don't exactly come cheap! Do all claims on mortgages have to go through the High court?


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## DerKaiser (9 Oct 2007)

An RTE show called future shock highlighted the risks of a property slowdown and half the country was up in arms accusing the show of scaremongering.  
An education is certainly needed for all, including the regulator.  As far as I know stress tests recommended by the regulator were based on a 2% rise in interest rates?  Two years ago the ECB rate was 2% but the yield curve implied a 2% rise was most likely in the immediate future.  This would mean that the stress test would just about cover the expected position of someone, with no additional margin for adverse experience - some stress test!


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## command (10 Oct 2007)

infact since september the stress testing rules have changed. It used to be 2% above the mortgage you were applying for but has changed to 2% above the central bank rate. 

A predatory lender therefore needs only stress test an applicant to 6% even though they might be actualy charging them a higher rate. 

I presume the thinking behind the rule change was the prevent stress testing on discounted introductory rates?


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## zoe (10 Oct 2007)

You can watch the Panorama programme by clicking here;


*    Watch Panorama: Sub-prime Suspect                     *


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## MichaelDes (10 Oct 2007)

It shows the disgrace and greed of some within the banking fraternality with a pass the parcel approach to these type of pyramid schemes. Unfortunately, it is not the first bit of financial wizardy to go wrong in the City and, it certainly will not be the last. The credit derivative market driven mainly by London was always going to end in tears. Look at the KKR takover over Boots with £9bn debt being carried...debt from buyouts totals £100bn amongst the City banks, which has been yet to be sold to the market. Looks like Thames Meade and Abbey Wood residents are not the only naive investors.


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## Persius (10 Oct 2007)

command said:


> infact since september the stress testing rules have changed. It used to be 2% above the mortgage you were applying for but has changed to 2% above the central bank rate...


 
I believe they changed it to 2.75% above the ECB rate. So yes a little bit less than the previous stress test (assuming mortgage 1% above ECB rate), but not as much as you state.


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## Persius (10 Oct 2007)

They outlined a scam that was taking place somewhere in the Docklands. Developer builds appt complex. Dealer purchases entire block from developer. Dealer then finds "purchasers" for each appartment in the block, and sells to them for way over the odds. However most of the "purchasers" don't actually exist. Dealer however manages to fraudently obtain mortgages in the names of each of these purchasers and thus gets paid.

End result is blocks with about 20% occupancy, high repossesion rates from non-existant purchasers and those who did buy in serious negative equity. I was amazed that this scam was possible. The checks on the mortgage applications must have been non-existant.


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## colc1 (10 Oct 2007)

Persius said:


> They outlined a scam that was taking place somewhere in the Docklands. Developer builds appt complex. Dealer purchases entire block from developer. Dealer then finds "purchasers" for each appartment in the block, and sells to them for way over the odds. However most of the "purchasers" don't actually exist. Dealer however manages to fraudently obtain mortgages in the names of each of these purchasers and thus gets paid.
> 
> End result is blocks with about 20% occupancy, high repossesion rates from non-existant purchasers and those who did buy in serious negative equity. I was amazed that this scam was possible. The checks on the mortgage applications must have been non-existant.


Does no one think such schemes are going on here or am I paranoid?!!


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## MichaelDes (15 Oct 2007)

I think the banking fraternities in Ireland are not up to the expected levels of checks and balances. It is not beyond the reason of doubt that the same thing that happened in Thames Meade or Abbeywood could happen here- see Indo [broken link removed]. Very worring :-<


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