What is the most shameful lending criteria you have encountered?

itsallwrong said:

Most shameful loan?
Wasn't there a case highlighted in AIB when they did an audit of internal staff loans of someone being lent 500k and on a wage of 30k a year?

Priceless..

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I used to work for AIB Group and got a staff mortgage in 2005 with joint incomes of about 75k and I did not encounter that sort of lending.

At that time though I was holding AIB shares through salary foregone / freebies which were worth the guts of 40k after i had worked in the bank for 5 years. Nearly all bank staff had tens of thousands of euro worth of shares. Maybe lending decisions were made based on those holdings.

demoivre said:

Interest only mortgages on PPRs, 100% mortgages, mortgages of 5 and 6 times salary, 3 and 5 year fixed rate mortgages given specifically to avoid the more strict stress tests associated with variable rate mortgages. All criteria came with the blessing of the Central Bank, Regulator and the Government.

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Not just blessing it was encouraged. Year after year more and more subsidies were given to home buyers in order to make sure that more people that couldn't afford to buy actually did buy. And all the opposition had to say was that too little was being done for struggling home buyers. What the banks were doing is exactly what politicians wanted them to do.

To be honest, I would take some of the stories on here with a pinch of salt.

The CUs in RoI must be a lot different to those up North, cos there's no way its as easy to get a loan from them, even during the good times. I am not a member but family are, and I think they have already had to jump through hoops to get money out of them.

I think as the decades pass the stories from the boom will get more extreme. I can see it now as I sit at the bar in my retirement, listening to a guy saying "I remember a mate of mine in 2006 on €20k getting a €3million mortgage".

Its become clear in recent times how some financial institutions were noticeably less prudent than others. Sometimes its obvious that mistakes were made, things were rushed and for whatever reason proper procedures not followed. Sometimes it may have been excused by an oversight, or by the "wink wink" , or a rush to get things done by a bank holiday weekend, or the borrower being a friend / acquantaince, or the lender geting a bonus / kickback, lack of experience of the lender or whatever. I remember one particular lender diversifying in to an area ( commercial lending through brokers ) they had no experience in, and little expertise as it proved. I would image lending staff sometimes got commission / bonuses / promotion for reaching or exceeding targets they advanced?


To answer the OP's question, the most shameful lending I know of is a loan for 90 times the persons income. The borrowers own bank did not give him a loan at all when he asked for one, but another bank lent a 7 figure sum which was over 100% of the property cost, for 90 times his income. The borrower (who was medically unwell ) had closed down his old business / sold old stock etc, and the broker knew that, but the financial institution either did not know or did not care. Should'nt the financial institution have phoned up / checked to see if the borrower had the means to make 20 years of monthly repayments? The building society used a "buy-to-let" mortgage application form, for this 209 year old property! No proper valuation was done - the valuation which was done valued the property ( a derelect property of an eleventh of an acre in the west of Ireland ) at 17 million an acre! The nearest record within a 130 mile radius was a fraction of that. The borrowers life has been destroyed since, and his life made a hell. Sleepless nights, 7 years without holidays or new clothes, losing assets built up over many years, secondhand Santy toys, a miserable lifestyle and future etc

No wonder many of the banks and building societies in Ireland got in to so much trouble, and destroyed the country in the process. Not all financial institutions acted imprudently or shamefully though. Some "bankers" have a lot to answer for. None have gone to jail and few have lost their jobs or pensions as a result of their mistakes. Not yet anyway.

The banks and building societies had a duty of care to their customers, and to society in general. After all, society has bailed them out. The financial institutions should have ensured loans were sustainable and the borrower had the capacity to make 20 years monthly repayments if that was the terms of the loan. They should have ensured that the property was fairly and properly valued by a competent, qualified and experienced valuer, not known to the property vendor, buyer etc.

In a hypothetical case, if a man off the street was mad enough to want to pay 200k for a secondhand ford fiesta, and was enticed by an interest only loan for the first few years, the financial institution should not lend 210k if his salary was 4k. The financial institution should have checked to see if the figures added up before lending the money. The man off the street was not the financial expert : it was the banks job to evaluate his ability to meet monthly repayments over the term of the loan, and the bank should not lend money to be repaid over 20 years when it knows it will not be repaid over 20 years. And the secondand fiesta should not have been valued at 200k if other fiestas were worth nothing like that - even if the valuer knew the borrower well, and the borrower wanted that particular fiesta.

The truth will out yet, and thank God it will. If it does not, bankers will repeat the same mistakes again at some point in the future. We must all learn from the past. Some have not felt the pain yet.

Call the above for what it is.Difference between reckless lending/borrowing and falsifying documents to borrow. Falsifying P60s and documents or facilitating someone borrowing on the back of fraudulent documents is fraud pure and simple. Its much more than shameless borrowing. Its a crime and should be reported to the Guards. Banks should have been much more vigilant and had a duty to check properly also to prevent it.
Reckless lending, allowing ridiculous multiples of salaries happened and should not have but it should not be equated with borrowing or lending based on fraudulent documents.Finally i don't believe some of the above. Anecdotes tend to turn out quite different when the full facts are known, though of course the lending may still be ridiculous.And....... contrary to the feeling one might get from reading Several posts above. The vast majority of the people did not engage in these practices so it was not the norm. That is simply a reason cited to excuse behaviours or to suggest its was somehow the done thing. It was not! Crying wolf, etc......

Chris said:

Not just blessing it was encouraged. Year after year more and more subsidies were given to home buyers in order to make sure that more people that couldn't afford to buy actually did buy. And all the opposition had to say was that too little was being done for struggling home buyers. What the banks were doing is exactly what politicians wanted them to do.

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Thanks Chris.

For some bizarre reason I hadn't thought about it in such a clear way for a long time, what with all the other noise.

The key point is that it was an active policy of government and opposition to encourage hundreds of thousands of first time buyers to enter the market over a short few years.

I still maintain that the one simple and necessary lesson from all of this is to look at the demographics. If 25,000 couples marry in a given year, more than double that number are coming into the market as first time buyers and supply increases to these levels, the government needs to think 'how on earth that is sustainable?'.

In fairness, we are a country that never had a housing surplus in its history. That won't be an excuse for ignoring the demographics again.

Gerard123 said:

. Falsifying P60s and documents or facilitating someone borrowing on the back of fraudulent documents is fraud pure and simple. . Its a crime and should be reported to the Guards. Banks should have been much more vigilant and had a duty to check properly also to prevent it.
.

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We don't do white coller crime in Ireland so you'd be wasting your time reporting it to the Gardai.

As for the duty of banks, looks like they had carte blanche from the central bank, regulator and government to dish out money by the wheelbarrow to people who should never have been approved.

The most ludicrous lending I heard of happened to me. I was on 35k and said including overtime it can be up to 40k. I applied for a mortgage of 439k - they rejected but instead gave me a mortgage of 409k along with an unsecured personal loan of 30k to make up the shortfall.
They also said I needed a guarantor for 100k to be fair.
But even so - how could I possibly have paid that back on that salary. (That didn't stop me taking it of course. Live and learn I guess !)

Brendan Burgess said:

A friend of mine asked me for advice some years ago when they wanted to buy a house. They had an offer accepted for €180k. I reckoned that their salary was around €30k . At the time the salary multiples were only about 2.5. I strongly advised him against buying. He showed me his p60 - his salary was €60k . I was really surprised he was earning that much and I told him so. He told me that his employer ran a separate payroll system to generate false p60s for employees. He was actually earning only €30k.

Bank of Ireland had approved the loan in principle but refused it when the bank statements were produced. He went back to the auctioneer who said "no problem" and introduced him to a local mortgage broker. The mortgage broker said that IIB (now KBC) was the only lender not to check bank statements so he got the loan from IIB.

Of course the house doubled in value. He subsequently remortgaged it for a deposit on an investment apartment. He has now lost his job and is calling for debt forgiveness.

I am sure that others have similar examples of shameful borrowing.

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Lol.!
It's amazing the parallels between mortgage lending (and general lending) and spread betting.
Both let you borrow way over your weight.
You may make a fortune if things go right for you.
You may lose more than your initial deposit if things go the wrong direction for you.
Both have a magic "safety" ratio of 3:1.