"Eviction,The fraud of the banks"

[Horatius]

(b) is a net win through the higher tax deductible for the customer compared to a normal annuity plan.

Any investment that relies on tax policy for its profit is a bad plan.

And yet, people still go for them. This reminds me of the building in which I owned my first condo apartment. The building had been built to take advantage of a tax plan that let people buy into new condo developments, then rent out the units, and part of that income was tax-exempt. That worked great right up until the government changed the tax policy, at which point the owners found themselves owning units that couldn't make a profit at the going rental rate, and which no other investors wanted to buy, because they weren't profitable.

They ended up not giving a crap about doing maintenance and whatnot, until the market value of the units got so low that people like me decided they could afford them. I bought in for the lowest, or maybe second-lowest, price they ever sold for, and in the next couple of years, more than half the building got sold to people who actually wanted to live there, rather than just rent them out. We took over the condo board, and started running the building properly, and the value rose quite a bit.

So, I guess these sorts of tax policies do work out for some people

 

[ddt]

Any investment that relies on tax policy for its profit is a bad plan.

<snip nice story>

It depends on how dependable your government is. As far as I'm knowledgeable with changes in Dutch tax code, changes in tax policy on long-term plans like mortgages and life insurances always only apply to new policies, and the old rules are retained for existing policies. I think that's only fair.

And in reality, many people calculate the tax deductible in into how much they can afford; otherwise, a lot less houses or apartments would be bought. Many people even ask the tax office permission that their employer considers the deductible already in the monthly payroll taxes.

 

[The Don]

It depends on how dependable your government is. As far as I'm knowledgeable with changes in Dutch tax code, changes in tax policy on long-term plans like mortgages and life insurances always only apply to new policies, and the old rules are retained for existing policies. I think that's only fair.

And in reality, many people calculate the tax deductible in into how much they can afford; otherwise, a lot less houses or apartments would be bought. Many people even ask the tax office permission that their employer considers the deductible already in the monthly payroll taxes.

Unfortunately in this respect the housing market in The Netherlands seems to match the one in the UK. A shortage of housing stock, especially in desirable locations combined with tax breaks to help homeowners drives up house prices. I remember when a friend bought a 4 bedroomed house in Hilversum I was shocked at the price

 

[timhau]

When will people learn that such mortgage shenanigans are pretty much always a bad idea? If you're not paying off all the interest and some of the principle every month, you're just *********** doomed. That should be personal finances lesson #1 taught in every school in the world.

But what if that means you can't afford the house you want? After all, some other people can afford to live in houses they want, so why is this right denied of you? It's got to be fraud, man!

 

[thedopefishlives]

But what if that means you can't afford the house you want? After all, some other people can afford to live in houses they want, so why is this right denied of you? It's got to be fraud, man!

If you want it badly enough, you don't have to pay for it. It's the FMOTL way.

 

[Horatius]

But what if that means you can't afford the house you want?

I know you're joking, but this is the sort of thing that makes it "pretty much always" and not just plain "always". Things like interest-only loans and these other plans do let you buy a more expensive house than a regular mortgage, and if you're in a position where you really need to do that*, it might be the best option. The key is to realize what you're getting into, and not act all surprised 25 years from now when you still have the whole principle outstanding.



*Say you live in a really expensive city, the interest on the loan might be less than rent on a equivalent property. Essentially, you're then paying rent on the loan, and not the property. This would make your monthly expenses lower, while giving you greater control over your home, and over the course of 25 years, the house will almost certainly go up in value, so that you can sell out at retirement to pay off the principle, or re-finance for an additional term.

 

[The Don]

[anecdote]

I have an interest only mortgage and it works well for me. We took out a £140k mortgage on a £500k house nearly 3 years ago. We had cash savings to allow us to buy the property outright but some of those savings were in high interest (7%, from before the credit crunch) and long notice accounts. The mortgage allowed us a "flex" to close out the cash savings at a convenient time and to have some cash on hand in case of emergency or do do work on the property.

We have an offset mortgage (where savings are used to offset the load) and at the moment all the mortgage is offset so we don't have to pay a penny in interest but we have a line of credit if we need money in a hurry. We're paying back the principal 10K a year.

[/anecdote]

 

[timhau]

I don't doubt the utility of interest-only mortgages for people who know what they're doing. They can also be dangerous as hell; for people with limited means, low earning potential and the impulse control of a 3-year-old, they can be used to open doors that shouldn't be opened.

 

[River Song]

w w w .bbc.co.uk/news/uk-england-nottinghamshire-28459746

"Hundreds stop Nottingham eviction"

The baliffs didn't turn up for his eviction "due to safety concerns"

 

[Horatius]

w w w .bbc.co.uk/news/uk-england-nottinghamshire-28459746

"Hundreds stop Nottingham eviction"

The baliffs didn't turn up for his eviction "due to safety concerns"

Linkified:

http://www.bbc.com/news/uk-england-nottinghamshire-28459746

Mr Crawford said he had paid off an endowment mortgage that he took out in 1988 but Bradford & Bingley have disputed this.

Which of course is the whole point: The person doesn't "pay off" the endowment. If his investments tanked, he still owed a lot of money. Idiot.

 

[Normal Wisdom]

He knows he still has to repay the loan too which is why as a pre-emptive measure he attempted to sue the building society for fraud. The fraud being that since the banks don't have any money of their own they cannot charge interest on a loan. As usual, the judge dismissed the case as "without merit".

It sounds to me like he either ignored or was too stupid to understand the warnings from the bank about his endowment and has been seduced by the FOTL / GOODF nonsense as a way of getting out of the mess he has got himself into.

It is depressing that so many of our newspapers have trumpeted this as some kind of victory for the people without understanding the real danger that these idiots pose.

On a connected point I saw on another thread somebody suggesting that it was high time that "Ceylon" was taken down. This man irritates the hell out of me which is the main reason I started to investigate more about FOTL and why I found JREF.

 

[Stacey Grove]

He knows he still has to repay the loan too which is why as a pre-emptive measure he attempted to sue the building society for fraud. The fraud being that since the banks don't have any money of their own they cannot charge interest on a loan. As usual, the judge dismissed the case as "without merit".

Hi, welcome to the forum.
Do you have any more details about his court case?

 

[Normal Wisdom]

Hi, welcome to the forum.
Do you have any more details about his court case?

Not really, I've just made an educated guess based on the two videos Tom Crawford has posted and the one in which he is interviewed by a couple of FOTLers one of which is the infamous "Ceylon".

I don't think I can post a link yet but it is on Youtube called "Unlawful eviction attempt 9AM Wednesday 23.7.2014". This gives a bit more of a feel for what has really gone on than the rather misleading videos that Mr Crawford posted himself. It can only bolster the detailed legal analysis to know that the senior barrister representing the building society is probably a paedophile!

Mr Crawford confirms that he sued the building society for fraud because he thought they would come after him for the principal sum. It's pretty clear that the basis of the fraud allegation is that banks don't have any money of their own so charging interest is fraud. His position seems to be that because he has incorrectly paid interest he should not have to pay back the principal. He seems outraged that the judge dismissed the case as having "no merit" but this is presumably because he is being led by the nose by "Ceylon" and his buddies who have convinced him with all their legal mumbo-jumbo.

I was particularly interested in Mr Crawford's sob story because I was in the same position as him, having taken out an endowment mortgage in 1987. The original idea was that over 25 years it would generate enough profit to cover the amount loaned and leave a surplus. In effect it was part mortgage and part investment.

By the late 90's it became clear in press articles that endowments taken out from around 1988 would not generate enough finds to cover the loan let alone leave a surplus. Lenders were required to write annually to each borrower to explain the projected shortfall. I think there was even a colour coded warning based on the level of risk.

As soon as it became clear that my endowment would leave a shortfall, I increased the payments above the monthly interest to start to chip away at the principal. Effectively turning it into a repayment mortgage. By around 2005 I had repaid the entire loan. I then sold the endowment for about £12k. I tried to make a claim for mis-selling on the basis that the documentation from the bank only talked about the surplus i would get. To be fair I seem to remember the guy i spoke to saying that technically there could be a shortfall "but that never happens". I was turned down on the grounds that by repaying early I had actually paid less in total than I would if the endowment had covered the loan. To be honest I was just glad to get it over with so I let it drop.

Mr Crawford would have to be a special kind of idiot to ignore all the warnings from the bank and particularly, once the bank had moved him to a repayment mortgage, to insist that they change it back to an endowment even though he knew that it would not cover the sum loaned and then to make no additional arrangements to make up the shortfall. However I suspect that this is what happened. I am sure that if he had shown the slightest acceptance that he owed the money that something would have been worked out to let him keep the house but he has obviously made it clear that he will not pay anything and so he deserves the inevitable eviction.

 

[Normal Wisdom]

Oops - double post

 

[jhunter1163]

[anecdote]

My wife and I bought our current house in the early stages of the US housing boom back in 2004. We got a five-year interest-only loan (meaning interest-only for five years, then a regular repayment loan with a 25-year term) anticipating that we would refinance into a regular 30-year fixed at some point before the end of the five years. We got a 6.25% rate.

Four years and nine months later, we refinanced into a standard 30-year fixed mortgage at 4.75%.

Three years after that, we refinanced into another standard 30-year fixed mortgage at 3.625%. Our mortgage payment now is only slightly higher than the original interest-only loan.

[/anecdote]

It sounds like "endowment" mortgages are what we would call "balloon" mortgages here in the States (interest only with full repayment at the end of the loan term) plus a savings/investment element. It also sounds like something I would stay far, far away from.

 

[jhunter1163]

[anecdote]

My wife and I bought our current house in the early stages of the US housing boom back in 2004. We got a five-year interest-only loan (meaning interest-only for five years, then a regular repayment loan with a 25-year term) anticipating that we would refinance into a regular 30-year fixed at some point before the end of the five years. We got a 6.25% rate.

Four years and nine months later, we refinanced into a standard 30-year fixed mortgage at 4.75%.

Three years after that, we refinanced into another standard 30-year fixed mortgage at 3.625%. Our mortgage payment now is only slightly higher than the original interest-only loan.

[/anecdote]

It sounds like "endowment" mortgages are what we would call "balloon" mortgages here in the States (interest only with full repayment at the end of the loan term) plus a savings/investment element. It also sounds like something I would stay far, far away from.

 

[Normal Wisdom]

The endowment mortgage arrangement worked for a while at least and people were left with surpluses after the loan to buy the house had been paid off. As I said, it was policies taken out from around 1988 that ran into trouble. In my case, it was my sister-in-law who recommended and endowment policy (she worked in insurance / investments) so we actually went looking for such a policy. The loan attracted a variable interest rate which went up to around 16% soon after we took it.

The problem with endowments was that there was a lot of mis-selling because lenders were on commission to sell the policies and did not highlight the risks involved. It was possible to seek compensation for mis-sold policies but I think you had to submit the claim within a specific period of being advised of the shortfall. Mr Crawford seems to have ignored this too although he does refer to his case being out of time.

 

[Aulus Agerius]

It sounds like "endowment" mortgages are what we would call "balloon" mortgages here in the States (interest only with full repayment at the end of the loan term) plus a savings/investment element. It also sounds like something I would stay far, far away from.

Yeah that's what an endowment mortgage was - an interest-only ARM with principle repayable at the end of the term, combined with an endowment which was intended to pay the principle when it fell due. Of course, a lot of assumptions went into that, and as Mr Wisdom points out many were "missold" this guy could have got compensation, but chose not to. He'll be long out of the limitation period by now.

There were plenty of exotic mortgages out there - SAMs are another great one "Shared Appreciation Mortgages" which, if memory serves, were a kind home equity loan where, instead of taking interest, the lender took a share of the appreciation in value of the home(a large share of course). They turned out to be a really bad idea. Then there were good old Northern Rock "Together" Mortgages, where they gave you a pretty normal ARM mortgage at something like 80% LTV, plus an unsecured variable rate loan pegged to the mortgage, which took the total load up to or over 100% LTV. Then there was the whole PPI thing. Alas, not enough people see the next bad idea coming around the corner.

Lots of reasons out there to criticize the banks and finance companies. Even some reasons to sue them. But alas for FOTLs, woo about money isn't one.

 

[Justin39640]

How do the banks invest the money in an endowment loan? This guy was paying off his loan during the internet boom, correct? I see where he screwed up but you have to think the banks should have been a little smarter in how they played the market.

Were they required to contact him when those investments went belly-up or send him statements about investments?

 

[Normal Wisdom]

The peak of endowment mortgage sales was in the late 80's during a period of rapidly increasing house prices and share prices. The investments underpinning the endowment were usually in shares and property and quite simply the forecasts for growth were vastly overestimated. By the mid to late 90's this started to become apparent.

Lenders were required to contact borrowers to let them know the level of risk - colour coded annual statements with "red" obviously indicating the highest risk. I cannot answer for every bank but it is certainly what happened in my case. So irrespective of who is to blame I certainly was aware that there was a problem and had plenty of time to do something about it.

Mr Crawford admits that he was told about the potential shortfall but not only did he do nothing to resolve it, he seems to have insisted that the bank did nothing either. Despite further correspondence over the years he is pretending to be surprised when at the end of the loan period he could not repay the amount borrowed.

The major piece of information missing from this story is how much the endowment policy actually delivered and what happened to it. It certainly wouldn't have been enough the repay the whole loan but it should have covered part of it. Yet in his latest video he explains that not only does he owe the whole £41,800 he borrowed but about another £1,500 on top.

He also makes clear that now the threat of eviction has been temporarily averted he intends to attempt to sue the bank for fraud again and also to sue the court who made the initial judgement and dismissed his previous suit. He promises to make the "paperwork" available in the future which should be enlightening.