hno:
up.<TABLE cellSpacing=0 cellPadding=0 width=629 border=0><TBODY><TR><TD colSpan=3>Self-cert mortgages could skew market
</TD></TR><TR><TD vAlign=top width=416><!-- S BO --><!-- S IIMA --><TABLE cellSpacing=0 cellPadding=0 width=203 align=right border=0><TBODY><TR><TD>
Many lie about their income in their mortgage application
</TD></TR></TBODY></TABLE><!-- E IIMA -->Could you believe that a bank would invite customers to defraud it? It may sound incredible, but that is what some of Britain's biggest mortgage lenders have in effect been doing.
As a result, a flood of illicitly obtained mortgage money may have been pouring into homeowners' pockets, boosting both house prices and consumer spending.
The Money Programme started investigating mortgages last year.
After months of undercover work, our film "Mortgage Madness" finally answered one of the great puzzles of the British housing boom: How some people were managing to meet the soaring cost of housing.
The answer was so simple, we found it almost unbelievable.
Some major British lenders had changed their lending rules in a way which allowed borrowers to get far bigger mortgages than they were entitled to.
All a borrower had to do was to lie about how much they earned.
Prudent lending
Lying on a mortgage application form is a criminal offence.
But it is a crime some lenders had made disarmingly easy to commit.
For decades, the maximum a borrower could raise on a mortgage had been set as a multiple of income.
On a typical multiple of three-and-a-half times income, the most someone earning £30,000 would be able raise on a mortgage was £105,000 - that is 3.5 x £30,000.
The income multiple rule was rough and ready, but it was effective in stopping borrowers from borrowing more than they could afford and lenders from lending more than was prudent.
The rule worked because lenders used to insist that borrowers proved the incomes they claimed, either by producing evidence from their employers or, if they were self-employed, profit figures from their accountants.
Excessive lending
But in the increasingly frenzied scramble for business during the housing boom, Britain's biggest mortgage lenders increasingly began to offer a new kind of mortgage where proof of income was not required at all.
With these new so-called "self-certification" mortgages, borrowers simply stated their income and lenders made it clear they would not check the amount borrowers claimed.
Known in the trade as "self-certs" these mortgages, with their lack of income checks, made it simple for borrowers to lie about what they earned.
Having lied, the lender's multiple would be applied to the inflated earnings figure and the maximum mortgage a borrower could get would be increased.
Buying power
Last year when we visited Ealing, a house price hot-spot in West London, nine out of ten of the mortgage advisers we consulted recommended we should lie about our £30,000 salary, falsely boosting it to over £50,000 on our mortgage application form.
The effect of the lie was dramatic.
Instead of the £105,000 or so we could have raised on an honest mortgage application, suddenly we were being offered mortgages of around £185,000, giving us vastly more buying power to pump into the local housing market.
In Manchester house prices are lower, but nevertheless three out of the seven advisers we consulted suggested that we lie for a bigger mortgage.
When we visited high street branches of Birmingham Midshires, part of Britain's biggest mortgage provider, the Halifax Bank of Scotland group, three out of three of the advisers we consulted offered us self-cert mortgages of around six times our income for which we would have to have lied.
One of these advisers boasted of getting a client a mortgage of around ten times income by inflating his salary to over £100,000.
Market distortion
The potential boost to house prices from this extra cash was obvious.
How big it was depended on how many people were lying on self-cert mortgages and how much additional borrowing was being generated as a result.
On the day "Mortgage Madness" was broadcast, the Council of Mortgage Lenders, the lenders' trade association, were quick to play down any suggestion that lax lending by some of their members could have distorted the housing market.
It could not have happened, they insisted, because the self-cert mortgages were a tiny part of the market; less than 1%.
Large problem
This 1% figure was so wildly at variance with what we had found on the ground that we didn't believe it.
We began a second investigation to try to find out how many mortgages there really were where lenders did not ask for proof of borrowers' incomes.
The result of this second investigation is astonishing. Far from being a piffling 1% or less of the market, it turns out it is huge. One leading broker we consulted estimated that up to 30% of new mortgages are now issued without lenders asking for any proof of income.
</TD></TR></TBODY></TABLE>
etc....
http://news.bbc.co.uk/1/hi/business/3478635.stm
</TD></TR><TR><TD vAlign=top width=416><!-- S BO --><!-- S IIMA --><TABLE cellSpacing=0 cellPadding=0 width=203 align=right border=0><TBODY><TR><TD>
</TD></TR></TBODY></TABLE><!-- E IIMA -->Could you believe that a bank would invite customers to defraud it? It may sound incredible, but that is what some of Britain's biggest mortgage lenders have in effect been doing.
As a result, a flood of illicitly obtained mortgage money may have been pouring into homeowners' pockets, boosting both house prices and consumer spending.
The Money Programme started investigating mortgages last year.
After months of undercover work, our film "Mortgage Madness" finally answered one of the great puzzles of the British housing boom: How some people were managing to meet the soaring cost of housing.
The answer was so simple, we found it almost unbelievable.
Some major British lenders had changed their lending rules in a way which allowed borrowers to get far bigger mortgages than they were entitled to.
All a borrower had to do was to lie about how much they earned.
Prudent lending
Lying on a mortgage application form is a criminal offence.
But it is a crime some lenders had made disarmingly easy to commit.
For decades, the maximum a borrower could raise on a mortgage had been set as a multiple of income.
On a typical multiple of three-and-a-half times income, the most someone earning £30,000 would be able raise on a mortgage was £105,000 - that is 3.5 x £30,000.
The income multiple rule was rough and ready, but it was effective in stopping borrowers from borrowing more than they could afford and lenders from lending more than was prudent.
The rule worked because lenders used to insist that borrowers proved the incomes they claimed, either by producing evidence from their employers or, if they were self-employed, profit figures from their accountants.
Excessive lending
But in the increasingly frenzied scramble for business during the housing boom, Britain's biggest mortgage lenders increasingly began to offer a new kind of mortgage where proof of income was not required at all.
With these new so-called "self-certification" mortgages, borrowers simply stated their income and lenders made it clear they would not check the amount borrowers claimed.
Known in the trade as "self-certs" these mortgages, with their lack of income checks, made it simple for borrowers to lie about what they earned.
Having lied, the lender's multiple would be applied to the inflated earnings figure and the maximum mortgage a borrower could get would be increased.
Buying power
Last year when we visited Ealing, a house price hot-spot in West London, nine out of ten of the mortgage advisers we consulted recommended we should lie about our £30,000 salary, falsely boosting it to over £50,000 on our mortgage application form.
The effect of the lie was dramatic.
Instead of the £105,000 or so we could have raised on an honest mortgage application, suddenly we were being offered mortgages of around £185,000, giving us vastly more buying power to pump into the local housing market.
In Manchester house prices are lower, but nevertheless three out of the seven advisers we consulted suggested that we lie for a bigger mortgage.
When we visited high street branches of Birmingham Midshires, part of Britain's biggest mortgage provider, the Halifax Bank of Scotland group, three out of three of the advisers we consulted offered us self-cert mortgages of around six times our income for which we would have to have lied.
One of these advisers boasted of getting a client a mortgage of around ten times income by inflating his salary to over £100,000.
Market distortion
The potential boost to house prices from this extra cash was obvious.
How big it was depended on how many people were lying on self-cert mortgages and how much additional borrowing was being generated as a result.
On the day "Mortgage Madness" was broadcast, the Council of Mortgage Lenders, the lenders' trade association, were quick to play down any suggestion that lax lending by some of their members could have distorted the housing market.
It could not have happened, they insisted, because the self-cert mortgages were a tiny part of the market; less than 1%.
Large problem
This 1% figure was so wildly at variance with what we had found on the ground that we didn't believe it.
We began a second investigation to try to find out how many mortgages there really were where lenders did not ask for proof of borrowers' incomes.
The result of this second investigation is astonishing. Far from being a piffling 1% or less of the market, it turns out it is huge. One leading broker we consulted estimated that up to 30% of new mortgages are now issued without lenders asking for any proof of income.
</TD></TR></TBODY></TABLE>
etc....
http://news.bbc.co.uk/1/hi/business/3478635.stm
just getting comical
NO RECESSSIONS ALLOWED!! INTERVENTION RULES!!
reality check: gonna make the one that comes eventually much worse
---------------------------------------------------------
How Bush may boost the economy
Any short-term push to stave off a recession could face political and budgetary challenges.
By Jeanne Sahadi, CNNMoney.com senior writer
January 4 2008: 4:52 PM EST
NEW YORK (CNNMoney.com) -- Word is that President Bush may propose new measures to boost the economy by the time he gives his State of the Union address later this month.
While he has steadfastly maintained that the economy is fundamentally strong, the fact that the president is considering a so-called fiscal stimulus package is an indication that the Administration is getting worried.
Such a package would aim to ward off a recession, the fear of which has grown stronger in the wake of discouraging data on jobs, rising energy prices and a slowing housing market.
There is also an indication that leading Democrats might be working on a plan of their own. A spokesman for Senate Finance Committee Chairman Max Baucus (D-Mont.) said in an e-mail to CNNMoney.com that Sen. Baucus "already has ideas of his own about the possible need for an economic stimulus package this year and is planning for the Finance Committee to discuss very early in the session what shape such a package might take."
Tax cuts on the table
It's not clear what measures the White House is considering, but it is widely believed that tax cuts are among them. In that realm, there are a number of options the president could propose, but all of them carry political costs, economic costs or both.
One option that economist Mark Zandi of Economy.com thinks might help is a temporary tax cut, much like the $300 tax rebate Americans got in the wake of Sept. 11. "It was well-timed and was significant for lower and lower middle-income households," Zandi said, although he acknowledged that not all economists agree about how successful the rebate was.
But a new rebate will likely draw criticism. In 2001, the government had the advantage of a budget surplus. Now it's operating with a deficit, which could raise concerns about the cost of a rebate. "Where's the money going to come from? [A rebate will] take it from some other place in the economy," said Chris Edwards, director of tax policy studies at the libertarian Cato Institute, which advocates for limited government and free markets.
Zandi thinks it might also make sense to make President Bush's income tax cuts for the middle class permanent, a move that leading Democratic presidential candidates have indicated they'd support. Where they part company with the president, however, is in making those tax cuts permanent for high-income households, too. So if the president did push for an extension of his tax cuts for the middle class, that could undercut his stated goal of making his tax cuts permanent for everyone, Zandi said.
Zandi would also advocate making the lower rates on capital gains and dividends permanent for everyone. Despite his belief that the federal government should not try to control the short-term performance of the economy, Edwards agrees that such a move could help stabilize the markets by giving investors more certainty about their investment tax bill. It also would reduce any pressure investors might feel to sell their holdings before the investment rate cuts expire.
But the cost of making any of the Bush tax cuts permanent is a sore point for fiscal watchdogs, who contend such cuts are unaffordable in the long term, given the growing budgetary demands of Social Security and Medicare as well as the war in Iraq.
Of course, with any tax-based stimulus, the potential benefit of its short-term effect has to be weighed against its long-term cost, said Clint Stretch, a federal tax policy expert at Deloitte Touche. "[You must consider the net benefit] if you have to turn around to the credit markets and borrow the money to pay for it."
Non-tax options
President Bush could also call for measures intended to stimulate the housing market, Zandi said.
Bush has already said Congress should act quickly to pass a number of housing-related legislative proposals that he supports. One key measure would reform the Federal Housing Administration (FHA), which would make the relatively low cost FHA-insured mortgages more readily available to consumers who want to buy homes and to those who want to refinance out of unaffordable subprime loans.
The White House also might consider calling for a temporary increase in the size of mortgages that Fannie Mae (FNM) and Freddie Mac can purchase from mortgage lenders. These two government-sponsored enterprises guarantee the purchase and trading of so-called "conforming" loans, which are those valued at $417,000 or less. Any loans above that amount are considered "jumbo" loans.
An increase in the conforming loan limit would make it easier and less costly for borrowers in high-cost areas to get loans because Fannie and Freddie would guarantee their purchase by investors.
In the past, the Administration has said it would support a temporary increase in loan limits, but only if lawmakers pass legislation that would boost oversight of both Fannie and Freddie, which have been plagued by accounting scandals. To top of page
NO RECESSSIONS ALLOWED!! INTERVENTION RULES!!
reality check: gonna make the one that comes eventually much worse
---------------------------------------------------------
How Bush may boost the economy
Any short-term push to stave off a recession could face political and budgetary challenges.
By Jeanne Sahadi, CNNMoney.com senior writer
January 4 2008: 4:52 PM EST
NEW YORK (CNNMoney.com) -- Word is that President Bush may propose new measures to boost the economy by the time he gives his State of the Union address later this month.
While he has steadfastly maintained that the economy is fundamentally strong, the fact that the president is considering a so-called fiscal stimulus package is an indication that the Administration is getting worried.
Such a package would aim to ward off a recession, the fear of which has grown stronger in the wake of discouraging data on jobs, rising energy prices and a slowing housing market.
There is also an indication that leading Democrats might be working on a plan of their own. A spokesman for Senate Finance Committee Chairman Max Baucus (D-Mont.) said in an e-mail to CNNMoney.com that Sen. Baucus "already has ideas of his own about the possible need for an economic stimulus package this year and is planning for the Finance Committee to discuss very early in the session what shape such a package might take."
Tax cuts on the table
It's not clear what measures the White House is considering, but it is widely believed that tax cuts are among them. In that realm, there are a number of options the president could propose, but all of them carry political costs, economic costs or both.
One option that economist Mark Zandi of Economy.com thinks might help is a temporary tax cut, much like the $300 tax rebate Americans got in the wake of Sept. 11. "It was well-timed and was significant for lower and lower middle-income households," Zandi said, although he acknowledged that not all economists agree about how successful the rebate was.
But a new rebate will likely draw criticism. In 2001, the government had the advantage of a budget surplus. Now it's operating with a deficit, which could raise concerns about the cost of a rebate. "Where's the money going to come from? [A rebate will] take it from some other place in the economy," said Chris Edwards, director of tax policy studies at the libertarian Cato Institute, which advocates for limited government and free markets.
Zandi thinks it might also make sense to make President Bush's income tax cuts for the middle class permanent, a move that leading Democratic presidential candidates have indicated they'd support. Where they part company with the president, however, is in making those tax cuts permanent for high-income households, too. So if the president did push for an extension of his tax cuts for the middle class, that could undercut his stated goal of making his tax cuts permanent for everyone, Zandi said.
Zandi would also advocate making the lower rates on capital gains and dividends permanent for everyone. Despite his belief that the federal government should not try to control the short-term performance of the economy, Edwards agrees that such a move could help stabilize the markets by giving investors more certainty about their investment tax bill. It also would reduce any pressure investors might feel to sell their holdings before the investment rate cuts expire.
But the cost of making any of the Bush tax cuts permanent is a sore point for fiscal watchdogs, who contend such cuts are unaffordable in the long term, given the growing budgetary demands of Social Security and Medicare as well as the war in Iraq.
Of course, with any tax-based stimulus, the potential benefit of its short-term effect has to be weighed against its long-term cost, said Clint Stretch, a federal tax policy expert at Deloitte Touche. "[You must consider the net benefit] if you have to turn around to the credit markets and borrow the money to pay for it."
Non-tax options
President Bush could also call for measures intended to stimulate the housing market, Zandi said.
Bush has already said Congress should act quickly to pass a number of housing-related legislative proposals that he supports. One key measure would reform the Federal Housing Administration (FHA), which would make the relatively low cost FHA-insured mortgages more readily available to consumers who want to buy homes and to those who want to refinance out of unaffordable subprime loans.
The White House also might consider calling for a temporary increase in the size of mortgages that Fannie Mae (FNM) and Freddie Mac can purchase from mortgage lenders. These two government-sponsored enterprises guarantee the purchase and trading of so-called "conforming" loans, which are those valued at $417,000 or less. Any loans above that amount are considered "jumbo" loans.
An increase in the conforming loan limit would make it easier and less costly for borrowers in high-cost areas to get loans because Fannie and Freddie would guarantee their purchase by investors.
In the past, the Administration has said it would support a temporary increase in loan limits, but only if lawmakers pass legislation that would boost oversight of both Fannie and Freddie, which have been plagued by accounting scandals. To top of page
who knows the week to week noise, asia following US so far tonight but expected and not super bloody, dow futures up 37 currently
projection for 2008 down significantly 10% or more only
the wild card to keep us afloat somewhat in 08 is the above an election year
prop jobs from government, bush trying to protect whatever legacy he thinks he has, dems giving the handouts to sheep screaming at them for help with housing imploding with an election the horizon
whoever takes office in 09 is gonna be left with one humongous mess IMO
Uh huh, too bad I probably won't be able to find a nice chart on election day in 04 when everyone thought Kerry was the winner. The market tanked.
But this time it's unique, because Democrats have an opportunity to gain a parliamentary-like majority. And given their far, far left ideology, a lot of investors are nervous.
Look at the markets after the Iowa caucuses -- DOWN. Part of it was the jobs report but if you think Wall Street doesn't pay attention to politics you're dreaming.
I know a couple people who've already converted some of their shares into cash and it's only going to get worse between now and Nov.
