So what possible interest is this to MI readers? I personally don’t have a problem with sub prime lending. At the end of the day its all about risk and reward, the higher the risk the higher the interest rate. Where clearly there is a problem, as highlighted by your various letters of the week on self certification, is the fact that there is too many lenders chasing too little business.
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As a former commercial mortgage underwriter, I have little sympathy with lenders who, rather than employing people who understand how to read a set of accounts, management figures, bank account statements and a business plan, employ inexperienced staff who follow a manual. If a newly formed business goes to a local bank manager for an overdraft clearly they are not going to have three years of audited accounts, so he’s going to ask about their business plan, what the turnover has been, look at the bank accounts, see what orders have already been taken and generally assess the business as a whole. This is clearly quite beyond any of the mortgage lenders I’ve ever come across, so we go for “self certification”. No proof of anything, we’re just going to take your word for it.
Still, everyone’s happy. The lender increases its mortgage book, the client gets their mortgage quickly and without fuss and of course our good selves get our slightly enhanced procuration fee.
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I believe at some point at time the current housing price bubble will at the very least deflate, probably combined with high interest rates and mortgage arrears and maybe then we’ll catch the cold the Americans currently have. I think that’s when all abuser of the system will get there comeuppance.
Paul Ormerod
Caliber Financial Associates Limited
