Re: Blemain & Cheshire Regulations
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So looks like this could be one of the first judgments for irresponsible lending?????
and confirms that the courts will look at the lenders underwriting procedures...what a bloody relief something is looking up.
- However, these considerations lead one back to the second part of Mr Bloomfield's passage, set out above. If GMAC was going to make an advance with a high LTV, it needed to ensure that it had properly investigated and verified the matters of central importance. In my judgment, it failed to do this in two major respects, which have to be considered together. (1) It failed to make enquiry or investigation in respect of the debts that had not been disclosed. I do not accept the arguments put forward by Mr Foskett and Mr Bloomfield to justify this failure. The practice of placing total reliance on the Experian checks meant that GMAC was either unaware of or unconcerned by the significant discrepancies between what those checks showed and what the Borrower had disclosed. Those discrepancies, both taken by themselves and in conjunction with other matters such as the issues concerning the Borrower's income, raised a significant question as to the Borrower's honesty. To answer, as Mr Bloomfield effectively does, that honesty is of no concern to a lender provided there is a sound credit history is to have insufficient regard to the obvious risk that dishonest statements of one's means, for the purpose of procuring greater financial accommodation than would be forthcoming if one told the truth, will lead to borrowers over-extending themselves and defaulting on their excessive liabilities.
(2) It failed to make enquiry or investigation into the Borrower's income. Despite what I have said about GMAC's business model, I do not consider that GMAC was reasonably entitled to proceed with such a high-LTV transaction in the manner it did. First, I am not persuaded that GMAC is correct to have thought that its own policies required only an informal telephone check to confirm the fact of twelve months' self-employment. Section 9.4 of its Lending Policy would have required 24 months' accounts. Section 10.1, which states that only high-risk cases will be selected for full verification checks, adds the qualification: "(unless Self-Certified or Self-Declared loans)". Although GMAC treated the application as being neither self-certified nor self-declared, it was in substance one or the other, as the only information regarding the Borrower's income was his own assertion in the application form. Second, and in any event, the discrepancies regarding the Borrower's stated income and regarding his liabilities, as set out above, made it obviously imprudent to make no further enquiries regarding his income. The other points arising out of the application, as mentioned above, though minor in themselves, would reasonably have confirmed the need for proper enquiry into the Borrower's financial position.
- On the basis of the evidence before me, I infer that, if GMAC had made proper enquiries as to the Borrower's financial position, it would have found that he was unable to verify his declared income or to give satisfactory explanation for his inconsistent statements of earnings or his failure to give proper disclosure of his liabilities. The probability is that GMAC would have concluded that the Borrower's income was of the order of his original statement, namely £85,000, and that it was insufficient to justify the loan that he sought. Further, the reasonable conclusion in the circumstances would have been that the Borrower was dishonest. In those circumstances, GMAC would not have made the advance to the Borrower.
- Accordingly, if I had found Countrywide liable, I should have found that GMAC was contributorily negligent. Both Countrywide's negligence and GMAC's contributory negligence would have caused the entirety of GMAC's loss, in the sense that the loss would not have been suffered were it not for the negligence or the contributory negligence as the case may be. Having regard to what I regard as the comparatively egregious nature of GMAC's lack of care, I should have made a deduction of 60% of the entire loss. If the entire loss were taken as £65,960.76 (see paragraph 57 above), the resulting figure would be £26,384.30. As that figure would be less than the full measure of recoverable damages, judgment would have been in that lower amount.
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So looks like this could be one of the first judgments for irresponsible lending?????
and confirms that the courts will look at the lenders underwriting procedures...what a bloody relief something is looking up.
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