Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : Cityscape Financial (CTYS) -- Ignore unavailable to you. Want to Upgrade?

To: John Liu who wrote (1649)	11/14/1997 8:51:00 PM
From: Rational	Respond to of 2544

John: They issued a lot of bad loans to grow fast. In the process, they could not control the quality of the loan pools. In UK, they took the abscence of rules governing interest rates in the subprime market as a ticket to charge high rates of interest. Executives were compensated heavily based on such excesses, IMHO. Sankar

To: John Liu who wrote (1649)	11/15/1997 9:06:00 AM
From: Bruce A. Thompson	Read Replies (1) \| Respond to of 2544

John, Yours #1634 My research into the UK mistakes turned up two lending mistakes. First was their "Credit Repair" loan. This was a loan with an initial rate of 17%. If the borrower made 12 payments on time the rate dropped by 3%. It did this each year until the rate floor of 9% was reached. To you & I, this seems like a good deal. (And it is) The UK regulators viewed a 3%-6% increase in rate for missing a payment as being usurious. In fact, it was referred to in the London Daily Times as "The Loan From Hell" The solution was: No more reducing rate loans. Now, instead of automatic reduction, the borrower has to refinance to get a lower rate thus losing more equity to refi costs. The second mistake was their choice of broker firms to originate through. They did not adequately investigate the people they lent through. Turns out that some of their brokers had been convicted of fraud in the past. This resulted in the Times headline "Cityscape Loan Fraudsters". The combination of the headlines and the rate increases lead some borrowers to believe that repayment would not be neccessary. (Some of these people are not rocket scientists) This also explains the resignation of the UK President. Other than these two situations (I'm intentionally leaving out comment about Rule of 78's) I really see no major lending mistakes in their policies. I have found over the years that their lending policies are sound, their loans are very marketable, and their underwriting policies to be predictable and thereby stable. IMHO Bruce