Topic: CREDIT CRUNCH

[Amazin]

If you jail all the bankers and financiers, the economy would crash even more!

Who said jail them all, Paulines7?

I'm talking about the people who were recklessly gambling for very high stakes who are clearly guilty of robbing people of their money, families of their homes and chilldren of their security.

The woman who was found guilty of conning auction houses out of paintings, jewellery and antiques is facing a jail sentence for £2m worth of goodies. If we take her sentence and multiply it by the billions wiped off the stock market and the cost of the job losses, 20 years would be chicken feed.

And Kitty, if you ran your business in a cavalier fashion, wouldn't that be a feather in your cap?

 ;D

(coat on, out the door!)

[OllieC]

Sorry - media hysteria had taken over my keyboard! What's the limit then?

Ha, very good! 3.5 times income was about the upper end, and "total personal income" was the phrase often used...

You could get over 5 times your income without proof with Northern Rock, but only if you had a high or medium credit score. They would lend a bit more if you went for a 5 or 10 year fixed rate - due to the protection this would give you. They operated a fast-track system which many people confuse with a self-cert mortgage although there are a couple of important differences, the main one being that they reserve the right to ask for proof of income at a later date, even after the mortgage has completed. Can't provide it & you could be accused of fraud.

In fact, lying about your income on any mortgage application - even self-cert, is fraud and it always amazed me that any broker would get involved with this (most people I know wouldn't do this). I only ever used self-cert for self employed people, or people with big bonuses or second jobs... which is what they were meant for.

Having said this, it often surprised me how little proof some lenders would ask for - like the time I arranged a loan for someone (who ran his own business) of just under a million pounds & he didn't even have to show one year's accounts (we did have them but that's not the point). Almost like a system designed to be abused, a cynic might say!

[Flunky]

When the first building societies started doing mortgages 3 times income was the "RULE" no arguing, interview with the bank manager etc etc.

Problem was house prices were far out stripping practical lending, All these people who said "hold on, Freds just asked 100K, right i am going to ask £105K" are also to blame. i remember a person in Wells next T' sea rubbing there hands because because Mr Londoner. Paid WAY over the top. the very next breath was complaining her son could'nt afford to buy locally. SHE was one of the causes.

The real problem starts when you start having high loan to values, 125% of your house value is crazy. However, if people already had loans these could be rolled in as unsecured borrowing, over longer terms (more interest!!!) therefore improving "affordability". Theres the justification. Should of stuck at 3x salary.

Ref self cert. Was a disaster waiting to happen. I too could not believe it. You were basically given free reign to commit mortgage fraud. Was dressed up "we wont check" or as you say Ollie "fastrack" it genuinely helped some people but others....Tch, you would not believe it.

[telboy]

Hi All,
I have to admit that I don't have many probs. in this regard except that I have to trim my cloth because of rising fuel/food/etc. costs & I accept that.
The reason for these problems is purely greed on the part of Banks/Hedge Fund Managers/ the public and all the other Financial money grabbing bast**ds.
The Worlds Governments are finally getting their 'brains' around this. It'll take more than a few years to settle down - but hey! don't be greedy anymore!
When you go out for a £4 pint - think on---------

[tonybloke]

I think the problem is that some folk see housing as a means of investment and money-making, not as somewhere to live (a HOME)  most folk talk about their house in terms of worth not comfort! ;)

[telboy]

tonybloke,
Correct. And people borrowed on the strength of their (perceived) investment. Not wise now, was it?
But hey! most of us have enjoyed the paper increase in our house purchace. Just sold our house by reducing the price 30%. A buyer was delighted & bought it. I still made a decent 'profit' on the original investment - so two happy bunnies!
If more folkes thought the same way - maybe our 'society' would adjust to real world?

[jonny211]

Just sold our house by reducing the price 30%. A buyer was delighted & bought it. I still made a decent 'profit' on the original investment - so two happy bunnies!

Don't go into politics telboy - you're too honest!

Jon

[Reetnproper]

I can't help feeling that a lot of the problems with the housing market have stemmed from dual income mortgages, as these mortgages have helped push the houseprices high AND have encouraged couples to over stretch themselves. Had mortgages only been awarded against a single income (the highest one naturally), had mortgage lenders stuck to the old 2.5 times the salary and refused to lend above 90%, then prices wouldn't have escalated so stupidly and many households would not be in negative equity.

I do believe that the financial institutions need to accept responsibility for a lot of the problems within the economy at the moment and should be made accountable for this however, the consumer must also take some of the blame. The problem with society as a whole is the general feeling that the consumer has a right to buy what he/she wants when he/she wants to and sod the consequences (look at how easy and without shame it is to declare bankruptcy now). God forbid that the consumer be expected to actually save a decent deposit for a house, or be expected to save up for the latest T.V., stereo, mobile phone etc.

Now that the 'credit crunch' is starting to bite, the man on the street is crying foul but the reality is that we all now need to make the adjustment back to responible buying, instead of borrowing to pay for even the most basic aspects of living. I know people who claim not to be able to live, are, allegedly, struggling to pay for food but, somehow, they are still able to afford to eat out once a week, go on holiday etc. etc.

We were just as bad as Jo Public but, thankfully, my hubby realised 3yrs ago that we were heading towards ruin and so we pulled our belts in, took control and now, 3 years on, we are finally seeing the light at the end of the tunnel. We've learnt our lessons and we wont be making the same mistakes again. Sadly I don't think that the financial institutes will learn their lessons and, give it a few years, I believe they will be back on the easy credit track, raking it in at the expense of the consumer and we, the consumer, will let them.

Reet
x

[ninnyscrops]

Reetnproper, that's a good post (IMHO).

Also blame tv programmes with the make a fast buck or thousands such as Location, Location, Location and the like which take away the affordable stuff for the youngsters and kid others.

My parents had us three children in their parents' rented house until they could save up to afford their own place. Our two haven't a hope in heaven of buying a chicken coop in the village until they reach retirement age!

Been abroad 3 times since we've had the children and now 29 and 27.  Put all our income into the mortgage.

There's only one consolation here - those banks have bled us all dry and now the well is empty, will be be looking to the little peeps again - their bread and butter. What goes around, comes around - just hold on!

Ninnyscrops

[ACE]

RBS  is quickly going down the drain, as they also have Coutts under their umbrella, I reckon I might loose a few clients soon. :( I bet the queen must be worried  ;)

[thifasmom]

I've been wondering and debating with my OH on what happens when a bank goes under and hasn't been bailed out by the government/ other financial institution. does its borrowers debts get cancelled or do the borrows still have to pay their mortgages and loans and if so to whom would they be paying. so can anyone clear this up for me ??? thanks in advance for your replies :).

[OllieC]

Any lender is entitled to sell your mortgage debt anyway (on the existing terms & conditions), so it would count as an asset & you would almost certainly still have to pay.
This has been a problem in the past - for example, I would place a loan with GMAC who had a pretty flexible lending policy. They would sell a loan book to Britannia (who have a pretty rigid policy) which Britannia would buy because they hadn't met their lending target. The customer would then move house, wanting a small increase, but Britannia would not allow it because new lending would fall under their policy. This cased problems for a couple of my clients...

[thifasmom]

Any lender is entitled to sell your mortgage debt anyway (on the existing terms & conditions), so it would count as an asset & you would almost certainly still have to pay.
This has been a problem in the past - for example, I would place a loan with GMAC who had a pretty flexible lending policy. They would sell a loan book to Britannia (who have a pretty rigid policy) which Britannia would buy because they hadn't met their lending target. The customer would then move house, wanting a small increase, but Britannia would not allow it because new lending would fall under their policy. This cased problems for a couple of my clients...

so what you are saying is; if a bank goes under, its mortgages and loans will have to be sold to someone who will therefore be in charge of receiving your payments. then what happens if no one wants to buy the ''portfolio'' from the stricken bank? or does this not ever happen?

PS the wealth of info on this site truly knows no bounds, I've learnt so much from this post, simply because the explanations are clear and concise with no unnecessary jargon, thanks again.

[OllieC]

It's never happened, as far as I know! But I think you would owe their creditors... Seems a bit one-way doesn't it! They can theoretically lose all your savings (okay, apart from the £50k knee-jerk thing), but they can't lose your debt.

Woody Guthrie said:
I've travelled all around this world, seen lots of funny men,
Some rob you with a sixshooter and some with a fountain pen,
Now as through this world you ramble, and through this world you roam,
You'll never find an outlaw drive a family from their home.

[Rhubarb Thrasher]

the bottom line seems to be - if you owe your bank a thousand, it's your problem. If you owe them a billion, it's their problem. Actually not their problem - still our problem ???

Just heard that Iceland has been repossessed

[thifasmom]

It's never happened, as far as I know! But I think you would owe their creditors... Seems a bit one-way doesn't it! They can theoretically lose all your savings (okay, apart from the £50k knee-jerk thing), but they can't lose your debt.

Nice >:(.

Just heard that Iceland has been repossessed

well i would have assumed they would have stayed in the black due to their merchandise of cheap low rate food :-X.

[OllieC]

Just heard that Iceland has been repossessed

Where's mom going to go now?!?!

[OllieC]

There's a song in there somewhere...

Mum's gone to Iceland, But Icelands gone to sh*t
The bankers say they're not to blame, it's global economics,
My mortgage has gone through the roof, at least the roof's still mine,
And I can make the payments if I do some overtime

etc... or something.

[ACE]

Just heard that Iceland has been repossessed

Where's mom going to go now?!?!

Bejams

[Rhubarb Thrasher]

this short selling is a lark, isn't it? You give your shares to a broker to look after.....err no. you give your shares to a broker - he she or it *borrows*them, gets together with his her it's mates, and sells them all off, the share price goes through the floor, your broker buy them back, gives them back to you, and trousers the difference Genius! And in America at least, if you hadn't yet paid for your shares, they didn't have to tell you they were doing it