City Watchdogs to Halt House Buyers From Taking Out Liar Loans

Wed, 14 Oct 2009

City watchdogs are aiming to ban 'liar loans' which are self-certification mortgages where house buyers have invented their income to qualify for massive loans and banks and building societies do not make independent checks on the customer's income.

This has led to massive fraud.

During the last property boom unethical mortgage brokers encouraged home buyers to exaggerate their income to get the loan they were after.

House buyers are going to be prevented from taking out self certification mortgages .

In certain cases some individuals were able to borrow up to eight times their true income. However, these individuals were then unable to meet monthly mortgage repayments when interest rates starteed to increase, ending up with massive arrears, financial mess and repossession .

Sales of these 'liar loans' was a factor responsible for boosting property prices to a peak where a bust was invariable. Warnings were issued regarding self-cert mortgages over a decade ago. However, the City watchdog, the Financial Services Authority (FSA) did not act.

Should self-certification mortgages be proved to be a strong catalyst for the mortgage crisis we are in, then these mortgages belong only in the history books of personal finance.

Link to this page

Copy and Paste the following HTML into your page.