Category: 
09/06/2008Is this another sign of the credit crunch?
During May Birmingham Midshires added a note to their mortgage book with the CML (Council of Mortgage Lenders)
5.1.1- Contact point if the seller has owned the property for less than 6 months.
Completions Team at office issuing mortgage instructions. See Offer for contact details.
NB We will not normally proceed on cases where the property is already owned by the borrower but for less than 6 months.
Applications which involve assignable contracts are not acceptable.
Assignable contracts, used heavily by some investors are no longer allowed by BMS. An assignable contract allows an investor to exchange contracts on a property, but sell his contract on to another investor, without buying the property. The new investor would just raise the funds and mortgage in the normal way and complete the sale.
This is a sign that BMS are becoming more and more tight with their mortgage lending. I wonder how long it will be before other lenders follow suit.
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There are 10 comments
Lenders appear to be doing their best to stifle the property investment market. Property investors are an important part of a vibrant market but now seem to be targeted by backward thinking lenders.
Maybe BMS would like to ensure that they would get a lot of money from their lending businesses. lol
Btw, thanks for sharing.
Events have moved on in July - and Fanny Mae / Freddie Mac, A+L takeover issues - are making the prospects difficult for any new buyer or investor.
Really hope that the Bank of England can take a longer term view and stimulate the economy by cutting rates. Some hope with Gord depressing everyone.
Just find a lender that will allow it, or use land trust or a number of other ways to keep everyone in the transaction happy.
Things are looking increasingly bad for the economy, and there seems to be bad news almost weekly in the us and uk. Lets hope we have some good news soon!
Things have moved on since this post, be interested in seeing your take on the current crises - who’d thought the credit crunch could possibly signal the end to free market capitalism? I’ve heard a few quotes in the papers recently stating “America is now more communist than China”
You chicken. I dare you to go on same ride as me tomorrow! =P
Ahh nice point Robert Brown, indeed this financial crisis has raised a number of questions about the way capitalism is handled.
We have seen more and more loans falling apart a week or two after contract acceptance because the lenders changed the rules in the middle of the process. I think this is really screwing up the market by having deals fall apart in midstream.
I have also heard that apart from Birmingham Midshires there are two more lenders who have now banned assignable contracts, and will no longer grant a mortgage to any purchaser using this mechanism. They are Bank of Scotland & The Mortgage Business (TMB). So if your strategy involved assignable contracts, you had better be quick on your feet before the other lenders follow suit and ban them too!
Regards,
Shane,
Panama real estate.