Housing Minister Margaret Becket said on the BBC Radio Four programme this morning (December 4th) that it cost mortgage lenders £35 000 every time they were ‘forced’ to repossess a house when homeowners fell into arrears with their mortgage.
Now I’m sure Margaret Becket hasn’t intentionally constructed a lie or simply invented this figure herself. But it is most definitely a lie and it is a completely fictitious figure too. So where did this piece of fiction come from ?
Could it be from the Council of Mortgage Lenders ?
The truth is most repossessions cost the lenders absolutely nothing. But they cost the persecuted homeowner plenty because it is the homeowner that is made to pay any extra costs incurred by the lender.
Not only does the repossessed homeowner have to pay all the real costs, but lenders invent utterly fictitious ‘costs’ which they add to the final bill to the homeowner. This is all extra profit opportunity for the lender.
This is why the banks were so keen to develop their laughingly labeled ‘subprime’ mortgages. They allow the banks to contrive to make more and more borrowers desperate for a mortgage as the banks falsely label them ‘too risky’ for ordinary, standard mortgages.
This contortion of thinking then allows the banks an excuse to tie these borrowers up by forcing them to accept weasel mortgage contracts worthy only of Shylock the evil money lender. The contracts are specifically designed to fleece the borrower at every turn and push him further into debt as his home is stolen bit by bit by the system the banks have deliberately designed to do exactly that.
You see, the banks have all got together to form a sort of cartel or effectively a monopoly where they all follow the same procedures to milk as much money as possible from their customers and in particular to catastrophically penalise the most disadvantaged and poorer people.
I personally know of a case where a homeowner has been systematically milked of about half a million pounds of the value of his house as he was repossessed four times in rapid succession. Mortgage lenders literally forced him to remortgage again and again by using their artfully constructed lending system to get their hands on nearly all the equity by means of falsely claimed ‘expenses’ and ludicrously named ‘early redemption penalties’ Oh, and rapaciously higher interest charges on the completely false premise of ‘higher risk’.
So where, precisely, does this claim of each repossession costing the mortgage lender £35 000 come from ?
I suspect it is a figure mostly comprising the imaginary losses dreamed up by lenders of the loss of profit they would have obtained if the mortgage had continued.
In other words they have lost absolutely nothing at all except their greedy little dream on some further profit in the future which their twisted minds makes them think they can describe as a real loss now.
It is a lie. It is the same as you or I saying we have ‘lost’ a million pounds because we failed to earn more money than we have. It is a fiction. Just like a lot of what the banks get up to. They are so used to habitual lying they no longer have any understanding of the truth – just like most other career criminals.
Tags: Bank Charges, Banks, Birmingham Midshires, Capital One, Chancellor, Cheltenham, Credit Crunch, Debt, financial crisis, Financial Service Authority, Fraud, FSA, Gordon Brown, High Street Banks, Iceland, Kensington, Labour Party, Lloyds Bank, Lloyds TSB, Loans, money, Mortgages, News, Office of Fair Trading, OFT, Ombudsman, Overdraft, Politics, Poverty, Prime Minister, recession, repossession
MODERN TIMES IN MUDSHIRES 
December 22, 2008 at 12:36 pm
Oh, and before you start deriding me for my apparent lack of comment on the financial industry practices in the sale and resale of debt (in Mortgage Backed Securities for instance), i have avoided this topic in fear that this may draw us off in another tangent. Nethertheless, we must remember that MBSs only exist as a result of borrowing from customers. So my early points about ‘Who’s to blame’ still hold steady.
December 22, 2008 at 12:24 pm
Rocketone, my ‘opinions on the matter are justified’ comment represents that i do feel that you head in the right direction with some of your comments and opinions on SubPrime, sadly you generally seem to undermine youself in a later paragraph… I justifiably think that some critic can be levelled at higher risk lending, particularly the American market, but it needs to be done at the right aspects – not just a general bashing. You must also recognise the purpose AND BENEFIT of subprime – its not a complete blackhole of soul destroying evil…
Right, to your questions: “Can it be the fault of someone else, other than the banks ? They were in sole control, were they not ? No Government or individual had the capacity to cause the ‘Credit Crunch’. It was caused entirely by the activities of the banks”
This does seem to be a complete departure from the start of this tread in which we were simply discussing the functionality of the subprime market – you now seem to be making it the scapegoat for the current financial situation. Nethertheless…
OK, i think you need to take a step back from the front line, put your bank hating gun away, and get yourself to the top of the hill so you can oversee the ‘battle ground’ below. Lets look at the situation we now find ourselves in and give the causes an honest appraisal – I think YOU will find (much to your annoyance no doubt) that the banks aren’t solely to blame for our current plight, not matter how much you try to pin the tail on the preverbial donkey.
It would be fair to say that ‘Credit Crunch’ essentially stems from debt – non repayment of that debt, or the persceptive risk of non repayment being fundamental to our problems. Debt, or borrowing, has been at its highest levels for years. Why has that happened? why, now more than ever, do/can people borrow money instead of living from their own resources?
Clearly, Banks (and such like) facilitate the creation of credit – and you will no doubt argue that ‘if they didnt lend so much money in the first place, people couldnt accumulate the level of debt they now find themselves in and this whole situation could be avoided’. Yes, well done. But that argument is simply countered by: ‘if people didnt borrow so much money in the first place, people wouldnt accumulate the level of debt they now find themselves in and this whole situation could be avoided’.
Supply of credit is useless without a demand for credit. If people dont wish to borrow, banks can’t force it on them. I think we can agree on that point. This however raises two questions – why do people now wish to borrow more money, and why are they now able to obtain it?
Clearly times have changed since my dad’s day. Ive heard him regail stories about having to visit the bank manager wearing a suit in order to obtain his mortage + additional borrowing, just so the bank manager would think him trustworty enough, and that saving was the attitude of the day. Times have changed – but why?
The reasons? well, we could debate over them all day long. I think however we can nail a few down with phrases like ‘Living Standards’ and ‘Competing Economy’. People want a certain standard of living. People want a certain standard of living for their children. People aren’t willing to ‘make do’ and strive to improve their living standards quicker than their own means allow. Is that the banks fault? NO. Its society’s fault. The need and demand for credit wasnt created by the banks – facilitated by them yes, but created by them – NO. Our economy, on reflection, functioned on the cash flow of debt. Is that the banks fault? No. Who is responsible for economic function/qualities of a country – the Government. Who is in control of financial regulation? the banks? No. The Government.
So… to your comment “No Government or individual had the capacity to cause the ‘Credit Crunch’. It was caused entirely by the activities of the banks” – i think you’re wrong. Whose to blame? probably ALL OF US. We the people borrowed money wanting lifestyles quicker than out pay cheques can provide. Defaulting customers borrowed too much money and did not manage their fiancnes better/more realisticly. Banks facilitated the lending of money at higher levels of risk than they did before. The government allowed the economy of debt to grow into the econmoy of doom. The goverment lacked robustness in their financial regulation.
You cant realistically maintain that this is solely the banks fault, can you? it is all inexplicably linked. I find it difficult to understand why you take the absolutist view that you have – its like blaming a Petshop that a rottweiler mauled a young child. Should the Petshop have sold the dog – probably not. Should the owner have bought the dog? probably not. Should the owner have let the dog off its lead in the park? probably not. Should the government have allowed the sale of such a dog to such an irresponsible owner. Probably not. Who’s to blame???? It can’t solely be the Petshop. Too many people wish to pass the blame and need a scapegoat. Making a scapegoat doesnt quite work though if the person themself carries a bit of blame with them.
Maybe you will however elaborate your ideas when you get time.
December 21, 2008 at 8:24 pm
I’m really anxious to reply (but will have to wait owing to lack of time right now ) in detail because many points you make are demonstrably incorrect. I feel confident you will willingly agree that is the case. You already concede my ‘opinions on the matter (sub-prime mortgage market) are justified’ having started off by completely rubbishing those opinions.
I have just written this. Can you argue otherwise ? Can it be the fault of someone else, other than the banks ? They were in sole control, were they not ? No Government or individual had the capacity to cause the ‘Credit Crunch’. It was caused entirely by the activities of the banks ? :-
‘Just look what the bankers have done recently to Word wide trade and tens of millions of lives !
They are indisputably, single handedly, responsible for destroying the World wide economy, putting millions into poverty.
It was they and they alone who managed the supply of money and it was they alone who were responsible for the integrity of that money.
This integrity of the money supply can only have been destroyed by the greed obsessed banking community, because no other group of people had the ability to manipulate the money supply in any way, other than the banks.
It is an inescapable fact that if the banks had chosen to behave differently to the way they did behave, the money supply could have remained stable and there would have been no World wide financial crisis’.
December 21, 2008 at 6:48 pm
Rocketone, unfortunately your point did not come across, and still doesn’t im afraid. I completely understand that the industry categorises people – of course it does – but its not simply a categorisation of good and bad. Clearly, a perfect ‘repayer’ with sound financials would be a ‘gold standard’ – Prime – customer. Then, at the other end of the spectrum, you would have the opposite standard. As for the people in the middle, they arent simply classed as good or bad – there is a spectrum of rating categories that customers fall into, ‘Near Prime’ or ‘Access’ for instance. Financial companies spend thousands upon thousands analising customer bases, purchasing credit risk analysis tools, trying to break customers down so that they can be marketed to correctly – its their business to make profit – you make out like they see one missed payment on a credit report and immediately make the customer sub prime. Dont be stupid.
With the greatest will in the world, financial companies can’t apply a ‘we’ll give you a try’ mentality each to customer and you are an idiot if you think they can/will. If a customer comes in with the same (or thereabout) financial circumstances/history of 10000 other customers, who have all been shown to default on their repayments, do you really expect the banks to forget about such statistics?
You claim that i cant see things from the ‘real world’ perspective – i would love to live in the ‘happy go lucky’ world you seem to envisage in your mind, where people can miss repayments, but it doesnt matter, as Mr Banker will treat them the same as good customer and carry on lending to them the same – sadly, i dont. I live in this little place i like to call “The Real World”. Where if you miss repayments, it affects you negatively. Its tough, but its the way it is – and the way it NEEDS TO BE.
Please dont misinterpret me as being somone who believes the industry is blameless – clearly it is in so many ways. And please don’t believe that i am here carrying the tourch of subprime trying to defend it till my last breath – im not. I think your opinions on the matter are justified. But you write as though its the industries fault, and thats the end of the discussion. Its not however. The industry, like any other industry, exists to serve its customers – it is customers who essentially decide what they want to take out of an industry. Some customers couldnt get credit from standard sources, so what happens, they obtain credit from the subprime market. Such is the way of things.
Id say, from your writings, that you clearly have a chip on your shoulder with the financial world – my guess is that you are either someone who likes to comment for comments sake, someone who likes to dispense their presumed intelligence and understanding of things, or, more likely, you are a subprime customer and feel hard done by by the ‘rough deal’ the world has given you. Instead of passing blame, sub prime customers need to ask themselves how did they get into their respective situations? Did they really need that brand new car on credit? or that 50inch plasma tv that they ended up defaulting on payments on? or did they need to move into that expensive house (they they ended up defaulting on) just because they couldnt make do with the two bedroom flat that they could afford? or instead of blowing all their money on going down the pub each day, or buying flashy holidays etc, could’t they have planned their finances better (like smart people) and saved some money in case they fell on bad times? etc… this list could go on and on and on… but hey, you probably couldnt care less that the borrowers and their excessive lifestyles may be partly to blame for their predicaments, it all the industries fault… isn’t it now….
December 20, 2008 at 8:40 pm
MMMMM !!! I haven’t the time to write a proper reply right now. But you are are really missing the point I am trying to make. I must blame myself for obviously not being sufficiently literate to adequately explain what I am trying to convey to other people. I’ll keep trying !
One thing you don’t understand, and presumably I haven’t managed to get across, is that the financial industry falsely categorises many people as ‘bad’ risks.
They are then forced unwittingly into the ‘subprime’ arena where the Alice in Wonderland thinking and behaviour of lenders makes Shylock look like a really cuddly, thoroughly nice upstanding citizen anyone would want to do business with !
You sound to me as though you are a member of the financial industry because your comment gives me the impression you can only see things from the point of view of that world and not from somewhere in the real World.
It is a simple truth that if the whole of the financial industry was grounded in the real World and not some demented fantasy then their natural guardianship of the World financial system would not have disintegrated into a cess pit of chaos as a direct result of their revolting behaviour.
December 20, 2008 at 5:41 pm
Rocketstone, ive read a few of your blogs now, and am increasingly at a loss to your ideas. Your claim that banks invented sub prime to cash in on repossessions is laughable – any ordinary person (who is not an idiot) can comprehend why the subprime market was created – it certainly wasnt for cashing in on repossessions. You state that the subprime market is based on the completely false premise of higher risk – are you really thinking that you are writing an insightful comment with utter drivel like that? The subprime market functions of the simple premise of ‘risk and return’. If you had two persons who wished to borrow money from you, one with a glowing credit history and sound financials, and the other, with a credit history more rocky than a trip on the moon, are we to take it that you would you lend them money on exactly the same terms??? you wouldn’t adjust your pricing to hedge against the higher risk of default from the more risky customer?? be serious. The example you use of someone being reposessed 4 TIMES yet the higher interest charged being based on the false premise of higher risk is ludicrous – the person was repossessed 4 TIMES – a clear indication of higher risk. You also make completly conflicting arguments in that subprime is there to make the poor poorer, yet you use an exaple of some who had equity in his property of 0.5mil – hardly someone living on the edge…And for the record, no one has suggested that the lenders are having to bear the costs of repossession, it has mearly been indicated that those are the costs. Of course those costs will be passed onto to the customers whose home are repossessed – but such is the way of things. Would you rather those costs be passed onto every other customer? of course not. People who have their homes repossessed fall into two categories – those who have fallen on bad times and those who have created bad times for themselves. People who legitamately lose their jobs, fall ill etc have my utmost sympathy for their situation. Those people who borrowed money to try to fulfil a lifestyle greater than their means need to take a long hard look at themselves and stop blaming the world for their mistakes.