Sunday, 18 October 2009

Government: Now The Third Party In Every Contract


It's a day of rest for fuck's sake, can't proscriptive cockwafflers cease hostilities for just 24 blissful hours in a week?

The Financial Services Authority will make banks liable for loans if they do not check customers can afford them.

It is expected to ban self-certified mortgages, in which customers do not have to prove their income.

Because bans are the knee-jerk response in these modern, enlightened times. Fucking beam me up, Scotty, I'm ready for life on another pigging world.

Good grief. Whilst a libertarian such as myself is always suspicious of blanket bans, this one is not only overweening, but also just seems plain daft.

Self-certified mortgages have a very real purpose. For those whose income is hard to prove by conventional means, or the self-employed for whom the general 'three years' accounts' rule is not possible, a self-cert is the only way into home-buying.

They are also (or were when I was in the difficult position of not having traded for three years), a very safe lending opportunity, it always seemed to me.

An average purchase price in my area is around £200,000 I reckon. The self-certs I have seen offered ask for a 20% minimum deposit. So, the lender instantly has a £40,000 head start on the deal. If you failed to make a single payment, the reposession costs and loss of value from a recuperative firesale auction are fairly well covered. There would be a short-term loss of liquidity for the bank but that is about it.

On top of that, the credit risk score required is higher, and the interest rate offered for such deals is normally at a premium which offers attractive profits for the lender - just what they would be looking for in these straitened times, one would assume.

As usual, though, regulators have balanced the evidence, weighed up all the pros and cons, and come to the conclusion that none of us are to be trusted to buy so much as a shoe box on the basis of our own cognisance.

It's the risk-averse culture transposed into the banking sector. Personal responsibility of both the borrower and lender is being eradicated in favour of heavy-handed state intervention. Willing to lend at little or no risk? No chance, the choice is no longer yours. Willing to borrow based on your own confidence in repaying? You're having a bubble, ain't ya?

Now, if the FSA had decided that deposits required for self-certs were too small, or that credit scoring wasn't stringent enough, or even that default rates for self-certs were unacceptably high (which they weren't) then fair enough. But there are never shades of grey anymore, just black and white - ne'er shall erring from the computer model be tolerated. Banning the practice entirely between consenting parties to a contract is a subtle extension of the nanny state, and an interference which shouldn't even be contemplated in a country purporting to be primarily driven by free trade between free individuals and organisations.

Just as in other restrictions and bans, this is the government muscling in as an enforced third party in every contract negotiated in the UK. Not a benign eye watching from afar, but rather an obtrusive in-your-face bully insisting that all life, and transactions therein, are performed to the state's approval.

This is just another day, another confiscation, for us naughty voter 'kiddies'. Not unexpected under this most odious of administrations, but couldn't the control freaks have announced it on a different day? It's right made me choke on my yorkie puds.

1 comment:

Angry Exile said...

Oh Jesus fucking Christ, the nightmare world of stupid just never fucking stops, does it? How the fuck can the FSA hold the banks liable? In a literal sense the bank already is and always has been liable to lose money if they fail to make the fairly obvious and important step of checking that the money is likely to be repaid, but surely ultimate legal liability rests with the one who took out the loan? So if I got a mortgage and then lost my job I get to keep the house because the bank is liable for failing to check the viability of my job? Yeah, nice plan guys. Fucking genius! Because that sounds like the the bank not only loses the money but also the opportunity to repossess and reduce the loss to minimal level (in turn that would also affect the availability of cheap repossessed houses in the market, which was how I was able to get on the fucking property ladder in the first place - anyone now where I was fifteen years ago won't be thrilled). And that means the banks will be extremely reluctant to lend to anyone who isn't a dead cert. And then there's the big question - how the fuck would this have prevented what happened with the banks buying the loans of other banks who had made poor lending decisions, often as a result of government policy abroad? This rule simply doesn't address the problem at all, and the fact of the matter is that as long as the fuckwits believe that central government will steal from the taxpayer to bail them out when they buy bad debts they'll continue to lack an incentive to fucking stop doing it.

As for the self certified mortgages, with you 99% there. The 1% where I'd differ is that the FSA shouldn't even get a say in increasing the size of the deposits or the way credit rating is scored for self certs. As the regulatory body which was supposed to oversee and which completely failed to prevent the British part of the financial crisis their ideas need to be taken with a colossal pinch of salt and they should be told to go fuck themselves with a splintered table leg. This is the scenario I'd suggest: I ask for money, bank chooses its own criteria to decide whether or not I get money, I know my responsibility is to pay back as agreed, bank knows its responsibility is to ensure that I'm likely to, FSA moves to cardboard box under Waterloo bridge and is issued with tin cup and sign reading "will witter meaningless bollocks for money".