Here's today's brain teaser for you to see if you're up to speed with The New Maths.
You may use a calculator, but please show your workings. Allotted time: ten minutes.
Mr & Mrs S buy a house in joint names for £50,000 in 1980.
They pay off the mortgage by the year 1995.
The potential selling price of the house rises to £1,250,000 by 2007.
Mr & Mrs S take out mortgages of £1,000,000 secured on house and each spends half the money.
Mr & Mrs S fall behind on mortgage repayments.
The house is repossessed by the bank and sold for £800,000.
The bank and other credits suffer a shortfall of £200,000.
Question: How much money do the bank and other creditors have to pay Mrs S?
Click and highlight to reveal answer: £400,000.
Background here.
Tuesday, 2 November 2010
The New Maths
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20 comments:
Not only that, but of course one or more brokers colluded with him by fraudulently obtaining mortgages. Looking at it simplistically, if his track record with credit cards was showing on his credit record (which it would have been) he was remortgaging with lenders who'll take on high risk cases; the interest rates (and so the proc fees) would have been substantial. The broker would have been making many thousands each time and probably charging serious fees into the bargain.
I don't mean to detract from your main point here, but she wasn't the only one who appears to have got away with a great deal of other peoples' money.
Hopefully, the police and FSA are following up (though I have little confidence that either will, or that the eventual punishment would fit the crime).
Where does divorce come into it?
FT, there's that as well. All con artists.
JH, because she dumped him as soon as she found out about his debts. So she's had a lovely thirty years, with him doing all the work and now he's divorced and bankrupt and she's got a fortune in the bank.
All he did was what Gordon Brown did, the difference is that following divorce we are still liable for his debts.
All con artists
And that's just the FSA (making out they understand what they're doing) and Police (juggling their stats); the rest are out-and-out fraudsters.
TFB: nice one :-) .
Explain to me again why she gets £400K?
She owned half a house, it was fraudulently 'spent' by her husband (a large amount on her presumably), and when the fraud is discovered she is reimbursed by the other victim of the fraud, the bank. On what grounds? That they should have KNOWN that the signature on the mortgage applications were obtained fraudulently? Should banks now interview all joint mortgage applicants separately in case hubby is defrauding his wife?
If she had had £400K in the bank and he had fraudulently obtained that, would the bank reimburse her? One reads of frauds by employees on business bank accounts all the time, and the banks don't pony up in those cases. What makes a house so special?
TFB, something like that. Only like Gordon Brown, Mr S will never pay up.
S, "If she had had £400K in the bank and he had fraudulently obtained that, would the bank reimburse her?" Nope. Similarly not if hubby had mortgaged up a business worth £800,000.
"What makes a house so special?" This is the very core of Home-Owner-Ism! Houses are special! They must be a source of never ending and tax free profits to their owners!
S, or ask yourself "If a criminal has unpaid fines, should these be reduced if his home falls in value?" and then look at what i posted this morning.
"She won her case this summer "because the judge was convinced she knew nothing of her husband’s duplicity or debt, and had not colluded with him to borrow vast sums of money."
What a very accomodating judge, to be sure.
@dearieme: so what if she didn't know about the fraud? Isn't that the very basis of a fraud? That the victim doesn't know its a fraud until too late? The logical conclusion of this ruling is that banks should compensate any victims of fraud that involve them in some way, which will be most of them.
I actually think this case is not evidence of Home-Ownerism, but the existence of the 'Pussy Pass', a system of legal discrimination in favour of women. It exists in the criminal legal system and seems to have migrated to the civil one as well. I doubt that a man would have got a similar ruling if his wife had defrauded him. But a woman can play the 'poor helpless woman' act and get £400K.
S, D, whether she 'knew' about the actual 'fraud' is a secondary issue. NB, what 'fraud' exactly? The man did mortgage equity withdrawal against a house that had risen in value, a perfectly normal transaction, although he might have hidden certain facts from the bank, as Former Tory points out.
She certainly benefitted from the 'fraud', as she had a nice life without going to work, a new car, sent her kids to private school, holidays etc.
So effectively she has already had her £400,000's worth (in cars, holidays etc), to allow her to have it again seems pretty outrageous.
S, as to your 'pussy pass', it's actually a 'Home-Owner-Ist pass' - please read the previous post about the criminal whose fine was reduced because his home had fallen in value.
FT / MW - Forget the FSA as a 'policeman'. They. Have. No. Fucking. Clue.
My 'best' debtor yet is a couple who had £140,000 ish on cards and loans and a £140,000 mortgage, on earnings of? She 20K; he 35K.
In defence of self certification mortgages. These are (were) a Good Thing. When I started in retail FS all those years ago the rules made it very difficult for many self employed people and those on fluctuating earnings to get a mortgage. There were excellent specialist self cert lenders dealing in the market to help such applicants, e.g. UCB Homeloans, whose loan book had better umpairment ratios than most high street lenders. I used them a lot and I have only one client I can think of whom I worry about, and he's still getting along about 15 years after I did it.
So when did s/c all go wrong? I'll give you one guess.
1997. Hallo New Labour. Hallo G Brown. Hallo profligacy and epically unsound money and, to cap it all, utterly unsound regulation that just increased moral hazard.
In 1996/97 I was the biggest user of UCB in Suffolk. But as the money madness accelarated and more and more lenders got in on the act UCB became less and less competitive - because they stuck to the risk measures and funding systems that they knew worked. At the same time I changed my advice process to basically 'it's all going to end in tears, don't do it'. In conversation with UCB's management we agreed that it was all madness and they effectively stopped writing business, eventually being subsumed into Nationwide and then closed and merged with another outfit whose name momentarily escapes me.
Needless to say all the new lenders offered bigger 'procuration fees' (aka commissions) than UCB.
This is no defence of the vast majority of 'mortgage brokers, most of them just manipulate the system to get their clients a house. They are not giving 'advice' at all. They are facilitating a transaction. I genuinely hold that people are not stupid and that they know they cannot afford these mortgages so it's clearly their own fault, and they collude in any deception. If lenders are daft enough to lend to them, and daft enough to rely on 'brokers' for honest representation of client's circumstaances, and to go on doing so even though they have file evidence that these same brokers are giving them shit clients, then they too deserve all they get.
So the problem is not self cert per se, it again starts with Brown and his madness.
WV - conitus Brilliant!
FT - Further comment. Yep, proc fees were huge - 2% + for many poor quality cases.
But yet again Brown's money madness destroyed the 'credit repair' market. Kensington Homeloans was one of the first Credit Repair lenders. They again had good impairment ratios. But but as the madness went on and on they were also sucked in. They are still going but as I have not done any mortgage business for yonks I have no current market experience.
To be fair some clients just don't trust lenders and are scared of the admin, which is where blokes like us come in. Most of them also have no idea about house buying and the implications, so we can provide a genuine service. Blokes like you and MW are in the minority - you are informed and savvy. Most peole are not.
L, thanks for anecdotal, it's all good.
According to WIki
UCB operated out of a single location in Sutton with over 300 employees, relocating to Bournemouth and merging with the Portman Building Society's The Mortgage Works in 2007 following Nationwide's merger with the Portman. It ceased new lending on the 31st of October 2008."
I'd like to mention HSBC as well as a 'responsible lender'. Despite being one of the largest banks, it only made about 3% of UK mortgage advances in the boom years*, and as a result, its market cap is nearly as much as Barclays, Lloyds & RBS put together.
* It's a much higher percentage now, but that's because the other banks are advancing far less, and not because HSBC have gone mad.
JH, because she dumped him as soon as she found out about his debts. So she's had a lovely thirty years, with him doing all the work and now he's divorced and bankrupt and she's got a fortune in the bank
To be fair to Mrs S, she dumped him because he had lied to her for years and she could no longer trust him. Does it really make a difference whether your spouse lies to you about money or about a lover (a more accepted reason for dumping someone)?
B, to be consistent, she would have to return the value of all the lovely things that he'd paid for out of that remortgaging. But she kept those, didn't she?
@ Lola:
I’m in complete agreement with your views on the FSA; I’m regulated by them as well, though in this incarnation I’m a much lower form of life than you clever Level 6 blokes doing all the propeller-head stuff. It’s clear to me that the only thing the FSA will achieve with any certainty as a result of MMR, MER, RDR and all the other alphabetti-spaghetti soup of acronyms is ensuring that the ordinary man in the street won’t get or seek out financial advice. He’ll be driven into the arms of his Bank or an internet provider whose interest lies in selling him what they have – as opposed to what he needs - and that on an “information only” basis; which is exactly what they provide even if they purport to be “advising”.
Considering that the idea was that no one would have to buy a financial product without professional advice, they have as usual scored an epic fail. Exactly par for the course for government initiatives generally and creations of G. Brown particularly.
The other thing the FSA has achieved is to make me look forward to getting out of the business on retirement. Me, and lot of others as I’m sure you’ll attest. Fortunately, I came here (in both the geographical and career senses) from a rather more highly paid / qualified environment elsewhere, so I can afford some flexibility in my timing…… I’m buggered if I’m going to spend my last 2 or 3 years studying for more exams and certificates. I’d rather be putting European miles on my bike’s odometer.
I loathe the regulatory machine and its zombies with a passion that surprises me. I loathe some of the "advisers" I see when the need for CPD hours finally becomes irresistible and I have to go at great expense to some seminar at which it all becomes clear all over again how almost the entire population has become infantilised.
Oh, did I mention that I find much that's easy to identify with in the "mad as hell" speech from "Network"? :-)
FT The FSA is, de facto, 'nationalisation by regulation'. That's how Brown set it up. That's what it does. Needless to say it suffers from the well known 'impossibility of economic calculation under socialism' problem. But for us the real issue is that Hoban (the utter wanker) has gone native. IMHO the only way to deal with him is to ask him the question, then when his fails to answer / answers wrongly, kick him in the balls. Pavlovian conditioning is all that will work.
The fraud presumably would be her husband getting her to sign documents that he had not told her the truth about, and then presenting them to the bank as genuine. The article said that the house was in his name, but he was legally required to get her assent to a remortgage (why that is if its in his name only, I'm not sure).
So actually she was not defrauded of anything, as she never owned the house anyway. If he had a bank account with £1m in it, and lied to her and spent the lot, she wouldn't be able to divorce him and get anything, cos the money would be gone. How she can divorce a man with negative worth and somehow come up with £400k escapes me. Not least when she was an (unwitting) beneficiary of his fraudulent behaviour.
I still don't see this as Home Ownerism, just evidence that women want to have their cake and eat it when it comes to divorce.
S, she has to sign, even if not named as owner at HM Land Registry because she was in occupation and has an 'overriding interest'.
From Practical Conveyancing:
How are the rights of a person in actual occupation affected when a property is remortgaged by the owner?
Under LRA 2002, the lender will not be bound by the interest of someone who is in occupation provided inquiries are made of that person and the interest not disclosed.
Needless to say, this is why lenders have standard documentation that all occupiers must sign (postponing their rights behind those of the lender).
So she signed a bit of paper qua occupant putting her rights behind those of the lender.
See also L'Estrange v Graucob - signed is signed.
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