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March 06, 2006
Tessa Jowell
Just one little question really.
In their separate bolt holes, Tessa Jowell and David Mills had reason over the weekend to wish they lived in Italy.
Seperate bolt holes? Who now will pay the mortgage for the helpless little dear? How, at the age of 60, will she be able to cope with all of this new stuff, money, banks, monthly payments and the like? For as we know, she hasn’t dealt with any of it before. As she says.
Does anyone have a copy of a useful little pamphlet? " You and Your Mortgage" or some such? Useful advice like "Your home may be repossessed if you do not keep up the payments on your mortgage"?
Fancy sending a copy round to the Culture Secretary’s office?
Department for Culture Media & Sport
2-4 Cockspur Street
London, SW1Y 5DH
I’m sure she’d be very grateful.
March 6, 2006 in Politics | Permalink
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I spent the weekend in the UK where the chattering classes were getting exercised by the story of "the minister, her hubby and the generous Italian client". Needless to say there was far more hypocrisy on view than insightful commentary and not entir... [Read More]
Tracked on Mar 6, 2006 5:31:06 PM
Comments
I was chatting to the pater familias last night and the subject of the Jowell family finances came up. Now it's a few years since Pa Remittance sat in approval on people's mortgage applications and admitedly the years (and copious amounts of whisky) may have dulled his senses but as a former banker he had a few comments that I think may be pertinent.
Apparently it is standard banking practice (and may even be law) that when a person wishes to remortgage a home of which he is only part owner, the lending institution is required to haul the other part owner in to explain things to them. This is done by someone who understands finances and the law. All matters are carefully explained until such a time as the second party both understands what is happening. Then and only then does the bank ask Party 2 to sign the documents. As proof that this has been done, the bank's explainer then countersigns the documentation.
In other words our Tessa can't use the "dumb little housewife letting hubby do all the difficult stuff" excuse without dropping Mr Jowell and the lending institution in the poo for breaking codes of practice and possibly the law.
I wonder how long it will take the authorities to work this one out?
RM
Posted by: The Remittance Man | Mar 6, 2006 11:02:24 AM
Tim,
"Who now will pay the mortgage for the helpless little dear?"
I thought the whole point was that there aren't mortgages on any of their myriad bolt-holes now that they have managed to repatriate the laundered mobster moolah.
PG
Posted by: The Pedant-General | Mar 6, 2006 11:27:57 AM
"As proof that this has been done, the bank's explainer then countersigns the documentation."
That would be your genuine smoking gun. There must be a bank clerk somewhere this lunchtime eyeing the photocopier and trying to guess how much that piece of paper would be worth to the likes of the Daily Mail...
Posted by: Justin | Mar 6, 2006 11:38:33 AM
Isn't her defence though not that she didn't understand they were remortgaging the house, but that she didn't know it was paid off with dodgy money?
Posted by: Matthew | Mar 6, 2006 11:59:28 AM
[Apparently it is standard banking practice ]
I don't think so, no. Maybe thirty years ago but I doubt it even then (I suspect that anything like this would have been considered a restrictive practice and would have bitten the dust in 1979 with the Competition and Credit Control Act). It would be more or less impossible to run the UK mortgage industry on anything like its current scale if anything of the sort had to be done - you can apply for mortages online these days, frex, and this requirement would seemingly make it more or less impossible to run a mortgage bank without branches. There is certainly no certification regime which would define what kind of person was qualified to perform this explanation ceremony.
In any case as Matthew says, Jowell has never said that she didn't know that the house was being remortgaged. I'd also point out that using mortgages for short-term speculative loans is pretty much a staple of the private banking industry and is not at all a weird or unusual thing to do, even now there is no such thing as MIRAS. The point is that the private banker doesn't want to be interested in how good the underlying "investment" is, so he takes a charge over a big and easily realisable asset, meaning that the credit risk for him is effectively zero.
Posted by: dsquared | Mar 6, 2006 1:04:36 PM
Dsquared
I think the point Pa Remittance was trying to make is that any reputable mortgage institution makes damned sure that Party 2 is fully aware of the transaction. The reason for this, if it is not law is simple - fucking lawyers - the last thing banks want is some lawyer handing them a writ for arranging a mortgage without the permission of one of the owners of the property. Now the Old Man did retire before the emergence of internet banking, but unless we are talking the iffy end of the market I would guess that what holds true for the traditional banks also holds true for the internet variety. A lot of the internet banks are actually only divisions of the mainstream banks anyway, the government doesn't hand out banking licences to just about anyone so Tescos, Asda etc have to link up with Barclays or TSB or whoever and piggyback on thier licence.
As to the qualification of the "explainer" most lending institutions require their senior branch staff (Senior Clerks, Assistant Managers and Managers) to be members of the Institute of Bankers a professional body with the same level of worthiness as the engineering and accounting institutes. The exams for the IoB are largely to do with banking practice and law. Since most applications to remortgage a property owned by two people are not of the dodgy type and both partners are already in agreement, the interview can take place quite simply and quickly in the manager's office.
Finally your comment that banks don't give a damn about the quality of the lender because they have the property as security is to put it politely horlicks. Banks sell money. They have no desire to be in the property business espescially the domestic home rental and sales business. Having properties on the books is a real ball ache for them; they need to be managed, tennents need to be found and eventually the property needs to be sold. This takes time and effort which as we all know takes money. That's why picking repossessed houses up is often a good investment. Banks sell at a discount simply to get their money back, they care not one jot for the defaulting borrower or the market, they simply want to get rid of a problem at the least cost and expenditure of time.
I hope this puts the record straight,
RM
Posted by: The Remittance Man | Mar 6, 2006 2:21:56 PM
[any reputable mortgage institution makes damned sure that Party 2 is fully aware of the transaction]
but this is achieved by requiring a signature on the papers, not by the sort of sit down interview that you describe. Tesco and Sainsbury's both do in fact have full UK banking licences (they wouldn't be allowed to use the word "bank" in the name of their financial services operations if they didn't) and they actually just partner with RBS and HBOS/Bank of Scotland because the banking partners are able to operate the back office much more efficiently than a small standalone operation could. In any case, you don't need a banking licence to be a mortgage lender and several quite large UK mortgage lenders don't have one.
[most lending institutions require their senior branch staff (Senior Clerks, Assistant Managers and Managers) to be members of the Institute of Bankers a professional body with the same level of worthiness as the engineering and accounting institutes]
No, it's a whole different world now. The average branch manager for a UK clearer earns about £27k - substantially less than a branch manager selling trainers. The branch network was massively hollowed out in the 1990s. In any case CIB membership has never been a regulatory qualification even for banking and it definitely isn't for mortgage lending.
[Finally your comment that banks don't give a damn about the quality of the lender because they have the property as security is to put it politely horlicks]
Presumably you mean the quality of the borrower, but no it isn't. All the problems you identify can be taken care of with a sufficiently conservative loan-to-value ratio and I would guess that having a £350k loan collateralised against a four bedroom house in Kentish Town would pay for quite a few months without a tenant. Obviously nobody wants a loan to go into default, but the availability of bankable collateral means that a private banker is able to arrange the loan quickly and conveniently which is very useful in situations where an investment opportunity (usually stagging a new issue) might go begging if you had to wait for the full majesty of a credit check that would be needed for a £350k uncollateralised loan.
[I hope this puts the record straight]
Well no it doesn't. No disrespect to your father but:
1. As I hope I have made clear, I am not exactly unfamiliar with the UK banking system myself and my knowledge is not seven years out of date ("before Internet banking" certainly means "before 1999").
2. I have taken out a mortgage and a remortgage on my house, which I own jointly with my partner, and I have never been in for the interview you describe. I let her handle all the paperwork and all that was required from me was a signature. This ain't how it works.
3. I would also not like it if Matthew's point got lost here - this is all a pointless dispute as Jowell does not in fact deny knowing that the remortgage was taken out.
Posted by: dsquared | Mar 6, 2006 2:46:00 PM
You're right when you say the Old Man has been a couple of years out of the game (he did retire slightly before 1999 but not by much) in which case I will bow to your more curent knowledge with one comment; sell banking shares and close the kiddies savings accounts. If they are letting unqualified people approve loans then I'm not entirely sure I'd want them lending my money out.
Fortunately SA banks seem to be a little more responsible at the moment at least.
RM
Posted by: The Remittance Man | Mar 6, 2006 3:07:51 PM
Dsquared is mistaken in claiming that banks aren't obliged to make sure a person with an equitable interest in a re-mortgaged property isn't aware of possible problems at an interview.
Lord Browne-Wilkinson sets out the law in the 1993 case of Barclay's Bank v O'brien:
"The only further substantial step required by law beyond that good practice is that the position should be explained by the bank to the wife in a personal interview. I regard this as being essential because a number of the decided cases show that written warnings are often not read and are sometimes intercepted by the husband. It does not seem to me that the requirement of a personal interview imposes such an additional administrative burden as to render the bank's position unworkable."
Moral: When taking legal advice it's best to listen to a real lawyer rather than an internet know-it-all.
Posted by: A lawyer | Mar 6, 2006 7:44:52 PM
In the first major review of that case, Royal Bank of Scotland v Etridge (2001) the House of Lords noted that banks just weren't doing those interviews, probably because of the fear of being sued for giving negligent advice, and instead were tending to rely on a solicitor informing the spouse. Etridge basically formalised this, there is an assumption that there might be a problem, but the upshot was the bank is under no legal obligation to insure the wife is not suffering unduean't enforce the claim if it does transpire there was undue influence, and there is no requirement for an interview between the wife and the bank, but it must make sure she has met a solicitor (on her own).
If this still is the situation then it RM's point seems valid - Jowell should have been instructed to have a face-to-face meeting with her solicitor who was obliged to make clear to her what she was letting herself in for and confirm that to the bank.
http://www.dentonwildesapte.com/assets/B/BriefingNote_RBSvEtridge.pdf
Posted by: Notalawyer | Mar 6, 2006 9:51:54 PM
I think it's worth pointing out that both BBvO'B and RBSvE were cases involving a second charge mortgage and the law (and practice) relating to first charge mortgages is appreciably different. Also note that the Warwickshire house is not jointly owned and is only in the name of David Mills, therefore none of these issues arise as Tessa Jowell's purely equitable interest in it is not protected even under BBvO'B. And finally, of course, it doesn't matter since Tessa Jowell never denied knowing that the remortgages had taken place.
Posted by: dsquared | Mar 6, 2006 10:10:14 PM
And finally, that UK banking practice is definitely not to carry out these interviews as a matter of course (I just asked a really good mortgage broker). These two cases establish the criteria for liability for the tiny minority of cases in which something goes wrong, but they certainly don't create a specific obligation on the banks to got through to process every time, and since the vast majority of these cases don't end up in tears, the banks make the sensible decision that it is not worth the trouble.
Posted by: dsquared | Mar 6, 2006 10:14:42 PM
three comments in a row = certain nutter, I am aware, but it just struck me that on the very strict interpretation of BBvO'B above, "flexible" or "current account mortgage" products like the RBS One Account or Woolwich Openplan would be completely impossible, as any use of the credit card or chequebook by one partner to buy a bag of spuds would (since it increased the mortgage liability) require the other one to get legal advice. I therefore submit that this is the wrong interpretation.
Posted by: dsquared | Mar 6, 2006 11:51:25 PM
If they are letting unqualified people approve loans then I'm not entirely sure I'd want them lending my money out.
People don't approve loans, at least not in bank branches. They enter financial information into systems which assess the borrower against a credit scoring algorithm. So computers approve loans, or if you want to be really pedantic about it, clever people in credit risk management who write loan scoring algorithms do it.
And dsquared is right - it certainly isn't UK banking practise to inform the partner of someone seeking a remortgage, as even a cursory glance at the rates of mortgage equity withdrawal combined with a bit of common sense would immediately tell you. All the banks need is a signature from each party to the agreement(and probably some form of ID for anti-money laundering purposes, thinking about it...).
Posted by: Andrew | Mar 7, 2006 9:17:12 AM
Notalawyer is correct to remind us that the Etridge case updated the O'Brien case to the extent that the banks obligations as described in the first case have now largely been outsourced to solicitors. The point remains however that there is a legal obligation that the wife understands the potential problems and if the bank is aware no such meeting took place then it is on constructive notice of these problems.
Dsquared says he thinks Jowell's equitable interest is not protected by the law. It is. That's the whole point of these O'Brien type cases.
Posted by: A lawyer | Mar 7, 2006 10:25:23 AM
We are now about a million miles away from the original point, but "a lawyer" appears to no longer be claiming (if he/she ever was) that there is a specific duty to arrange a meeting, for which thanks. As Andrew correctly notes, the obligations have not "been outsourced to solicitors" for the majority of remortgages; they have been more or less ignored, and the banks have decided to bear the legal costs of doing so. Since nobody has suggested that Tessa Jowell might be considering suing SG Hambro, Guinness Mahon, Mortgage Express or A&L, I think we can declare this irrelevant.
However, because some misguided fools do get their legal advice from Internet loudmouths, I must point out that I did indeed screw up the concept of "equitable interest" above. I meant to make the point that although Tessa Jowell presumably has an interest in the Warwickshire house by virtue of being David Mills' wife, this interest is not protected by BBvO'B/RBSvE, unlike the interest she has in the Kentish Town house.
Posted by: dsquared | Mar 7, 2006 10:46:07 AM
As ever when listening to lawyers I am now thoroughly confused.
Is Pa Remittance a senile old buffoon harking back to the days when bankers wore pinstriped trousers? Or is he an up to the minute, au fait kind of chap who despite his retirement still keeps his finger on the pulse of his former profession?
I can live with either description, just put me out of this misery of not knowing.
RM
Posted by: The Remittance Man | Mar 7, 2006 12:07:09 PM
I think it's more the case that the banking industry (and particularly the mortgage industry) has changed a hell of a lot in the last ten years, in particular since the demutualisation of Halifax and Woolwich and the banks' move from being bit players in mortgage banking (which was dominated by the building societies as recently as 1995) to being the core of the mortgage market. For the majority of Pa Remittance's career, mortgages would have been a very small part of a high street bank manager's life (and the majority of the mortgages that a high street bank would have written would be exactly the kind of "business loan secured on the family home" where BBvO'B considerations are most relevant).
This chart shows what I mean better than anything, I think: "Mortgage equity withdrawal" is exactly the transaction that Mills carried out and it has gone from being a rarity to a staple of the UK economy.
http://www.bankofengland.co.uk/statistics/mew/mew.gif
Posted by: dsquared | Mar 7, 2006 12:50:08 PM
