SECURITISATION OF MORTGAGES - who 'owns' your mortgage?

Started by M O'D, June 28, 2011, 01:00:39 PM

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M O'D

The question - "Who owns my mortgage?" will become increasingly prevalent over the coming months. This article, from the Guardian, is full of the usual disinformation about what money actuallly is and how the banks create it. Nevertheless, it does provide an interesting angle on the nature of state corporatism - UKAR was set up by the government as a kind of holding company, set up to manage the interests of the mortgage arms of the Badfume and Burgle and Northern Crock. Interestingly, Richard Pym, CEO of the Badfume and Burgle has since 1 October 2010 been the CEO of UKAR

QuoteWith 750,000 customers, UK Asset Resolution, set up to run the nationalised mortgages of Bradford & Bingley and parts of Northern Rock, is the country's fifth largest mortgage lender. But 23,000 of those mortgage holders are more than six months behind with payments and Banks admitted the projections for the number of people falling behind on payments could get "scary" if lenders did nothing to prepare for higher rates
source: http://www.guardian.co.uk/business/2011/jun/27/house-repossessions-wave-interest-rates-rise

It also leads one down the avenue of securitization - the practice of bundling up mortgages into saleable packages which are brought by Special Purpose Vehicles like Aire Valley and Granite, legal entities created as beneficiaries of mortgage (backed securities), often owned by the very lenders themselves. This would appear to be a classical example of a Ponzi pyramid scheme.

Further investigation lead me here http://www.taxresearch.org.uk/Blog/2008/06/13/bradford-bingley-being-dragged-down-by-securitisation/ from 2008 it states
QuoteThe bank has £11.1bn of mortgages in its Aire Valley master trust securitisation programme, which is triple A-rated. However, action taken by the three main rating agencies to downgrade B&B's own credit rating after its profit warning means the bank does not meet the sufficiently high rating required under the interest rate swap that it provides to the Aire Valley trust.

B&B has to take action within the next 30 days and has three options. Besides injecting additional cash, it could replace itself as a counterparty with an intermediary, or bring in a guarantor, with an appropriate rating.
For more on Aire Valley see http://production.investis.com/bbg/disclaimer/

Subsequent to this, the BnB was nationalised by the UK Government. 

This is from one of the comments on the Guardian page
QuoteApart from the inhumanity and the sheer indignity of ordinary people having to suffer because bankers thought it would be a wheeze to bundle mortgages together and sell future payments on them in advance, it's yet more short-sightedness; the bankers want your money to boost their capital ratios.

With regard to the eviction of remi and michael http://www.youtube.com/watch?v=nA4A1g9ID7A&feature=related , then it would appear that, in effect, we have state corporatism behind it. Which would suggest the failure of a government agency to correctly apply the Law of Mortgages and the Courts to fail in the same, means that failure of the law to provide remedy, renders it null and void - a case of one rule of the rich and/or criminal elite, being applied exclusively for its benefit, with the people denied the same.

The fraudulent banking system and the lawlessness displayed by most of Her Maj's Court Service who continue to find in its favour is teetering on the verge of collapse. Imagine what would happen if every one of those 23 000 with 6 months of arrears on their unenforceable mortgages simply refused to budge? Wouldn't be great if we were able to notify them all of the fraudulent nature of their mortgages? Imagine, imagine!  ;D

Happy days?

namaste
;)




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mumu

...........and so we started playing THEM? at thier own Game BUT they didn't want to PLAY!? How sad!, that thier world has collapsed around them and i really did aspire once to be just like them? until i stepped beyond that painted veil, realised i had a conscience, Soul.

Believe!

namaste

chrisalis

#2
You may be interested to know that UKAR's business model is rather strange. Far from "mananging" Northern Rock and B&B's mortgages, it's aim is to get rid of all the customers.

They also waste a phoenominal amount of money on contract managers and contractors in general and missed a deadline to deliver a merged IT system of NR and B&B's mortgage books by November (now put back to February) for which I've heard they've been fined £10 million. (possibly)

Incompetent? Not many, but then again, what do you expect of a government run organisation?

Oh, your man Richard Pym lasted as CEO 9 months, the current encumbent is Richard Banks, should you wish to contact him. They seem to make a habit of employing Dicks.

Chrisalis

M O'D

From http://www.ft.com/cms/s/0/26ac5dd2-532c-11e0-86e6-00144feab49a.html#axzz1pqNvX5Nv
Quote

March 20, 2011 10:56 pm

UK Asset Resolution seeks post 'bad banks' role

By Sharlene Goff and Patrick Jenkins

The company charged with shrinking the troubled loan books of Northern Rock and Bradford & Bingley is hoping to secure a future beyond winding down the £80bn portfolio by running mortgages for other lenders.

UK Asset Resolution, formed last year by the merger of the two state-owned "bad" banks, is looking at whether it could reinvent itself by offering back-office services to new lenders that may enter the market as the economy recovers, say people with knowledge of the company.

UKAR's priority is to repay the outstanding £48bn government loan that formed part of the bail-outs of Northern Rock and B&B. Any change in direction is unlikely until it has made more headway in running down its risky mortgage book.

But analysts say broadening its service offering would be a logical way to sustain the business as the legacy loans are repaid. It could also pave the way for a return of UKAR to the private sector as an established service company that could eventually be sold off.

Little competition exists for the outsourcing of mortgage services. HML, which is owned by Skipton Building Society, is one of a handful of providers.

Analysts say increasing the availability of back-office support – such as processing loan applications, credit checks and overseeing records – could encourage new lenders or foreign banks into the market as they would not have to build their own infrastructure from scratch.

UKAR is investing heavily in its business in spite of being in rundown. It is spending £60m on upgrading its IT systems, a move expected to reduce costs by £40m per year, according to people familiar with the company.

Later this month UKAR is expected to reveal that it was profitable in 2010, in stark contrast to Northern Rock's still lossmaking "good" bank.

However, the group could run into further difficulties this year as unemployment rises and higher taxes start to bite. One big threat is rising interest rates, which could push up its customers' mortgage payments to unaffordable levels.

UKAR's arrears rate runs at about double the industry average and people close to the company say it could rise further this year.

About 10 per cent of the group's 850,000 borrowers are experiencing financial difficulty. Many of Northern Rock's customers took out high loan-to-value mortgages at the peak of the property market. Fraudulent lending on buy-to-let properties badly hit B&B.

Running down the £80bn mortgage portfolio is a slow process. It relies on borrowers paying back their loans, with the majority expected to be repaid within ten years. The process could be accelerated by selling packages of loans. UKAR is not thought to have had high enough offers to make sales worthwhile.
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M O'D

From the CEO of UKAR, Richard PYM (Lien Debtor  ;))
QuoteWe achieved the targets we set ourselves for 2011.  The underlying profit of the combined businesses increased
from £444m in 2010 to £1,089m in 2011.  This was achieved after the interest rate we pay on some of our
Government funding increased to more commercial levels.  Total remittances to the taxpayer including
repayments, interest, fees and corporation tax increased from £1.6bn to £2.8bn.   

The number of customers in arrears by 3 months or more reduced from 38,500 to 33,200 contributing to the new
provisions for loan impairment falling from £1,089m to £390m.  We reduced customer balances from £83.5bn to
£75.3bn which enabled us to repay £2.15bn of Government loans but we still remain the 6th largest mortgage
provider in the UK.  Operating expenses fell from £278m to £221m. ...

We are very conscious that we currently owe HM Treasury directly and indirectly £46.6bn and it is our
expectation and our determination to repay that debt in full without loss to the taxpayer.

Richard Pym 
Chairman
1 March 2012

Source: http://www.ukar.co.uk/media-centre/press-releases/2012/~/media/Files/U/Ukar-V2/Attachments/press-releases/UKAR-Preliminary-Results-2011-FINAL.pdf

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GiGie

QuoteWith regard to the eviction of remi and michael http://www.youtube.com/watch?v=nA4A1g9ID7A&feature=related , then it would appear that, in effect, we have state corporatism behind it. Which would suggest the failure of a government agency to correctly apply the Law of Mortgages and the Courts to fail in the same, means that failure of the law to provide remedy, renders it null and void - a case of one rule of the rich and/or criminal elite, being applied exclusively for its benefit, with the people denied the same.

The fraudulent banking system and the lawlessness displayed by most of Her Maj's Court Service who continue to find in its favour is teetering on the verge of collapse. Imagine what would happen if every one of those 23 000 with 6 months of arrears on their unenforceable mortgages simply refused to budge? Wouldn't be great if we were able to notify them all of the fraudulent nature of their mortgages? Imagine, imagine!  ;D

As you know we have taken different tacks (just something a judge accused me of recently) It has long been established in my mind that the attempt to shoe horn us into a Civil Action is purely a court where the machinations of the UCC can run rife. ie no justice whatsoever.  Why on my efforts they even feel the need to set up a judiciary site telling me I can't take bankers to criminal action with intent!!


Oh yes. The wool has been well and truelly removed from my eyes. Several Police have too resorting to remarks like this
"we have to do what THEY tell us". In other words "we know you are right but they have issued it telling us to do this and we are going to ignore (the law) any way. So now we have what is tantamount to a protection racket and before we merely had a sophisticated protection racket.

There's no use the rhetoric "well it's better than anything else we would have in it's place". No it isn't.

There's a Trillion allegedly on the UK PLC debt burden. A grossly fictitious figure mooted purely for no other means than to delay the inevitable revolution when people finally realise they are being conned. There are in fact better means than 3 party politics to run our world governed by a few elite families hell bent on causing us all to suffer interminably.

As far as I can see police and judiciary are now formally corrupt on the matter. Chaining us to a debt burden is not cutting the mustard as it is more than obvious a complete and utter fiction. when the Tories got in they talked of reducing the 180 billion deficit now in the space of just 18 months that has somehow increased to a Trillion. Come on? Still I guess with the reduced job market there's never been a better time to enlist in the Forces eh.

To add insult to injury they are talking about putting in the Prols wage packets exactly what their tax is going on. it will say something like this £1,800 NHS, £4850 BENEFITS (get that) £700 police, £280 roads. What a fracking con. What about the 300 million visitors. Everything that breathes a breath yes that includes your pet iguana's vet tax bills. You name it. HOW MUCH TAX IS REALLY BEING SUCKED OUT OF EVERYTHING THAT WALKS THIS ISLAND? Answer me that one. Giving me docile arbitary figures to keep me sheeped up. Please. Notice how it fits the agenda to start the witch hunts on the vulnerable????

M O'D

Very encouraging developments from Ireland as the CEO of the Bank of Scotland flies in for trial over issue of the securitisation of mortgages, as is the main thrust of this thread:

BREAKING NEWS – Mortgage securitisation finally sent for full trial

QuotePosted on May 31, 2013 by Admin D
BREAKING NEWS

This morning in the High Court in Dublin, two of the founder members of DDI Ben Gilroy and John Squires along with others helping the Freeman family defeated all motions of Bank of Scotland (Ireland) in the long running case of P FREEMAN & ANOR V BANK OF SCOTLAND (IRELAND) LTD & ORS.



Ben and John have been fighting this case in their role with People For Economic Justice, and in Court 16 this morning Mr Justice Gilligan dismissed the motions put by Bank of Scotland, and finally sent the case forward for full trial on the issue of securitisation.  The team has been seeking a full trial without success for some time and have been stymied by counter motions by Bank of Scotland.  So critical is this case that the Chief Executive Officer of Bank of Scotland had been required to fly from Scotland to be present in Court.

Now for the first time in Ireland the issue of securitisation of mortgages is going to be heard in court.  The ramifications of this will affect almost every mortgage in the state, as the vast majority of mortgages have been combined into financial instruments and sold off as securities to other investors.  It was this kind of securitisation that inflated the banking system to a state of bankruptcy and caused the financial bubble that sees us now forced into living under austerity.

In a separate case this week another motion brought by Ben against an Irish based bank resulted in the bank settling out of court for a seven figure sum. For legal reasons because of the settlement the case cannot be quoted.

Ben spoke after the case saying that he hoped that those detractors who have been spreading misinformation about how he operates in court, both in the media, printed press and in cyberspace, will be honourable and correct the imbalance they have caused.

http://directdemocracyireland.ie/breaking-news-mortgage-securitisation-finally-sent-for-full-trial/


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M O'D

Memorandum from Carmel Butler

QuoteCONSUMER AND TAX PAYER
"|Let us be clear that the reason for today's injection is the lack of openness and honesty by the banks on the amount of bad debts that they have on their books|"
JOHN McFALL MP[105]

1.  The banks have stated their case. They say: the banking crisis ensued from bad borrowers to bad debts to toxic assets to taxpayer support. The banks with their powerful lobby, powerful public relations and easy access to the media have framed the public debate. Consumers on the other hand do not have such powerful infrastructure to effectively rebut the bankers' defamatory accusations. This written evidence challenges the bankers' version and endeavours to dispel the bankers' myths. The chain of events is rooted in lenders' abuse of unfettered power to impose unsustainable interest and charges on consumers combined with their determination to avoid contributing to the public purse.
 
2.  The evidence contained in this memorandum is focused on two fundamental issues. Firstly, the consumer issues that arise in the context of Special Purpose Vehicles ("SPVs") that are incorporated as securitisation companies who issued the infamous "toxic-assets"; and secondly, the taxpayer heist at the hand of the SPV securitisations companies. The evidence will illuminate the hitherto hidden truth that the tax payer is supporting the profits of foreign owned companies incorporated in tax havens and their private investors.

BRIEF INTRODUCTION

3.  I am British Citizen resident in the UK and a qualified lawyer admitted to practice in New York, U.S.A. I have an LLB Laws from the London School of Economics and a JD (Juris Doctor) from Columbia University, New York. I practiced securities law at Sidley Austin LLP New York office from September 2006 to December 2007. Whilst at Sidley Austin I worked on various Structured Finance transactions such as mortgage securitisations, CDOs and various derivatives. I am also a consumer of a mortgage product that has been securitised. Consequently, as both an ex-practitioner of securitisations and a consumer subjected to a securitisation, the intention is to focus on consumer issues that arise from mortgage securitisations, its central causal role in the banking crisis and its detrimental effect on the economy and public purse.

SUMMARY OVERVIEW

4.  Six key submissions are evidenced in this memorandum:

—  Passing on the Interest Rate Cuts (see paras. 5 to 13). Banks do not pass on the interest rate cuts to borrowers because they do not have that power. That power is vested in the SPV securitisation companies.

—  Openness and Honesty (see paras. 14 to 37). The Government has saved banks from the allegedly bad debts on their books. But banks are unable to say the extent of the bad debt problem. This is because, in truth, there are no bad debts of any significance. Two sleights-of-hand are discussed under the headings "the legal ruse" and "the auditor ruse". Enlightenment of the combined effect of these manoeuvres explains how the allegedly bad debts appear on the bankers books.

—  The FSA Regulatory Role (paras. 38 to 43). The Practitioners Panel have called for rigorous enforcement of the FSA's MCOB rules. Consumers would concur with this principle.

—  The Fallacy of Financial Advice (see paras. 44 to 52). The source of this issue is the mortgage originators' failure to disclose material facts on the products sold to consumers. The lenders' concealments render independent financial advice a nullity and an academic exercise.

—  The Rule of Law—Repossession or Dispossession? (paras. 53 to 78). The Financial Services Practitioner Panel calls for the faithful application of the rule of law with respect to the performance of contractual obligations. There is no difficulty in concurrence with this principle. Accordingly, the Treasury Committee are invited to consider the SPV securitisation companies performance of its contractual obligations and the effect of their abrogation from such obligations on the functioning of the mortgage market.

—  The Perfect Storm (paras. 79 to 88). The cause of the banking crisis is widely mooted as the abrupt closure of the wholesale money markets in August 2007 but the public debate on why the market seized is conspicuously absent. It is submitted that new tax laws were the catalyst instilling fear which caused the flight.

The money-men fled from securitisation companies on the real prospect of their being called upon to contribute to the Treasury. The liquidity had to be filled. The tax-paying public was rallied to fill the gap and to suffer the economic fall-out. Paragraphs 83 to 86 recommends: a potentially effective solution in which the Government can revive the housing market and economy without the need for the banker's acquiescence to the hitherto unheeded pleas for the bankers to commence lending.

—  Conclusion (paras. 89 to 91). Confusion through concealment creates complexity. Transparency is the antidote. Once illuminate, securitisation is simple. Follow the asset and follow the cash which reveals that the supreme beneficiaries of the crisis are the banks, the SPVs and their investors.

—  Recommendations: The Committee is invited to consider the recommendations at paragraphs: 37, 43, 52, 79 and especially the recommendation at paragraphs. 85 to 88.

PASSING ON THE INTEREST RATE CUTS

5.  The Committee has rightly been concerned to elicit a reason for banks failure to pass on the Bank of England interest rate cuts to borrowers and yet, do pass on the interest rate cuts to the savers[106]. The answer to the question is simple. The banks have passed the interest rate cuts to the savers because the banks have the power to set the interest rate for the savers. Conversely, the banks do not have the power to pass the interest rate cuts to the borrower.

6.  This is because, the banks have sold the mortgage contracts to the SPVs and it is the SPVs alone, that have the contractual power to determine the borrowers interest rates. Consequently, it is the SPVs that decide whether or not to pass on the interest rate cuts. It is the SPVs that have decided not to pass on the interest rate cuts.

7.  This fact is evidenced by the various and respective Prospectuses that the SPVs file at the UK Listing Authority. In general, the bank that originates the loans will make a True Sale[107] of the mortgages to the SPV which means the contractual power to set the borrower's interest rate is vested in the SPV.

8.  Following the bank's True Sale of the mortgages, the bank's contractual relationship with the borrower is extinguished. The SPV, as assignee, becomes the party that is in privity of contract with the borrower. However, neither the bank nor the SPV inform the borrower of the SPV's ownership of the mortgage contract.[108]

The SPV will remain concealed. The borrower is unlikely to discover the SPV's ownership of their mortgage contract because, following the sale to the SPV, the bank and the SPV enter into a contract wherein, the bank agrees to administrate the mortgages on behalf of the SPV and in return, the SPV remunerates the bank for its administrative services.

Consequently, whilst the bank has extinguished all its right and title to the consumer's mortgage contract, the bank's connection to the consumer's mortgage is through its administration agreement with the SPV only. Following these legal manoeuvres: (i) the consumer and the SPV are in privity of contract under the mortgages; (ii) the bank and the SPV are in privity of contract through their administration agreement; and (iii) the world will remain ignorant of these events because, the bank continues to service the loans as if nothing has happened.

9.  Therefore, the bank's only interest in the loans following its True Sale of the mortgages is that of a mere administrator and servicer of the loans. It is the SPV that is the bank's client from whom the bank earns its servicing fees and from whom it receives its instructions. Consequently, the bank's loyalty is to SPV client only. The power to set the borrowers interest rates is a contractual power contained in the mortgage contract:a fortiori when the contract is sold to the SPV, the contractual power to set the borrowers interest rates is vested in the SPV and not the bank. Therein is the reason why the banks have not passed-on the interest rates cuts. It is simply because: they cannot. They must, in accordance with their administration agreement with the SPV, implement the interest rate policy of their client, the SPV.

10.  Evidence of these submissions is best demonstrated by example. In the case of Northern Rock, the SPV has given Northern Rock the authority to set the interest rates. However, Northern Rock has undertaken to set the interest rate at a level that not only covers Northern Rock's administration costs, it is contractually obliged to set the rate at a level sufficient to support the entirety of all the administration costs, expenses and profits of each of the numerous entities involved in the securitisation structure[109]. This means that Northern Rock must set the interest rate at a level that will ensure the SPV suffers no revenue shortfall. In the event that Northern Rock fails to set the rate at a level sufficient to satisfy the SPVs required revenue, then the mortgage trustee may "notify the administrator that|the standard variable rate and the other discretionary rates or margins for the mortgage loans|should be increased|the administrator will take all steps which are necessary|to effect such increases in those rates or margins."[110] Consequently, Northern Rock may only exercise the interest rate pursuant to the SPV's authority to do so under the terms of its administration agreement, and in any event must set the rate at levels to the satisfaction of its SPV client. In other words, Northern Rock does not have the autonomous power to set the rates independent of its SPV client. Accordingly, it is the SPV that controls the interest rate setting power.
 
11.  Whilst Northern Rock has been used as the example, the Treasury Committee is reminded that this circumstance is not unique to Northern Rock. It is standard to most SPVs. In conclusion, it is recommended that the Committee encompass within its inquiry consideration of the role of the SPV in the banking crisis and the relationship between the banks and the SPVs.
 
12.  Finally, if the Government is determined that the interest rate cuts are passed on to the borrowers, it must ask the SPVs.
 
13.  In conclusion, this means that the correct answer to the Committee's question No. 170[111]: ".  .  .  Are the banks just pocketing a few bob for themselves here?": the full and correct answer is—No, it is the SPVs that are pocketing a few bob for themselves.

OPENNESS AND HONESTY

14.  There are no bad debts on the banks books. And if there is any bad debt, the amount is de minimis. A primary purpose of a securitisation is: to remove the credit risk from the bank's books. The bank, under a `true sale' will sell all its rights and title in the mortgages to the SPV and the SPV will in return pay the bank cash for the mortgage assets. This plain truth has remained elusive because under the terms of the true sale contract, the bank and the SPVs have unlawfully agreed to keep the transaction concealed from the borrower and, from H.M. Land Registry. Thus giving the false appearance to the world that the banks still own the mortgages.
 
15.  Two sleights-of hand are at play in this manoeuvre. One is the legal ruse, the other the auditor ruse. This is not to suggest that the professions have conspired, they are each compartmentalised and each are generally unaware of the combined effect.

THE LEGAL RUSE

 
16.  First, the legal ruse. The law provides mortgagees with a statutory power to transfer a legal charge.[112] It is under these statutory provisions that the banks exercise their right to assign the mortgages to the SPVs. In a contract of sale that provides for a disposition[113] of an interest in land, the legal title will be conveyed immediately from the seller to the buyer[114] on the completion date. There can be no doubt that on completion, the buyer has acquired the legal title, but there will inevitably be a "registration gap" between the conveyance date on which the buyer acquired the legal title and the date on which his legal title is registered at H.M. Land Registry. During this registration gap, the law provides that the buyer's title: "does not operate at law until the relevant registration requirements are met".[115]
 
17.  This is where the legal ruse comes into play. It is this "registration gap" that the SPV unlawfully exploits in order to conceal its ownership and control of the mortgages. Under the Land Registration Act 2002 ("LRA 2002"), the transferee[116] of a registered charge is required to register at H.M. Land Registry, its ownership of the mortgage that it purchased.
[117] Therefore, it is a legal requirement that the SPV register its proprietorship of the mortgage at H.M. Land Registry. Whilst the law implicitly permits the registration gap as a matter of pragmatism, the law also implicitly mandates that the registration requirements are to be observed expeditiously. Nonetheless, in contumacious disregard for its legal duty to comply with the registration requirements of the LRA 2002, the contract of sale expressly provides that the SPV will not register the transfer at H.M. Land Registry indeed, the contract provides that notice of the transfer is to be concealed from the borrowers and H.M. Land Registry and a fortiori concealed from the world[118].

18.  The suppression and concealment of this information from H.M. Land Registry is a criminal offence[119], and in furtherance of this offence[120], the SPV's legal title to the mortgages is also concealed from the county courts and the Government. The Banks remain registered as the proprietor of the mortgages and accordingly all interested parties are deceived by this concealment with one exception. The SPV does inform its investors that the bank sold its legal title to the SPV (to whom, the right to register the legal title to the mortgages is important). Consequently, the bank appears to be the legal owner, but it is not.
 
19.  For example, in the case of Northern Rock as the seller of mortgages, the prospectus states: "under the mortgage sale agreement dated March 26, 2001 entered into between the seller, the mortgages trustee, the security trustee and Funding, the seller assigned the initial mortgage portfolio together with all related security to the mortgages trustee|"[121]. Additionally, under the terms of Northern Rock's mortgage sale agreement, it is, "entitled under the terms of the mortgage sale agreement to assign new mortgage loans and their related security to the mortgages trustee". [122] (bold emphasis added).
 
20.  Northern Rock may remain falsely registered as the putative `legal owner' but in truth, Northern Rock is merely the administrator of the mortgage loans. Again the Prospectus states: "The seller acts as administrator of the mortgage portfolio under the terms of the administration agreement, pursuant to which it has agreed to continue to perform administrative functions in respect of the mortgage loans on behalf of the mortgages trustee and the beneficiaries, including collecting payments under the mortgage loans and taking steps to recover arrears."[123] (Bold emphasis added).

21.  The legal reality is that: (i) Northern Rock sold its legal title to the SPV, in this case, to Granite Finance Trustees Limited[124] and therefore, Granite is the legal owner; (ii) Northern Rock is the administrator of the mortgages and falsely holds itself out as the legal owner of the mortgages; (iii) Granite Finance Trustees Limited should be, but is not, registered as the owner of the mortgage; and (iv) all these facts remain concealed because Granite and Northern Rock have unlawfully contracted to suppress this information from H.M. Land Registry.
 
22.  Notwithstanding that the SPV conceals its legal title from H.M. Land Registry, the SPV will, nonetheless, avail itself of, and exercise, all the statutory and contractual legal powers that the legal owner enjoys. For example, the SPV will exercise the legal owner's statutory power to create a legal charge [125] on the borrower's mortgages. The SPV will file at Companies House a Form 395 "Particulars of a Mortgage or Charge" within the statutory 21 days, to register the Legal Charge that the SPV created against the mortgage loans in favour of the SPV's trustee, as security for the payment of money due to its investors and creditors.[126]
 
23. The SPV's exercise of the legal owner's contractual and statutory legal powers leaves no doubt that SPV is: the legal owner of the mortgages. Nonetheless, the banks and the SPV unlawfully exploit the "registration gap" in a smoke and mirrors tactic to cause confusion and conceal the SPV's legal title. The SPV is the legal owner. The banks are the administrators.

THE AUDITOR RUSE

  24.  The Treasury Committee has endeavoured to discover the amount of bad debts on the banks' books. An answer to that question has hitherto evaded an adequate response. As discussed above, the bank has sold the mortgages and thereby transferred the credit risk to the SPVs which means, that the banks do not have these (allegedly) "bad" debts on their books.[127] Therefore, to provide the Committee with the full answer, the question must be re-framed as: having sold legal title to the debts, how do these allegedly "bad" debts appear back on their balance sheets?
 
25.  Likewise as discussed above, the SPVs legal title to the mortgages is also concealed from the auditors. The auditors know that the bank originated and owned the mortgage loans and therefore, the mortgage loans are initially and correctly `recognised' as an asset on the bank's books. However, when the bank securitises that asset, the bank has sold the asset to the SPV. This means that the SPV owns both the benefits and the credit risks of the assets. Accordingly, the bank's transfer and sale of legal title should result in the assets being `derecognised' as an asset on the banks' books. However, the auditor's continue to recognise the assets on the bank's books. This is because of an inadvertent erroneous evaluation and application of the IAS39 accounting standard.
 
26.  IAS39 sets out three main scenarios in which an asset will be derecognised and removed from the bank's books. Under any one of these three scenarios, the mortgage loan assets that have been securitised should be derecognised with the consequent effect that the assets are removed from the banks books.
 
27. The mis-application of the IAS39 derecognition policy is best illustrated by the following example. In the Northern Rock's Annual Report and Accounts 2007, the derecognition policy states:[128] "The Group also derecognises financial assets that it transfers to another party provided the transfer of the asset also transfers the right to receive the cash flows of the financial asset." In a securitisation, that is exactly the legal effect. However, auditors are called upon to make an evaluation of the bank's legal rights in their analysis. The auditor must determine who has the legal right to the cash flows. Understandably, an auditor is not best qualified to make an accurate legal determination.
Nonetheless, the auditors do see that: (i) the bank's legal title is still registered at the Land Registry (albeit falsely); (ii) the auditors see the bank's administration of the mortgage loans; and (iii) the auditors see the cash flows from the mortgage loans are paid to the bank. In contrast, the auditors do not see (iv) the contract of sale wherein the bank transferred to the SPV, all its title and rights to the asset; (v) do not see the bank's administration agreement with the SPV which evidences the bank's interest is merely authority to administrate the mortgage loan asset; and (vi) do not see that the bank has no right or title to the cash flows it receives from the mortgage loans. Consequently, the auditors understandably fail to accurately evaluate the legal rights and accordingly fail to derecognise the asset. As a result, the asset erroneously remains recognised as an asset on the bank's book.
 
28.  However, the auditors are mindful that the asset has been securitised and that such transactions require some acknowledgment and entries in the accounts. Again, IAS39 is the culprit. IAS39 directs the auditor to "Consolidate all subsidiaries (including any SPE)"[129]. The IAS39 therefore instructs the auditor's to consolidate the special purpose entity[130] (or vehicle), into the group accounts.
 
29.  This is an extremely bizarre instruction to auditors for three reasons. Firstly, this instruction contradicts the foundational principle of a securitisation structure which is: that the originator of the asset must be `Bankruptcy Remote' from the SPV. That is, that the SPV is a wholly independent company that is in no manner whatsoever connected with the originator of the assets it has purchased. The true sale must be an `arms-length' transaction between the two wholly independent entities. This is an essential element of the securitisation structure to ensure that the SPV and its assets are not in any way affected by the bankruptcy or insolvency of the asset originator. Secondly, the bankruptcy remoteness of the SPV is the credit rating agencies predominant factor for the SPV's Notes achieving the triple A rating. Thirdly, there is no legal basis on which a wholly independent company, (iean SPV) should be included in the consolidated accounts of another company where the SPV is not a subsidiary or legal undertaking of that company.
 
30.  Notwithstanding that the SPV and Northern Rock are wholly independent and separate companies, the mortgage loan assets and liabilities that the Granite SPV own, was consolidated onto the Northern Rock's Group accounts.
 
31.  To illustrate this point, take for example Granite Master Issuer plc's prospectus where it expressly states: "The Issuer is wholly owned by Funding 2|The Issuer has no subsidiaries|The Seller [Northern Rock] does not own directly or indirectly any of the share capital of Funding 2 or the Issuer"[131].
 
32.  Therefore, when reading the Northern Rock accounts,[132] the figure of £43,069.5 million stated as a Northern Rock liability, is in fact, Granite Master Issuer plc's liability. The "Debt Securities" issued of £43,069.5 million is the liability of Granite Master Issuer plc, a wholly independent company which the auditor has erroneously consolidated on to the Northern Rock Group accounts solely because of the erroneous application of IAS39.[133] That liability is Granite's liability to its investors.
 
33.  Likewise, Granite's assets also appear on Northern Rock's balance sheet. Consequently when reading the figure of £98,834.6[134] million stated as a Northern Rock asset, at least £49,558.5 million,[135] is in fact, Granite Master Issuer plc's asset.
 
34.  The Committee is respectfully reminded that whilst Northern Rock has been used to illustrate the point, this application of IAS39 is common practice.
 
35.  In summary, the assets "appear back on the books" due to the misapplication of IAS39. The error is compounded through the unlawful exploitation of the registration gap which conceals the facts necessary for an accurate application of IAS39. It is this concealment that causes the auditor confusion. These assets and liabilities should not be on the bank's balance sheet. They are there solely because of the combined effect of the legal and auditor ruse[136].
 
36.  In consequence, the British tax payer is not just the supporter of British banks, the tax payer is the unwitting guarantor and supporter of all the privately owned, wholly independent SPVs foreign companies incorporated in tax havens. Their consolidation into the group accounts of British banks means that the tax-payer is also funding the capitalisation of the SPVs. These foreign SPV companies and their investors must be extremely satisfied with the UK tax payers support. After all, there are always winners in any crisis.
 
37.  Recommendations:

—  Auditors should reconsider the application of IAS39 and perhaps seek legal opinions on the bank's legal rights and obligations in its evaluation and application of this accounting standard. It is recommended that the law firm that acted on the actual securitisation is not used for this purpose, and that an independent barrister may be more suitable. Moreover, an SPV should never be consolidated into the Group accounts unless it is an actual legal subsidiary or a legal undertaking of the Group.

—  Both the SPVs and banks must be held to compliance with the Land Registration Act 2002 and accordingly, complete the registration requirements under the Act. For those that do not comply with the registration requirements, enforcement action should be considered. Transparency is the antidote that will cure the abuses facilitated by concealment.

THE FSA'S REGULATORY ROLE

38.  Whilst the FSA regulates mortgages, it does not regulate the SPVs that own the mortgages. Given that it is the SPV's that exercise the power and control over mortgagors, interest rate policies and repossession policies, there is a major lacuna in regulatory oversight. Through the medium of the ruse discussed above, an added bonus of concealment is that the SPV circumvents regulatory oversight. It may be argued that such lacuna is covered by the FSA's authorisation and regulation of the loan administrator.

However, this argument does not address the inherent conflict between the bank's compliance with the FSA's regulations and its loyalty to its SPV client. This is because the SPV is vigilant on the bank's implementation of its policies under their administration contract whereas, the FSA in contrast are widely known for its apparent determination not to enforce[137] its MCOB[138] rules and regulations.

Therefore, given the choice between the impotency of FSA deterrence on the one hand, and client loyalty and profit incentive of banks and SPVs on the other hand, the dominant motivation that will inevitably prevail is the satisfaction of the profit incentive. This means that the bank's allegiance to its SPV reigns supreme over the bank's regulatory obligations to consumers. After all, the irony of the FSA's `Treating Customers Fairly' principle, is that the SPV is the customer of the bank whereas, the borrower not. The borrower is in fact, the customer of the SPV.
 
39.  But all is not lost. The Financial Services Practitioner Panel is in consensus with the principle that the FSA's MCOB rules should be enforced. In its Annual Report 2007/8 it stated: "This was a major area of risk from a consumer point of view and the Panel considered that the Mortgage Conduct of Business (MCOB) rules were not achieving the objectives that were intended by them—in fact, to some degree, they had served to compound the issue "[139]. The Practitioners Panel then goes on to call for the FSA to supervise and enforce the MCOB rules, it continues, "The Panel remains concerned that the FSA's supervisory and enforcement activities in this area continue to move too slowly to significantly improve standards in this sector."[140] The principle quoted here is highly laudable, and to the extent quoted above, this principle from the consumer's perspective, would attract strong consensus.
 
40.  To be accurate however, the Practitioners Panel is vociferous for FSA enforcement of the MCOB rules only to the extent that they apply to the 3,000 small businesses that provide services in the financial intermediary sector. Nonetheless, the Consumer Panel and Practitioners Panel both support the FSA's enforcement of the MCOB rules in principle and apparently, both the Practitioner and Consumer Panels would wish to achieve the objectives that were intended by the MCOB rules.
 
41.  Whilst the Practitioner Panel's call for MCOB enforcement is supported in principle, it is suggested that enforcement against the many small business in the intermediary sector should be deferred because: (i) enforcement in that sector would yield no immediate assistance to the consumer or small businesses; (ii) that sector of the economy is at present, relatively inactive; (iii) it is probable that some of those small businesses may not survive the economic downturn and the FSA should not exacerbate their plight for survival at this juncture; and (iv) the Government aspires to assist small businesses in any event.
 
42.  Accordingly, in recognition that the FSA's resources are finite and therefore should be focused and targeted to achieve the Government's aspirations, it is suggested that the enforcement campaign focus on the MCOB rules to the extent applicable to mortgage administration and mortgage repossessions. An FSA publicly announced policy decision to take enforcement action against mortgage administrators non-compliance with the MCOB[141] would have an immediate deterrence effect, concentrate the mortgage administrator's mind, attitude and conduct on its regulatory obligations and in turn, produce immediate assistance to consumers in financial difficulty. The announcement of such policy may also achieve the added bonus that the FSA's TCF objectives, (which were also intended to protect consumers), may also be realised as a result of an enforcement policy. Moreover, an actual enforcement may have a longer-term deterrent effect and re-position the FSA's supremacy in the conflict between the bank's deference to its SPV clients prevailing over its obligations to consumers. Finally, and most pertinently, from a public relations perspective, it may restore a large degree of public confidence in the FSA and the financial industry generally and stem the repossession trend.
 
43. Recommendations:

—  the Treasury Committee give its fullest support to the Panels aspirations and immediately recommend that the FSA vigorously enforce the MCOB rules; and
—  the courts are informed of the claimant's[142] administration and repossession legal obligations under the MCOB rules and that the courts assure themselves of the administrator's strict compliance with those rules before ordering repossession. Again, this would have immediate impact to assist consumers in difficulties.[143]

THE FALLACY OF FINANCIAL ADVICE (TERMS OF REFERENCE 1.9 AND 3.7)

44.  On 14 January 2009, Mr Tutton of the Citizens Advice Bureau gave oral evidence wherein he enunciated the principles that "|borrowers need to have the risks properly pointed out to them|to understand the consequences|what is the interest rate, what is it going to cost me?|and borrowers are properly helped to decide what they are getting into."[144]

45.  There is an abundance of consumer laws and regulations that govern credit agreements and in particular, govern the advice that independent financial advisers provide to consumers on mortgage products. In practice however, the consumer's choice of lender and product is often a nullity and can be deemed an academic exercise. This is because, whilst the consumer may be advised to select a mortgage product from Bank X and may choose to enter into a contract with Bank X on that advice, the reality is that Bank X will not be the company with whom the consumer will ultimately be in privity of contract, nor will Bank X be the entity that performs that contract.
 
46.  In general, neither the IFA, nor the consumer knows at the outset that Bank X will merely originate the mortgage contract and that Bank X will sell the mortgage contract. Moreover, whilst the consumer may be informed of the initial `pass-the-parcel' of their mortgage contracts to various entities, the consumer will never be told of the final and ultimate owner of their mortgage contract, namely the SPV entity that securitises their mortgage contract. In other words, neither the IFA nor the consumer is aware of, nor considers the impact of the "originate-to-distribute model" when providing or considering financial advice.
 
47.  To illustrate the practical impact of the SPV's concealment from the borrower, take for example, a consumer that was advised to choose a GMAC-RFC standard variable rate mortgage. Firstly, some of those borrowers would have been securitised through an SPV called Clavis Securities plc. Thus, the consumer's advice as to the lender is rendered academic. Secondly, unbeknown to the borrowers, Clavis unilaterally decided that borrowers who had purchased a GMAC standard variable rate mortgage contract would be treated as if they had purchased a track-rate mortgage.[145] Accordingly, Clavis' decision renders the consumer's advice on product as also academic. Thirdly, it was irrelevant to Clavis that the borrowers contracted to pay GMAC's standard variable rate, because Clavis at all times charged its borrowers at least 0.25% in excess of GMAC's standard variable rate. Accordingly, Clavis at all times demanded (and was paid) interest that the borrowers were not contractually obliged to pay.
 
48.  In one case on point, the non-contractual demanded interest rate overcharge was disputed. The response was that it had the "power and liberty" to charge as they pleased. Following a vigorous defence of this contention, it was finally conceded that it had overcharged interest but at the same time, inferred that the overcharge was de minimis as it only amounted to approximately £3,000. However, this amount is not de minimis to an individual nor when taken in the context of the securitisation as a whole. That securitisation involved a pool of approximately 4,500 mortgages contracts each of which would have been subjected to the same contractual abuses. As Clavis had overcharged each of those consumers an extra non-contractual 0.25% and assuming that that overcharge was in the region of £3,000 for each consumer, such modus operandi would yield a conservatively estimated extra £13.5 million.
 
49.  There is an abundance of anecdotal evidence that consumers are instinctively aware that their mortgage accounts are being abusively charged.[146] However in the majority of cases, it is improbable that consumers would be able to identify and articulate the character and nature of the abuse sufficient to present such defence in a court. Therefore, this type of abuse remains substantially, undetected. From the consumer perspective it inevitably results in repossession, but on strict construction of the borrower's mortgage obligations it is in fact, dispossession.
 
50.  Therefore, with respect to mortgage products that will be securitised, the notion that a financial adviser can advise consumers, and the notion that consumers have choice, is a pure fallacy. The evidence shows that whilst the fault cannot be laid on the adviser, it does not change the practical reality for the consumer who will be aggressively held to their obligations (including, in some cases demands for money which they are not contractually obliged to pay), whilst the SPV lender will conveniently absolve itself of its obligations (including, in some cases substituting the product with a completely different product). Consequently, neither adviser nor borrower can make an informed decision on that which, directly and substantially affects them. They cannot know how much the interest rates will be, and cannot know how much it will cost them, because all of these variables are dependent on the arbitrary decisions of the SPV with whom the borrower is ultimately in privity of contract—and that information is at all times, concealed[147].
 
51.  Finally, this issue highlights the importance of the principle of Transparency. To echo the Prime Minister,[148] "all transactions should be transparent and never hidden". The concealment of the SPV from the borrower presents the SPV with the opportunity to abuse with impunity, safe in the knowledge that the consumer would never know who is really perpetrating the abuse and whom they should hold accountable. The borrower should know with whom they are in privity of contract and that information should never be concealed.
 
52. Recommendations:

—  Mortgage originator's must make full and frank disclosure of the effect of securitisation on the borrower

—  The contractual formula for interest rate setting must be fully disclosed and fixed such that the extensive discretionary powers are abated and/or

—  The SPV's unfettered powers to unilaterally inflate the borrower's obligations should be curbed.
THE RULE OF LAW—REPOSSESSION OR DISPOSSESSION?

 
53.  The Committee's attention is drawn to the Practitioner Panel's promulgation in its Annual Report 2007-08 under the heading "Caveat Emptor" wherein it stated: "The Panel believes that a consumer's legal responsibilities should be those underpinned by contract law, which includes a duty to act lawfully and in good faith, not to make misrepresentations or withhold material information, to abide by the terms of the contract, and to take responsibility for his or her own decision."[149]
 
54.  The Practitioner Panel's is commended for its enunciation of these principles under the banner "caveat emptor" as it demonstrates that the Panel have correctly identified that `the buyer beware' maxim is an appropriate forewarning which consumers should heed when purchasing loans from powerful financial institutions. Consumers should always be alert to the shenanigans of sellers with whom they contract. However, at this juncture it is apposite to remind the Committee that irrespective of a prudent purchaser's precautions, the consumer cannot beware of that which is deliberately concealed. Consequently, the consumer is doomed to become the unwitting counterparty to the SPV in their mortgage contracts in any event. The consumer did not expressly agree to contract with the SPV more accurately, it is the SPV that imposed itself on the consumer.
 
55.  Two observations to the Practitioner Panel's promulgation are appropriate. Firstly, the Panel's axiomatic principles are tantamount to a demand for the faithful application of the Rule of Law. That demand invites an exorable concurrence from consumers which invitation is unreservedly accepted. Secondly, as the Treasury Committee has rightly observed, there are two parties to the contracts and they both share risk.[150] Accordingly, the principles apply with equal force and conviction to the SPVs legal responsibilities.
 
56.  In consideration to the faithful application of the Rule of Law, it is necessary to illuminate the conduct of SPVs in their performance of their legal obligations under the mortgage contracts.
 
57.  The material provision in the mortgage contract is that the lender will loan the advance for a term of 25-years. The SPV imposed itself into the mortgage contract as assignee, and as such, assented to perform this fundamental term of the contract. However, the SPV has no intention of performing that 25-year term. The SPV uses its wide discretionary interest rate setting powers to demand interest, often in excess of that which the consumer is legally obligated to pay, and often sets its rates at levels that are specifically designed to force consumers to seek to remortgage to a more reasonable rate. For those consumers who do not, or cannot remortgage, the excessive fees and interest rate charges are designed to guarantee arrears such that, the alleged arrears can be contrived as the grounds for repossession. Either way, the strategy ensures that the mortgages in the securitised pool will be redeemed within a 2 to 5 year period. Hence, the practice is designed to defeat the SPV's obligation to lend for the 25-year term. Moreover, it does so in a manner that gives the impression that it is the borrower in default of contract.
 
58.  Therefore, with respect to the Practitioner Panel's call for disclosing material information, it is necessary for originator's to disclose the material facts that (i) the consumer's contract will be sold to an SPV and that the SPV may not intend to fully honour its contractual obligation to lend for the full 25-year term; and (ii) that the SPV's interest rates will reflect not only the bank's administration of the mortgage loans, but also the extensive fees and expenses[151] of all the entities involved in the securitisation transaction[152].
 
59.  Evidential support for these contentions can be found in the repossession policies and the interest rate setting policies. There is also evidence from the lightening speed in which the SPV pays down its Investors and there is prima facie evidence from the amount of new business in mortgage market for remortgages[153] (in comparison to new business written for a house purchase mortgage). Such evidence is best illustrated from actual examples:
 
60.  In June 2006, Clavis Securities plc became the owner of 4,293 consumer mortgage contracts that were originated by GMAC-RFC Limited. Clavis securitised those mortgages totalling £587,945,144 in a securitisation transaction which issued £600 million[154] of Notes to Investors. This £600 million of Notes mature in the year 2031[155] which reflects the 25-year term of the mortgage contracts.
 

61.  In theory, the principal amount on the Investors Notes should pay down in exact correlation with the consumer's payments of principal on the mortgage. From the consumer perspective, this means that it should take at least a couple of decades to pay down the Investors. However, the Clavis Investors Report in December 2008 shows that miraculously, Clavis have paid down £456.8 million of these 25-year consumer mortgage contracts in only 2½ years. This means that within the short duration of only 2½ years, Clavis has successfully manipulated over 77% of its borrowers to redeem either through duress perpetrated on the borrower to remortgage[156] through its interest rate policy and/or through repossession. Either way, Clavis has absolved itself of performing its 25-year loan obligation to the vast majority of its borrowers[157].
 
62.  It is submitted that it can reasonably be inferred from these facts, that Clavis had no intention of performing its 25-year obligation. Whilst the Clavis securitisation is used to illustrate the point, this course of conduct is not an isolated example. It is ubiquitous throughout the securitisation industry and illustrates that the SPVs are in breach of contract for their evident intention not to perform and/or their failure to perform their contractual obligation to the consumer for the 25-year term.
 

63.  To achieve the SPVs absolution from its 25-year obligation, the SPVs use their wide discretionary interest rate setting powers to manipulate consumers to remortgage[158]. For those consumers who cannot remortgage, it is almost a certainty that they will be subjected to repossession action at some juncture. In all cases, the interest rate charged is designed to create arrears. There are cases where one or more of the following examples apply: (i) borrowers who are current in their payments are suddenly informed that arrears had accrued some years earlier for which immediate payment is demanded;[159] (ii) the arrears are contrived through applying interest and charges that the consumer is not contractually obliged to pay[160]; (iii) adding fees and charges and falsely claiming that they are interest arrears contrary to the MCOB[161]; and (iv) the amount claimed as arrears is exaggerated by claiming amounts that are not yet due. In all cases, the consumer has to trust the mortgage administrator's calculations and is rarely in a position to challenge the accuracy of the alleged arrears. The SPV, through their mortgage administrator will commence action grounded on the alleged arrears which are often erroneous, inflated and/or plain false.
 

64.  The abusive use of the SPV's discretionary powers to demand non-contractual interest is best explained through illustration. GMAC borrowers who contracted under GMAC's standard variable rate ("SVR") product, agreed to pay GMAC's SVR following the initial fixed period. Under the legal principle nemo dat qui non habet[162], GMAC did not possess the contractual right to charge its SVR borrowers in excess of GMAC's SVR rate. As GMAC did not possess a contractual right to charge more than its SVR, it did not possess, and could not, assign to any assignee, the right to charge GMAC borrowers in excess of the GMAC SVR. In other words, if GMAC could not contractually enforce the borrower to pay more than its SVR, nor could an assignee of that contract. Therefore, an SPV that acquired a GMAC SVR mortgage had no contractual right to charge the borrower any amount in excess of GMAC SVR. In short, an SPV as an assignee can only lawfully demand of its borrowers to like extent that GMAC could lawfully demand.
 
65.  However, in practice, the SPVs violate this fundamental Rule of Law and unlawfully demanded that consumers pay at interest rates in excess of GMAC's SVR. Failure to remit the unlawfully demanded payment rendered the borrower in jeopardy of repossession. Consequently, the SPVs were in breach of contract to each of those borrowers to whom they charged interest in excess of the GMAC SVR.
 
66.  It is the excess interest that consumers were unlawfully overcharged that often formed the basis of the alleged arrears. Additionally, those falsely alleged arrears were used to form the basis of the SPVs alleged right to further exacerbate the borrowers account with considerable charges such as monthly arrears fees, debt counsellor's fees, legal fees, etc. Following these abusive (and unlawful) charges, the SPV's use a further strategy of claiming future payments as alleged arrears to further exaggerate the appearance of large arrears. It is these strategies of overcharges and exaggerated claims, that contrive the false appearance of the borrower's breach of contract which the courts accept without reservation and the borrowers are unable to challenge.
 
67.  Again an exact example will demonstrate the point. Clavis Securities plc, through its mortgage administrator issued proceedings on 14 December 2006[163] alleging arrears of £4,530.63 for which they requested an immediate possession order. Of the £4,530.63 claimed as arrears, £1552.27 were not arrears because that amount was not due for payment until 31 December 2006. Nonetheless, the exaggeration of arrears strategy had the effect of giving the court the false impression of substantial arrears which would cause undue prejudice to the consumer before judge[164]. Of the remaining £2978.36 claimed as arrears, £1489.18 represented the payment due on 30 November 2006 and therefore was only 14 days overdue and the final £1489.18 represented the payment due on 31 October 2006 and therefore was only 44 days overdue.
 
68.  On strict construction of the contract, the SPV invoked the one-month arrears clause to commence the action. However, the only payment that was one month in arrears was the October payment of £1489.18[165]. Moreover, on strict construction of the consumer's obligation to pay interest, as discussed above, interest was at all times overcharged (which was eventually admitted[166]). The admitted interest overcharges amounted to some £3,000. Therefore, in this case, out of the total alleged arrears of £4530.63: (i) £1552.27 was not due for payment at all on the date that the amount was falsely claimed as arrears; and (ii) the remaining alleged arrears of £2978.36 could be more accurately classified as representing the £3000 interest overcharges rather than arrears. The conclusion is that the entirety of the repossession claim was falsely alleged and falsely claimed[167].
 
69.  Again, whilst the example illustrates Clavis Securities plc's unlawful breach of contract, this conduct is not isolated to the Clavis Securitisation. It is ubiquitous generally, and standard practice in the context of GMAC mortgages that have been assigned to other SPVs.
 
70.  As another example, consider the repossession policies of Northern Rock plc. The Treasury Committee have searched for explanation for Northern Rock's repossessions rates and its failure to pass on interest rate cuts, adequate explanations for which has hitherto, remained elusive. There are two fundamental questions that should be answered in order to illuminate an adequate explanation for Northern Rock's interest rate and repossession policies. The first fundamental question is "who" sets these policies and the second question is "why" the policies are implemented and apparently immutable.
 
71.  Northern Rock merely administrates the mortgages on behalf of the SPV that owns the mortgage contracts[168]. The SPV that owns the mortgage contracts that Northern Rock originated is Granite Finance Trustees Limited (a Jersey incorporated company). It is Granite Finance Trustees Limited that exercises the contractual powers under the mortgage contracts and it is Granite Finance Trustees Limited that determines the interest-rate setting policy and the repossessions policy. Northern Rock plc as the administrator acts as agent for the SPV and implements the SPV's policies[169]. Therefore, when endeavouring to elicit an explanation for the policies, the Committee should be mindful that it is Granite Finance Trustees Limited who set the policies that Northern Rock must implement.
 
72.  The second fundamental question is "why" those aggressive policies are dogmatically pursued. The answer is: in June/July 2008 Granite Finance Trustees Limited required more than £8.8 billion to redeem some of its Notes. Throughout 2008, the SPV's monthly Investor Reports[170] stated that: "All of the notes issued by Granite Mortgages 03-2 plc may be redeemed on the payment date falling in July 2008 and any payment date thereafter if the New Basel Capital Accord has been implemented in the United Kingdom." The same notice is given on a further five Note issues alerting the investors to the same advice.
 
73.  The condition that triggers the Note redemption is the implementation of the new Basel Capital Accords, a condition that has been satisfied.[171] Accordingly, the Granite Master Issuer's Notes for each of the series 2003-2, 2003-3, 2004-1, 2004-2, 2004-3 and 2005-1, may now be redeemed. Naturally, this means that Northern Rock plc, in its capacity as administrator and cash manager, acting as agent on behalf of the Granite SPV, must raise the cash that will be required for such redemptions. The cost of these redemptions amounts to £8.8 billion[172].
 
74.  Nick Ainger M.P. observed that in the half-year to June 2008, Northern Rock's repossessions increased 68% on the previous period, and he queried whether there was a link between the aggressive repossession policy and the staff's bonus incentive scheme. He requested an explanation from Mr Sandler[173], Northern Rock's Non-Executive Chairman. In reply, Mr Sandler admitted that the staff incentive scheme "|is designed in the early years around the objective of debt repayment"[174]. Mr Ainger's instinct was correct and the full open and honest answer to his question is: that the incentive scheme was designed around the objective of debt repayment because Northern Rock's client, Granite Finance Trustees Limited and Granite Master Issuer plc, requires £8.8 billion in cash to redeem its Notes.
 
75.  In these premises, it is submitted that the SPVs are in violation of a material term of their legal obligations under the mortgage contracts. The SPVs' course of conduct evidences that they have no intention of honouring their contractual obligation to loan to the consumer for the 25-year term. The Practitioner Panel's calls for the Government to support the rule of law. To that end, consumers would be assisted if the owners of the mortgage contracts would be held to honour their contractual obligations, and/or pay damages to each of the borrowers whom they force to remortgage.
 
76.  The SPVs breaches of contract are not limited to the examples above. The Early Redemption Charges ("ERC") are also unlawful. These ERCs are often in tens of thousands of pounds and do not reflect the SPVs reasonable costs of the redemption. They are therefore, penalties imposed on the consumer and are unlawful because the imposition of such excessive charges on the consumer is a violation of the FSA rules[175]. Moreover, the SPVs impose the charges on properties that they have repossessed. Notwithstanding that ERCs in the tens of thousands are unlawful in any event, the contractual trigger for an ERC charge is when the borrower voluntarily redeems. In the context of repossession, the borrower is not voluntarily choosing to redeem, rather it is the SPV that demands redemption. Thus, the ERC clause is not triggered and should not be charged. Nonetheless, in breach of contract, the SPV demands that charge and borrowers are unlawfully forced to satisfy that non-contractual overcharge too.
 
77.  To conclude, the Practitioner Panel's demand for faithful observance of the Rule of Law is welcomed. They may have intended that only those laws that benefit their members be considered, however on review, consumers would greatly benefit if the courts would properly construe the contracts and that judicial support for the SPVs ubiquitous and excessive and unlawful charges are refused. The consumers would benefit if the SPV were held to their contractual obligation to provide the loan for the 25-year term, and the consumers would benefit if the SPVs were prevented from abusing their discretionary powers to set interest rates. In short, consumers would benefit if the rule of law was observed and that the principle of equality before the law had real meaning, substance and effect.
 
78.  In conclusion: in light of the SPVs legal obligations which are generally performed in violation of the FSA's MCOB rules, and generally, in breach of contract, it begs the question whether the SPVs are lawfully repossessing the homeowner or more accurately dispossessing the homeowner.
 
79.  Recommendations:
—  Strictly apply the rule of law. Statute law is merely words on paper until brought to life through judicial observance, application and enforcement.
—  Empower the consumer to access the law to effect the enforcement of their rights, both contractual and statutory.


THE PERFECT STORM

80.  The Committee has heard the widely rehearsed crie de coeur from bankers that the wholesale markets abruptly closed in August 2007 and that they "didn't see it coming". Which means that the real question to be determined is: why did the wholesale markets abruptly close?
 
81.  The bankers' explanation is that the assets became toxic. The bankers blame the source of toxicity on the allegedly "bad" borrowers who defaulted on their loans. This universal defamation of the borrowing public unjustly stigmatises the homeowner when in fact, in August 2007, the default rates were no more than would be ordinarily experienced. To accept the bankers' allegation without question requires a gullible belief that a minority of defaulting borrowers had the power to bring down the whole of the banking industry. That contention is too incredulous to countenance and consequently, it is submitted that the bankers' explanation should be rejected.
 
82.  A more reasonable and logical explanation for the source of the toxicity can be found in tax law. In the Finance Act 2005, the Government took tentative steps with new tax law targeted specifically at securitisation companies. The 2005 Act provided "interim relief for securitisation companies".[176] Then, on 21 March 2007, H.M. Revenue and Customs made a public announcement[177] stating that legislation would be introduced in the Finance Bill 2007 that would affect "Large companies involved in securitisation or issuance of debt" and that the measures would have effect following its Royal Assent. The Finance Act 2007 received its Royal Assent on 19 July 2007. It cannot be a mere co-incidence then, that the wholesale money markets went into meltdown within a couple of weeks apparently with the cry "toxic-assets". On the facts, it is logical to deduce that the source of toxicity is tax rather than the bankers' defamatory allegation against the allegedly "bad" borrower. The flight from funding was fear. Fear of paying tax.
 
83.  The twist of fate turned the tide on tax policy and trumped the Treasury's tax intentions. The SPVs, rather than being the new contributors to the Treasury coffers became the greatest recipients of the Treasury coffers. The consumer now pays the money-masters twice. First directly to the banks and then indirectly through the Treasury.
 
84.  To exacerbate these events, a further factor came into play. The banks cry for capital. The cry was driven by the apparent immediate need to comply with the new Basel Capital Accords. Angela Knight informed the Committee that the banks' capital requirements "jumped" overnight[178] which naturally implies, that the banking industry was caught off-guard. Again, this assertion is too incredulous to attract credibility. Nonetheless, this lame excuse is the generally accepted foundation for the tax payer funding the banks' balance sheets. The result is that the ordinary public was hit with this double-whammy of tax policy and Basel.
 
85.  The Government aspires to stimulate the economy which requires the revival of the housing market. The Government appears to be in state-mate with the banks. There is demand for property purchases, but the banks will not facilitate the buyer's desire to buy. Again, the Government is at the mercy of the banks. But the Government does not necessarily need to beg the bankers to lend. It can apply the rule of law and revive and give life to law that already exists.
 
86.  The Law of Property Act 1925 s.95 contains a provision: "Where a mortgagor is entitled to redeem, then subject to compliance with the terms on compliance with which he would be entitled to require a reconveyance or surrender, he shall be entitled to require the mortgagee, instead of re-conveying or surrendering, to assign the mortgage debt and convey the mortgaged property to any third person, as the mortgagor directs; and the mortgagee shall be bound to assign and convey accordingly" Emphasis added.
 
87.  This means that the borrowers have a statutory right to assign the mortgage debt to a buyer. The loan already exists. No new lending is required. The borrower can assign the debt to the buyer as part of the property sale. The SPVs have made use of their statutory rights to assign. It is now time to give life and real effect to the borrower's right to assign. The Government does not need the bankers, the funding is already available. The Government can revive the housing market without the acquiescence of the bankers. If nothing else, the threat of facilitating the public's use of this provision would add weighty negotiation leverage to effect the Government's aspirations. The Government has given the golden carrot to the bankers who have coveted that carrot to the exclusion of all. It is perhaps time to use the stick.
 
88.  Implementation of this provision is simple. H.M. Land Registry could create a new Transfer Form to facilitate the mortgage assignment. For example, the TR1, transfer of the property and TR4, transfer of mortgage charge, could be used as the basis to create a new form to simultaneously transfer and assign both the property and the mortgage debt to the buyer. Additionally, the HIP pack could be amended to include disclosure of the mortgage product.
 
89.  The Government has supported the minority, the bankers to the absolute detriment of the majority, the public. The Government should re-focus its perspective and support the majority. Consumers only need the Government commitment to enforce the rule of law to empower the ordinary public.
CONCLUSION

90.  Qui Bono? Who benefits? The banks and the SPVs. The banking-crisis has undoubtedly been the greatest heist of public money at the hands of money-men wielding their power in the guise of victimhood. In reality it is passive-aggressive intimidation. Power is being concentrated in the hands of the few remaining banks that have successfully dispensed with competition, leaving the public at the future potential mercy a cabal of bankers and the attendant possibility of a concealed cartel. The golden rule will prevail. He who holds the gold—Rules! Private foreign companies and their investors have also done exceptionally well. The SPVs are being capitalised by the public purse through bank consolidated balance sheets and consequently, the public purse will carry any SPV losses. The investment paradigm appears to have shifted. Historically, investors capitalised their companies and received high returns for taking risk and, if the risk manifests, investors lost their investment; but now, the Investors still receive high returns but, the public capitalise their companies and guarantee the investors' returns.
 
91.  The intention of this memorandum is to highlight securitisation issues from the consumer and the tax payer perspective. It is not intended to give the impression that the securitisation process is harmful per se but it is intended to demonstrate that without checks and balances, this financial engineering dysfunctions to the detriment of the consumer and ultimately the economy. Transparency is essential, together with openness and honesty from the financial institutions[179].
 
92.  The contractual relationship is not one of equals, it is one of Goliath and David without the stone! The scales of justice are in urgent need of recalibration. To restore equilibrium between the contracting parties the remedy is: the faithful application of the rule of law. The failure of British courts to give effect to consumer rights makes the UK a most creditor friendly jurisdiction (which means a most debtor unfriendly jurisdiction) in the world attracting the highest creditor friendly rating of A1[180]. This high rating is achieved not through the lack of consumer protection law, but rather through the lack of consumer law enforcement. Consumers do not necessarily need new protection laws, consumers need empowerment to enforce their contractual rights and the consumer laws that exist.
 
This memorandum is respectfully submitted for your consideration.

February 2009

http://www.publications.parliament.uk/pa/cm200809/cmselect/cmtreasy/144/144w273.htm
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#8
The developments documented here are from across the Irish sea; the blogger writes,

Quote"Let's be clear here, I am not advocating that the Bank's shouldn't be paid, but they should only be paid what they are owed, they should be honest and observe their fiduciary duty of care to their customers, after all the Bank only exists if the public has confidence in it because that's the very foundation of a Bank! Confidence!"

My question is this, When he says they should be paid what they are owed, does he mean a fee for arranging the extension of credit which is streamed from the deposit of the prom note ?  Other than that, what could the bank possibly be owed?  ::)

I note too that the plaintiffs are not attacking the validity of the mortgage agreement ... which in itself is a KEY factor in the woeful scam that is a mortgage ...


SECURITISATION...EPIC FAIL..



QuoteFollowing on from the possibly, unquantifiable success in the High Court last week where Securitization, the Codes of Practice of the Irish Central Bank and the validity of appointed Receiver's is now well and truly under the scrutiny and spotlight in the proper arena, the Courts, the ramifications are gargantuan if the Bank's are judged to have acted improperly or even illegally.

We all now know that the Banks, the property market, the media and indeed our own Government all got very drunk on their own perceived success during the Celtic Tiger years, in doing so they pulled the general public into the dance by cajoling them and scaring the bejesus out of most of them, but to put this into some top-level perspective I will make a couple of brief points:

1) Irish Banks have gone from peak lending in Mortgages, of just short of €40 billion Euro in 2006 to €2.6 billion in 2012.

That's a staggering 95% drop!

2) In the same period, another way of looking at it is through the numbers of loans drawn down, which at its peak in 2006 was 204,000, fast forward to 2012 and the figure again plummets to 15,800, again a drop in the region of 93%!

(figures from the IBF – Irish Banking Federation website)

So, does that tell the story, in clear layman's language?

How did it happen? How did we get to be able to borrow so much money?

The answer my friends is as the song goes – "blowing in the wind", but one element I hold out to be absolutely responsible is "SECURITISATION" which was only possible through lax, or almost non-existent Bank regulation.

For those of you who wish to understand, in as much as one can understand, Securitisation, can I recommend you watch the following short presentations at:

https://www.khanacademy.org/science/core-finance/derivative-securities/mort-backed-secs-tut/v/mortgage-backed-securities-i

this will show you part 1 of a tutorial entitled Mortgage Back Securities 1, please go on and view parts 2 & 3 also, you should then have a reasonable grasp of the process that is Securitisation.

The reason I have such an issue with Securitisation is simple, I believe it has taken too much if not all the risk, for Bank's, out of the business of lending money, ( before I go any further, I would like to say that I understand and subscribe to the arguments and objections to the terms "lending money" and the "creation of money" but I am sticking to the mainstream terms for the unfamiliar among us).

Bank's, once they have securitised loans no longer carry any risk, this risk has been passed on to the "Noteholder" who is nothing more than a market speculator who accepts the assumed risk which accompanies all market speculation, we have all heard the terms " past performance is no indicator of future success" etc... so, the speculator may win or lose but, the Bank never loses, they have sold your loan at, possibly a premium, and from then on simply act in the capacity of a "Servicer", in other words they collect your money every month and pass it on to the speculator, withholding a fee for the service, so why do the Bank's charge such exorbitant interest when they assume no risk?

This gets even more dastardly when things go wrong, which is the case here in Ireland because, now the "speculator" is not getting his money each month, Irish people have lost their job, work for less wages and as such cannot afford to pay the monthly mortgage payment.

So, the Bank says, " Ok just pay the interest" for a while, why do they say this? because the interest is all they have to pass on to the "speculator", that is what he "bought" when he purchased your loan, the right to collect your interest, he gets his principal back at the end of the term or in Securitisation language, when the Note becomes due, normally a couple of years after the end of the term of the longest mortgage in the security tranche or deal, but in the meantime, he gets to collect your interest every month, do you see now! as long as you can pay the interest the Bank is ok! it's when you can't pay the interest even, the "speculator" starts to shout, where's my money!

The speculator finds out you have defaulted and immediately triggers a clause in his contract with the Bank which allows him to foreclose on you! so what does the Bank do? they say to the "speculator" Ssssshhhhh stop shouting, if the other people who are paying their mortgage in Ireland find out what we have done, they may stop paying too! and the Bank then offers to buy back the Mortgage from the "speculator" at up to a 60% – 70% discount, the "speculator" weights up his options and normally takes the offer, because remember the business he is in, he speculates in the markets to make money, he is ultimately better off taking a hit getting some money and getting back into some other deal which will work better.

Hey Presto! the second stroke has been pulled by the Bank!

1) They sold your loan, maybe at a premium, so they have their money they loaned you back, straight away.

2) They have bought back your loan at a massive discount.

Let's simplify it a bit more:

Your mortgage is 200,000,

The Bank sells it for a 10% premium so they get 220,000

The Speculator pays the premium because over the life of the loan he will make another 150,000 and his principal back.

The Market collapses and the Bank buy's back the loan, (220,000) at a 50% discount so it pays 110,00 for it and pockets a quick 110,000k profit that you know nothing about!

Should you know?

I say absolutely, after all, none of this can happen without you, shouldn't you profit from the benefit also? or at least only be liable for the amount the Bank is risking!

Let's be clear here, I am not advocating that the Bank's shouldn't be paid, but they should only be paid what they are owed, they should be honest and observe their fiduciary duty of care to their customers, after all the Bank only exists if the public has confidence in it because that's the very foundation of a Bank! Confidence!

So I say, having campaigned for an investigation into Securitisation for a long long time, I am absolutely delighted beyond imagination that we will see Securitisation on trial in an Irish Court in the near future.

For those who would like to view the entire High Court Judgement from last friday, please click the link below:

Freeman Judgement 31052013



The Documents mentioned in the Judgement under the terms, Central Bank Codes of Conduct are listed below:

Code Of Practice on the Transfer of Mortgages

http://www.centralbank.ie/regulation/industry-sectors/credit-institutions/Documents/Code%20of%20Practice%20on%20the%20Transfer%20of%20Mortgages.pdf

Code of Practice in Asset Securitisation

http://www.centralbank.ie/regulation/industry-sectors/credit-institutions/Documents/Asset%20Securitisation%20Notice.pdf

I will also provide the link for :

Code of Conduct for Mortgage Arrears

http://www.centralbank.ie/regulation/processes/consumer-protection-code/Documents/Code%20of%20Conduct%20on%20Mortgage%20Arrears%20%201%20January%202011.pdf

for those of you who wish to investigate further, the following is a list of SPV's or Special Purpose Vehicles which attach to relevant Banks and are the issuer's of the Residential Mortgage Backed Securities (RMBS) which contain your mortgage if it was securitised, (important to note that every effort was made to securitise "everything" by the Banks) which it more than likely was.

Ulster Bank & First Active – Celtic Residential Mortgage Securitisations

Bank of Ireland – Kildare Securities & Brunel Residential Mortgage Securities

KBC Bank – Pheonix Funding

Irish Nationwide – Armoin Securities

EBS – Emerald Securities

PTSB – Fastnet Securities

Start Mortgages – Lansdowne Securities

Bank of Scotland Ireland – Wolfhound Securities

AIB – AIB Mortgage Funding

Do your homework folk's, educate yourself, nobody is going to do it for you!

Awaken

http://awakenlongford.wordpress.com/2013/06/02/securitisation-epic-fail/
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Laurence James Howell

Hi All,
I have got a complaint in at FOS asking to clarify the position in respect of a true sale. Also, if a true sale has occurred has registration of the legal title bean delayed, in effect deliberatley delaying registration of the Legal Title which then gives the banks the facility of legal standing to evict.
The complaint is being investigated as we speak and I will post the results.

Peace through Love

M O'D

A Miracle Judgment!

Quoteby Scott Cundill on June 11, 2013 in Uncategorized

A miracle has just landed in our lap.

A young couple from Cape Town approached us after watching SABC 3's Special Assignment, where the banks and their secret schemes were exposed. This couple handed us a written High Court Judgment where FNB tried to act as agents for one of their shadow corporations.

Judge Moosa told FNB that they have no case and he threw the bank out of court! FNB could not show a connection between the bank, the shadow corporation and the customer. Judge Moosa dismissed the bank's case before they had even started. This is exactly how a Judge is supposed to act.

Read the Judgment here: http://downloads.newera.org.za/May%20Hearing/Judge%20Moosa%20Judgment.pdf. [Right mouse click and "save target as"].

If not for the work of NewERA and Special Assignment, not to mention this brave couple who represented themselves in Court without an attorney, this Judgment would probably have remained buried. Now that we have it, please ensure that every lawyer you know gets a copy. This judgment could be used to help people keep their assets

The banks are now caught between a rock and a hard place. On multiple occasions they and their lawyers have blatantly lied to the Court and this has been exposed on National Television. None of the banks, and not a single watchdog organisation (such as the NCR, Bank Ombud, FSB, etc) have come forward to be interviewed by Special Assignment. Why? Why are they protecting the banks and not the people?

Here is a written transcript of the episode which you can also watch online here. Will the banks and their lawyers come clean and inform the Court of the truth?

Meanwhile the banks had this to say in The Business Day on June 4th:

"...Basel 3 have pushed local banks into focusing on more profitable noninterest income, with increased involvement in the recovery process."

In other words, if you think the banks and their debt collectors are acting like insane psychopaths now, then just wait because it's about to get worse. Read here for a horrific example of what they have already started doing. ...And remember, the banks never actually lent money in the first place. Loans are fabricated from thin air. This is not conspiracy, it is a proven international banking fact.

As you can see, we are making progress towards economic freedom for the people. Please become a Member of NewERA or make a donation using the links above.

THE NEW ECONOMIC RIGHTS ALLIANCE

http://www.newera.org.za/a-miracle-judgment/
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M O'D

UKAR to contact interest-only mortgage customers


QuoteUK Asset Resolution, the body tasked with running the nationalised mortgage books of Bradford & Bingley and Northern Rock, is contacting customers about their mortgage repayment plans, Richard Banks has said.

By Kevin White | Published Apr 02, 2013 | 0 comments


The chief executive of the government-controlled company said it was contacting interest-only mortgage customers of both banks to find out how they planned to pay off the loans, as part of a programme of "proactive arrears management".

Commenting on UKAR's annual report and accounts for 2012, Mr Banks said: "We are concentrating our efforts on spending more time talking to our customers about their financial situation, with a particular focus on customers with interest-only mortgages.


"This involves contacting customers to discuss their plans to repay their mortgage at the end of their term. For most, this is not an immediate issue, but the mortgage market and house price inflation have changed dramatically.

"Currently, 56 per cent of accounts are interest-only, although 76 per cent of these have over ten years until they are due to be repaid."

Data from Moneyfacts in February, revealed that just 22 providers now offered interest-only products, compared to 79 in 2007.

Mr Banks said that the lack of interest-only products currently available on the market necessitated a need for customers to adapt to the new environment to ensure they met their commitments and protect their homes.

He added: "In some circumstances, the most appropriate cause of action is for customers to sell their homes, and we support this process wherever possible through assisted voluntary sales"

A spokesman for the Financial Conduct Agency said that a thematic review commissioned by predecessor the FSA into the state of the interest-only market, and the number of customers who did not have a repayment vehicle, would be published during the second quarter of 2013 amid fears of an impending interest-only "timebomb".

The 120-page report also revealed that UKAR had paid back some £5.2bn of government funding from the nationalisation of Northern Rock and Bradford & Bingley since it was formed in 2010, including £3.1bn during 2012.

The number of mortgage customers fell to 587,000 during 2012 (compared to 638,000 in 2011) as credit-worthy customers refinanced their mortgages and moved to other providers.

Mr Banks said it was inevitable over time that the nature of its loans book would change, with only the customers with poorer credit scores eventually remaining.

The loan books are closed to new business, however, it has been reported that UKAR will be in charge of running the government's mortgage guarantee scheme from January 2014.

http://www.ftadviser.com/2013/04/02/mortgages/mortgage-products/ukar-to-contact-interest-only-mortgage-customers-UG8DqQtlL9RgvrCzkIGlWK/article.html
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M O'D

MOVED TO PRIVATE BOARD  ;)
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Quote"Cashflow Model
20th May 2009
Bradford & Bingley plc today makes available to investors in the notes issued under the Aire Valley Master Trust Securitisation Programme a cash flow model in respect of the Programme. The model is a tool that enables the payment and maturity profile of each series of Notes issued under the Programme to be charted according to the level of the constant prepayment rate affecting the collateral underlying the Notes."

SHOW ME THE NOTE? YES, PLEASE. BRADFORD AND BINGLEY AND MORTGAGE EXPRESS NOTES 2000  ;) http://www.bbg.co.uk/~/media/Files/B/Bradford-and-Bingley-V2/securitisation/airvalleyfinance2.pdf

QuoteFrom 2008: "In its report, Moody's noted the rapid deterioration of assets on B&B's books compared with those in its securitisation vehicle, Aire Valley Master Trust. Contractual obligations with Aire's noteholders are triggered in the event of a ratings downgrade, requiring more mortgages or even cash be injected into the vehicle.

After June's downgrade, B&B had to move £2bn of mortgages into Aire, increasing the value of its assets from £11bn to £13bn. Aire now holds a third of B&B's entire mortgage book - apparently the better third. A second downgrade, in the words of one banker, would "make it more onerous for B&B to run the programme and would not be fantastic for long-term profits".

With house prices crashing, the economy flagging and analysts at Panmure Gordon estimating that B&B is worth no more than 20p a share, TPG may reflect that the reputational damage was worth it."

..."

QuoteJC Flowers eyes bombed-out banks after Bradford & Bingley deal fails

The US private equity firm JC Flowers, which offered to buy Northern Rock last year, is looking closely at Britain's bombed-out banking sector with a view to swooping on weakened targets. The move comes after Texas Pacific Group walked away from its own deal to buy 23pc of Bradford & Bingley for £179m after Moody's downgraded its credit rating.

The dramatic turn of events forced the bank to fall back on four of its largest shareholders for capital. Last night shareholders said they wanted the bank to start the search for a new chairman to replace Rod Kent. Although the four institutions backing the new deal did not insist on his removal as a condition of support, one investor said "he has lost all credibility" and would have to go shortly."...

Note also the fact that they are setting the interest rates under LIBOR ~ I L L E G A L L Y  :o

http://theautomaticearth.blogspot.co.uk/2008/07/debt-rattle-july-5-2008-blood-of.html

Quite a rabbit hole, eh? ;)


http://www.bbg.co.uk/corporate/financial-information/debt-investors/securitisation
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M O'D

'Jail reckless bankers': Failed bosses could also lose right to claim bonuses for up to ten years, says inquiry into financial malpractice

New criminal offence to tackle 'shocking and widespread malpractice'

No British bankers jailed since financial crash began in 2007


Quote
The bosses of failed banks should face jail or lose the right to claim bonuses for up to ten years for 'reckless misconduct', a report recommends today.

The new criminal offence would make sure that top executives paid for their 'shocking and widespread malpractice', the Parliamentary Commission on Banking Standards said.

Not a single British banker has been sent to prison since the financial crash began in 2007, but the proposed legislation would make sure they would be 'on the hook' in future, it added.

As well as prison terms, errant bankers would face heavy fines and bans from the financial services industry, as well as curbs on bonuses and the threat of pensions being cancelled.

Commission chairman Andrew Tyrie MP said: 'Under our recommendations, senior bankers who seriously damage their banks or put taxpayers' money at risk can expect to be fined, banned from the industry, or, in the worst cases, go to jail. That has not been the case up to now.

'This deals with some of the senior people who many feel got off lightly last time and for whose mistakes we are still paying.'

In its 527-page report, the commission found that 'deep lapses in standards have been commonplace'. 'It is not just bankers that need to change. The actions of regulators and governments have contributed to the decline in standards,' said Tory MP Mr Tyrie.

The commission of MPs and peers calls for a sweeping overhaul of top pay, with City regulators given new powers to cancel pension rights and payoffs for the bosses of bailed-out banks.

It also wants watchdogs to be able to force banks to defer bonus payments for up to a decade, in order to prevent bosses reaping large rewards for risky, short-term strategies that subsequently lead to losses.

'The rewards for fleeting, often illusory success have been huge, while the penalties for failure have been much smaller, or non-existent,' Mr Tyrie said.

However, John Cridland, director general of the CBI, said: 'There are tough criminal sanctions in the UK for those who engage in fraudulent behaviour. Enforcing those must come before the introduction of new sanctions.'
The findings of the commission, set up last summer in the wake of the Libor scandal, are not binding, but the Government is being urged to implement its recommendations 'in full'.

The proposals will now be handed to ministers. The reforms will aim to prevent a repeat of the bailouts and scandals such as Libor rate-rigging, where bosses have walked away with large payoffs and pensions.
But bankers will not be targeted retrospectively. Fred Goodwin, who left RBS in ruins but is still receiving a pension of £342,000 a year for life, will be unaffected.

Nor will any legislation ensnare former HBOS boss James Crosby, who will collect £406,000 of his £580,000-a-year retirement deal. Under current rules, senior bankers have been able to evade punishment by claiming they were not personally responsible for collapses and that they had not committed deliberate fraud, with the onus  on financial authorities to prove wrongdoing.

But in the new proposed regime, top managers would be held individually accountable and would have to show they took 'all reasonable steps' to avoid a failure.

'A lack of personal responsibility has been commonplace throughout the industry,' Mr Tyrie added. 'Senior figures have continued to shelter behind an accountability firewall.'

The commission also wants a new licensing system to stop traders involved in setting Libor rates and prevent area managers who oversee the sale of financial products from slipping through the net.

They will have to abide by a new set of conduct rules or lose their licence.

The report also recommends that City watchdogs should be able to force badly-behaved banks to sign a formal agreement to improve their culture and standards.

The commission – whose members include the Archbishop of Canterbury Justin Welby and former Chancellor Lord Lawson – also demands the dismantling of UK Financial Investments (UKFI), the body that is supposed to manage taxpayers' holdings in RBS and Lloyds at arms' length from ministers.
It said the Government, which denies forcing the resignation of RBS boss Stephen Hester, has interfered in the running of the two banks and that UKFI is seen as a 'fig leaf' for 'the reality of direct government control'.
Ministers must also make an immediate commitment to analyse whether RBS should be split up into a 'good bank', that could lend more to small firms and personal customers, and a 'bad bank' to dump its toxic assets, the commission said.

A study of high street lenders by competition watchdogs and an independent panel of experts to look at measures to help bank customers were also part of the recommendations.

Lord Oakeshott, a former LibDem Treasury spokesman, said: 'Why are there no banged-up bankers? That is what most people want to know after the last five years of scandals and shame and moral and financial bankruptcy.'
He added: 'We must stop the subterfuge of UKFI and put the Treasury on the spot to make the banks we own lend.
'RBS, our biggest business bank, has failed the nation that rescued it at £1,500 for every taxpayer. It must be broken up with new management and tough net lending targets for the good bank so small business can grow again.'

http://www.dailymail.co.uk/news/article-2344155/Jail-reckless-bankers-Failed-bosses-lose-right-claim-bonuses-years.html#ixzz2WlAlCcU2
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