Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html

Haven't they learnt any lessons from the near past?

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mailto: news {at} admac {dot] myzen {dot} co {dot} uk

alan_m wrote

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html

Because they want to make more money than they are currently doing.

Haven't they learnt any lessons from the near past?

The lesson from the past isnt that sub prime mortgages
are unthinkable, the lesson from the past is that when
those are bundled and collateralised, that they shouldnt
get anything like AAA ratings and that they dont qualify
for anything like that rating. That doesnt mean that
they are never a viable investment tho.

Nothing wrong with a sub prime mortgage that charges
a higher interest rate because the mortgage is more risky.

The problem with them in the US was that they were
most written by those who didnt give a damn about
the risk because they were resold as soon as they were
written so those who wrote the mortgage only cared
about the commission and in fact the commission on
sub prime mortgages was actually higher because in
theory they would be paying a higher interest rate
once the sucker rate ran out.

And the other problem is the terminally stupid US
non recourse mortgage system where if you can
no longer pay the mortgage you are free to hand
back the keys with no penalty what so ever.

When you can borrow more than the value of the
property, you dont even lose the initial mortgage
payments, you pay those out of the excess you
have borrowed over the value of the property.

So it is a completely risk free investment for the
individual taking out the sub prime loan. If
property values keep increasing, you just flip
the property and put the profit in your pocket.

If the bubble bursts you hand back the keys
and lose nothing at all, not even the initial
mortgage payments.

On Saturday, 23 April 2016 23:01:29 UTC+1, Rod Speed wrote:
alan_m wrote

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html

Because they want to make more money than they are currently doing.

Haven't they learnt any lessons from the near past?

The lesson from the past isnt that sub prime mortgages
are unthinkable, the lesson from the past is that when
those are bundled and collateralised, that they shouldn't
get anything like AAA ratings and that they don't qualify
for anything like that rating. That doesn't mean that
they are never a viable investment tho.

Nothing wrong with a sub prime mortgage that charges
a higher interest rate because the mortgage is more risky.

It's a rare thing that Rod gets something right.


NT

alan_m wrote:

Why have the Halifax started advertising that they are giving sub
prime mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html


Haven't they learnt any lessons from the near past?


No. Stupidity is endemic in our banks WRT the US market. I bet
they don't mention the exchange rate risks!

What I never understood about this practice was how so called well educated
finance savy folk fell for this in the first place. if you work it through,
probably less than a couple of minutes thought required, any financial
organisation would spot the flaw and how they would end up holding the baby
so to speak. Its obviously some form of hypnosis!
Brian

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"Capitol" wrote in message
o.uk...
alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html

Haven't they learnt any lessons from the near past?


No. Stupidity is endemic in our banks WRT the US market. I bet
they don't mention the exchange rate risks!

In article ,
Brian Gaff wrote:
What I never understood about this practice was how so called well
educated finance savy folk fell for this in the first place. if you work
it through, probably less than a couple of minutes thought required, any
financial organisation would spot the flaw and how they would end up
holding the baby so to speak. Its obviously some form of hypnosis!

It's no different to payday loans. You charge a far higher interest rate
to make up for those who default on repayments.

So as ever, the poor pay far more to borrow money they desperately need
than the rich. ;-)

--
*When it rains, why don't sheep shrink? *

Dave Plowman London SW
To e-mail, change noise into sound.

On Sun, 24 Apr 2016 14:36:04 +0100, Brian Gaff wrote:

What I never understood about this practice was how so called well
educated finance savy folk fell for this in the first place. if you work
it through,
probably less than a couple of minutes thought required, any financial
organisation would spot the flaw and how they would end up holding the
baby so to speak. Its obviously some form of hypnosis!
Brian

As soon as the people worked out that they could give out a dodgy loan at
low initial rates, run it for a year to establish a repayment history, and
then sell it on to a 3rd party with no comeback the "easy money" light
came on and any moral scruples (in financial salesmen??) went straight out
of the window.

The same model applied all down the line.
Buy so called "good" loans, mix them with sub-prime, discount the whole
package, sell on, profit!

The people getting bonus and promotion were buying and selling these
derivatives.
So everyone else piled in because they were driven by performance bonuses
(and keeping their jobs).

Eventually the derivatives were so mixed up it was impossible to
accurately qualify them,

Free money with no responsibility?

Just like finding a broken candy machine which gives out free candy if you
bang the side.

It may be theoretically wrong, but hey - free candy!
And it isn't like shoplifting or mugging is it?
Serve them right for not fixing the machine.

So everyone could see the obvious flaw, but nobody believed that they
would be the one without a chair when the music stopped.

Cheers

Dave R

--
Windows 8.1 on PCSpecialist box

On Sat, 23 Apr 2016 21:09:35 +0100, alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...at-is-back-to-
front-ad-campaign-for-Halifax.html

Haven't they learnt any lessons from the near past?

They have learned their lesson and that's why they're doing it again.
They sell sub-prime loans for a premium. The loans eventually turn bad
threatening a systemic collapse. The loans then get lumped onto the
national debt and you and I and our children and their children foot the
bill for it all. It's good business innit.

On 24/04/16 14:36, Brian Gaff wrote:
What I never understood about this practice was how so called well educated
finance savy folk fell for this in the first place. if you work it through,
probably less than a couple of minutes thought required, any financial
organisation would spot the flaw and how they would end up holding the baby
so to speak. Its obviously some form of hypnosis!
Brian

they wer all cahsing short term, profits .

It goes like this.

You are a junior investment operator. You get offered junk that is A1
rated by Moodies and pays out big time. Itf you refeuse it you get fired
fir low performance. If it lasts a year your bonus will be stupendous.
If it all comes down, its not your bank, its the shareholders.

And the government will always bail you oput, because they owe your bank
trillions.



--
€œit should be clear by now to everyone that activist environmentalism
(or environmental activism) is becoming a general ideology about humans,
about their freedom, about the relationship between the individual and
the state, and about the manipulation of people under the guise of a
'noble' idea. It is not an honest pursuit of 'sustainable development,'
a matter of elementary environmental protection, or a search for
rational mechanisms designed to achieve a healthy environment. Yet
things do occur that make you shake your head and remind yourself that
you live neither in Joseph Stalins Communist era, nor in the Orwellian
utopia of 1984.€�

Vaclav Klaus

Brian Gaff wrote

What I never understood about this practice was how so called well
educated finance savy folk fell for this in the first place.

Its not really a case of fell for. Even Bernanke didn’t work
out the massive risk involved for the banking system until
the **** had hit the fan very spectacularly indeed.

if you work it through, probably less than a couple of minutes thought
required, any financial organisation would spot the flaw and how they
would end up holding the baby so to speak.

The problem was that the bundled and securitised sub prime
mortgages were given AAA ratings that they didn’t even come
close to qualifying for so even with a couple of minutes thought,
it wasn’t that obvious that anyone would ever end up holding
any baby.

And the ratings operations did in fact justify those AAA ratings
by pointing out that the default rate on those sub prime
mortgages was so low that they weren't in fact a significant risk.

What no one, even Bernanke, didn’t comment on was that while
that was true, it would no longer be true once the housing bubble
burst due to the completely stupid US non recourse system which
means that the borrower is free to just hand back the keys if the
mortgage ends up under water because of a big drop in real
estate property prices so they could no longer flip the property
before the sucker initial interest rate ran out.

And even Bernanke didn’t realise that one consequence of
the fact that those sub prime mortgages being sold off to
those tho bundled and securitised them just after they had
been written meant that those who were writing the
mortgages didn’t give a damn about anything except the
commission they got on the loan. In fact the worse the
loan was the higher the commission was, because it would
in theory be paying a higher interest rate once the initial
sucker rate had ran out. So quite a few who would have
qualified for a prime loan got a sub prime loan instead,
just because that paid a higher commission.

It only became clear after the **** had hit the fan that
all those factors combined and CDOs in spades meant
that it was all going to come unstuck very spectacularly
indeed once the bubble had burst. Even Bernanke who
was an 'expert' on the causes of the Great Depression
didn’t manage to see that coming.

Its obviously some form of hypnosis!

Not hypnosis so much as group think.

The problem is that the banking industry does sometimes
come up with a radical new approach which works very
well forever. Consumer credit is a good example of that.
So it isnt hard to decide that this sort of bundling and
securitising of sub prime mortgages may indeed be
another example of that and that it will work fine too.

After all, consumer credit will inevitably see some default
on their consumer credit debt. What matters is whether
you are charging enough in interest to cover those that
inevitably default on their consumer debt. With credit
cards they do. With sub prime mortgages they didn’t,
largely due to the terminally stupid US non recourse
mortgage system which means that there really is no
penalty what so ever for those who choose to exploit
a housing bubble and have no financial risk at all when
the bubble inevitably bursts.

"Capitol" wrote in message
o.uk...
alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html

Haven't they learnt any lessons from the near past?


No. Stupidity is endemic in our banks WRT the US market. I bet
they don't mention the exchange rate risks!

David wrote
Brian Gaff wrote

What I never understood about this practice was how so called well
educated finance savy folk fell for this in the first place. if you work
it through, probably less than a couple of minutes thought required,
any financial organisation would spot the flaw and how they would
end up holding the baby so to speak. Its obviously some form of hypnosis!

As soon as the people worked out that they could give out a dodgy
loan at low initial rates, run it for a year to establish a repayment
history,

In the US they didnt run them for a year, they were resold as soon as they
were written.

and then sell it on to a 3rd party with no comeback the "easy money"
light came on and any moral scruples (in financial salesmen??) went
straight out of the window.

The same model applied all down the line.
Buy so called "good" loans, mix them with sub-prime,
discount the whole package, sell on, profit!

The people getting bonus and promotion
were buying and selling these derivatives.

Bundled and securitised mortgages aren't derivatives.

So everyone else piled in because they were driven
by performance bonuses (and keeping their jobs).

Eventually the derivatives were so mixed up
it was impossible to accurately qualify them,

Free money with no responsibility?

And even Bernanke did manage to work out what the problem was.

Just like finding a broken candy machine which
gives out free candy if you bang the side.

It may be theoretically wrong, but hey - free candy!
And it isn't like shoplifting or mugging is it?
Serve them right for not fixing the machine.

So everyone could see the obvious flaw, but nobody believed that
they would be the one without a chair when the music stopped.

Its much more complicated than that with the likes of Bernanke.

"The Natural Philosopher" wrote in message
...
On 24/04/16 14:36, Brian Gaff wrote:
What I never understood about this practice was how so called well
educated
finance savy folk fell for this in the first place. if you work it
through,
probably less than a couple of minutes thought required, any financial
organisation would spot the flaw and how they would end up holding the
baby
so to speak. Its obviously some form of hypnosis!
Brian

they wer all cahsing short term, profits .

It goes like this.

You are a junior investment operator. You get offered junk that is A1
rated by Moodies and pays out big time. Itf you refeuse it you get fired
fir low performance. If it lasts a year your bonus will be stupendous. If
it all comes down, its not your bank, its the shareholders.

And the government will always bail you oput, because they owe your bank
trillions.

Bear Stearns didnt get bailed out.

On 23/04/2016 21:09, alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html


Haven't they learnt any lessons from the near past?



If I remember correctly the character in the advert wanting the loan was
somewhat dodgy. Could the repayments also be considered as money
laundering?

--
mailto: news {at} admac {dot] myzen {dot} co {dot} uk

"alan_m" wrote in message
...
On 23/04/2016 21:09, alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html


Haven't they learnt any lessons from the near past?



If I remember correctly the character in the advert wanting the loan was
somewhat dodgy. Could the repayments also be considered as money
laundering?

Nope.

On 23/04/2016 21:09, alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html


Haven't they learnt any lessons from the near past?

Given the lack of truth in so much advertising, it might be regarded as
reassuring that they are only advertising - they might not actually be
doing any lending at all.

--
Rod

On Sunday, April 24, 2016 at 8:21:16 PM UTC+1, alan_m wrote:
On 23/04/2016 21:09, alan_m wrote:

Why have the Halifax started advertising that they are giving sub prime
mortgages for property in the USA?

http://www.thesun.co.uk/sol/homepage...r-Halifax.html


Haven't they learnt any lessons from the near past?



If I remember correctly the character in the advert wanting the loan was
somewhat dodgy. Could the repayments also be considered as money
laundering?

--
mailto: news {at} admac {dot] myzen {dot} co {dot} uk

Private Eye pointed out that HSBC have now been convicted of so much money laundering and rate fixing offences in so many territories that they should more properley be regarded as Serious Organised Crime rather than a bank....