"Eviction,The fraud of the banks"

[sophia8]

This video is being passed around Facebook. In it, a nice old Nottinghamshire bloke calling himself Tom relates how the Bradford & Bingley Building Society committed fraud with an endowment policy and is now evicting him from the home he has been paying a mortgage on for 26 years, with the connivance of corrupt judges and solicitors; his eviction notice is for July 23rd and he's asking for people to come along and support his bid to stay in his dear little home.
Listening to him I notice a lot of familiar buzzwords - "common law", "entities", "corporations" and other indications that he's not quite the ordinary old buffer he looks. And after a couple of listens to his long and convoluted story about bank fraud, I'm not at all sure he's the innocent party that he claims to be.
So, poking around the the interwebz, I found roguemale.org RM calls himself Michael, but his story sounds amazingly like Tom's (though with the significant difference that Michael was evicted from his home in 2010 and that the house he's is now being evicted from belongs to somebody else). Moreover, in the podcasts available on his site, he sounds uncannily like Tom.
Tom/Michael rages about the usual stuff - Rothchilds, bankers, Jews, feminists, political correctedness, anti-racists ("Anti-racists are anti-White!"), rants about the genocide of Britain's "indigenous people" by fluoridations, vaccination, wifi radiation, "the chemicalisation of food and water" etc. I'd guess he's a FOTLer basically, with added racism and a large side of Mens Rights.

The video seems to be going viral and a couple of my friends are certainly taken in by it - they're convince he's an innocent victim of terrible injustice and I'm sure he'll get a big crowd of "rescuers".
It would be interesting to see what happens on the 23rd - anybody in Nottingham want to go along to his house and do some filming?

 

[Denver]

If it is a fraud, "Nottingham"shire is a beautiful touch.

 

[kookbreaker]

Does he actually provide any evidence that he has paid his mortgage regularly?

 

[Horatius]

Sounds to me like he or his wife agreed to a refinancing scheme, without understanding what they were agreeing to. He says they got an "endowment" in 1988 (is that a UK term for mortgage? I couldn't find anything relevant in searching), and then mentions that "12 years" later (that would make it 2000) that someone (who is never specified) told his wife that they would "never pay it off".

They seem to have talked to a banker, and it turns out they had a "Part and Part" arrangement:

http://www.firstchoicefinance.co.uk/Index.asp?T=Part and Part Mortgage

A key point of these loans:

As with any mortgage you take out through ourselves you must seriously consider if it is the best option for your situation. Unfortunately part and part mortgages cannot erase all of the disadvantages involved when repaying a mortgage (as much as we would like them too!). Similar to an interest only mortgage, the part of your mortgage that hasn't been paid off by the capital and repayment aspect will still be owed in full to the mortgage lender. It is your responsibility to ensure that you have a means to pay this outstanding debt at the end of the mortgage term, this element is often referred to as a repayment vehicle.

So it looks like their original lender rigged their payments to match what they could afford at the time, while still giving them the loan they needed for the house they wanted. They probably completely misunderstood that, and didn't realize they'd still owe X% of the original principle at the end of their mortgage amortization. They then decided this was all somehow "fraud", since obviously there's no way they could have misunderstood, and unknowingly lived beyond their means all these years.

 

[sophia8]

I haven't the first idea about mortgages or endowment policies - hopefully somebody here will be able to chip in with expert knowledge - but I agree that Tom and his wife probably misunderstood the whole thing.
Digging around some more on the Rogue Male site and piecing together a timeline, it seems that after the 2010 eviction they found somebody (the dark-skinned guy in one of the photos, identified as 'RM2') willing to share his house with them; then all three of them got evicted from there (he mentions finding all of his furniture that he's stored there trashed in a skip). Now they're getting evicted for the third time, probably from a house they rented (I can't imagine them getting another mortgage) that they then couldn't/wouldn't keep up the rent on. Also, if Rogue Male had cancer, he doesn't seem to have mentioned it.
But it's none of their fault - it's the evil banks and the corrupt courts that are responsible for throwing this sick, elderly man and his wife out of the family home they've paid for for 26 years! Man the barricades, all you free-born indigenous people and stop this genocidal atrocity!!!

Anyway, I'm fed up with trying to make sense of him - he's a whinging, scamming*, thoroughly unpleasant idiot who deserves not a jot of the sympathy he's getting.

*His site advertises one-to-one lessons on how to deal with banks and courts, plus template letters, for £35 an hour.

ETA: After a bit of googling, I've discovered that an endowment policy is a type of long-term savings plan which was used extensively with interest-only mortgages at one time.
Horatius has it pretty much right. In Tom's case, it seems that the endowment plan payout didn't cover all of the loan principal and he still owed a large sum; either it was a serious case of mis-selling, or he really didn't understand the terms of the loan. Either way, he flipped, decided it was corporate corruption and banking fraud, and went the FOTL/Sovereign Citizen route.

 

[Garrison]

An endowment mortgage was essentially a scheme where money was invested with the idea that after usually 25 years its value would have grown to a sum large enough to pay off the mortgage with money left over. Unfortunately many people discovered that the endowment would never grow sufficiently fast to pay off the mortgage in the specified time. Very large management fees for some endowments didn't help. There may not have been fraud per se but there was a lot of sharp practice and mis-selling.

 

[Horatius]

An endowment mortgage was essentially a scheme where money was invested with the idea that after usually 25 years its value would have grown to a sum large enough to pay off the mortgage with money left over. Unfortunately many people discovered that the endowment would never grow sufficiently fast to pay off the mortgage in the specified time. Very large management fees for some endowments didn't help. There may not have been fraud per se but there was a lot of sharp practice and mis-selling.

Ah, I see. Yes, this sounds like a bad idea that blew up in their faces. How would such a scheme work during periods of economic recession?

Interesting to note:

http://en.wikipedia.org/wiki/List_of_recessions_in_the_United_Kingdom

At least three such recessions in the UK during the period in question, any one of which might have prompted a refinancing of the mortgage with a more traditional scheme, such as the part-and-part mentioned.

So yeah, bad choices catching up to him 25 years later. Old, old story.

 

[GlennB]

The UK mis-selling of endowment mortgages was quite a scandal. Buyers were, er, 'not properly advised' in many cases.

Two in three people with endowment mortgages were told that their policy "would definitely" or "was guaranteed" to pay off their mortgage, CA researchers have discovered.

(yeah, I know it's The Telegraph, but the basic facts are there).

As of July 2006, UK banks and insurance providers have paid out approximately £2.2 billion in compensation (wiki, on endowment mortgages)

Whether this geezer has a case is another matter.

 

[Horatius]

As of July 2006, UK banks and insurance providers have paid out approximately £2.2 billion in compensation (wiki, on endowment mortgages)

The underlying premise with endowment policies being used to repay a mortgage, is that the rate of growth of the investment will exceed the rate of interest charged on the loan. Toward the end of the 1980s when endowment mortgage selling was at its peak, the anticipated growth rate for endowments policies was high (7-12% per annum). By the middle of the 1990s the change in the economy toward lower inflation made the assumptions of a few years ago look optimistic.

Called it!

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.

 

[The Don]

The UK mis-selling of endowment mortgages was quite a scandal. Buyers were, er, 'not properly advised' in many cases.

Yes, back in 1993 they tried to sell us an endowment without properly explaining the risks and their returns were based on 8%-10%-12% range - too optimistic IMO.

Then again an ex-colleague went into endowments fully eyes open but (quite correctly) took the compensation when it was offered.

 

[threadworm]

My first mortgage in 1985 was an endowment, and at the time it seemed like a reasonable proposition - for some people who timed it right it would undoubtedly have worked. Thankfully as we moved on we took out 'normal' mortgages and the endowment aspect became less significant, which I think was the case for a lot of people as they moved up the property chain.

It stopped being a worry at all when I signed over the house as divorce settlement

PS - Nottinghamshire is actually a place

 

[The Don]

Called it!

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.

Well it's been claimed time and time again on this board that if you invest the difference between an interest only mortgage and a repayment mortgage then the returns from that investment will exceed the amount borrowed. Some posters have even "guaranteed" that this is the case based on historic returns. These same posters suggest that early repayment is also a mistake and instead any extra money should be invested because the returns will exceed the interest saved.

Personally I doubt that it's as much of a nailed on certainty due to the tax implications of such an investment (in the UK capital gains can be taxed at very high levels) and the fact that historic investment returns may not be a good indicator of future investment returns.

 

[Horatius]

Well it's been claimed time and time again on this board that if you invest the difference between an interest only mortgage and a repayment mortgage then the returns from that investment will exceed the amount borrowed.

While that may be true when considered over a sufficiently long time frame, it ignores a couple of important factors.

The first is variance. Like in playing poker, if you play by following certain rules, you will, mathematically, do better over time than people who don't follow the rules. However, that only works if you have enough money in your stack to cover the times when a lucky donk rivers you. While investments do tend to accumulate value over time, there are also periods in which they decrease, and if your payment comes due during such a lull, you're on the hook for the difference.

That leads into the second problem, which is that, unlike poker, you don't have the option to cash out whenever you want. You might be able to cash out early if you have an unusually good year for investments (but you'll probably have to pay a premium), but you cannot just choose to stay in the game if you're currently caught short. When the mortgage comes due, it has to be paid, no matter what your situation is.

You have to ask yourself: if there was any investment that 100% guaranteed a better return that the interest rate on the mortgage, why wouldn't the banks just invest their money in that, rather than lending it to the like you you? "Oh, you go ahead and buy that investment, we'll settle for the lesser return"; a phrase said by no banker ever in history.

 

[ddt]

Well it's been claimed time and time again on this board that if you invest the difference between an interest only mortgage and a repayment mortgage then the returns from that investment will exceed the amount borrowed. Some posters have even "guaranteed" that this is the case based on historic returns. These same posters suggest that early repayment is also a mistake and instead any extra money should be invested because the returns will exceed the interest saved.

The latter depends very much on the tax structure. I think for most of my lifetime, it was indeed more profitable to keep your savings in the bank, in a normal savings account, than use it for early repayment of your mortgage.

The endowment mortgage has been pretty popular in the Netherlands too. More sensible people took its safer brother the so-called "savings mortgage", which consists of a savings plan that is guaranteed to reach the principal at the end of the period, and a loan which is only repaid in full at the end of the period. The advantage over a normal annuity mortgage is that the interest paid on the loan is always paid on the full principal, and is tax deductible, while the savings plan is exempt from capital gains tax. At least, that was the case until 2010 when this loophole was closed.

 

[Horatius]

The advantage over a normal annuity mortgage is that the interest paid on the loan is always paid on the full principal, and is tax deductible

This is an argument I had with my Dad last week. I don't believe there's any way this could be more cost effective than just a regular mortgage. Tax deductions will always be worth less than having that money in your pocket, unless you have a tax rate over 100%.

There may be legitimate reasons to have an interest-only mortgage, but trying to save money via tax deductions on that interest just isn't one of them. If you're paying interest anyways, and they offer a deduction, sure, take it, but it would be better to not pay that much interest in the first place.

 

[ddt]

This is an argument I had with my Dad last week. I don't believe there's any way this could be more cost effective than just a regular mortgage. Tax deductions will always be worth less than having that money in your pocket, unless you have a tax rate over 100%.

There may be legitimate reasons to have an interest-only mortgage, but trying to save money via tax deductions on that interest just isn't one of them. If you're paying interest anyways, and they offer a deduction, sure, take it, but it would be better to not pay that much interest in the first place.

I'm not talking about an interest-only mortgage. The type of mortgage I talked about consists of a package deal of two components:
1) a savings plan where you pay in monthly a fixed amount, and which accumulates interest;
2) an interest-only mortgage
and at the end, the savings plan has just the right amount to repay the mortgage in full.

Because the bank sells (sold) it as a package deal, they can set a high interest rate on the savings plan and thus offer this with a same or even lower monthly (combined) payment as with a regular mortgage. However, as the principal is only repaid at the end, the interest paid remains constant and thus your tax deductibility remains constant.

Whereas with a regular mortgage, the interest component of your monthly payments slowly shrinks, as a (small) part of your monthly payments are repayments of the loan, and thus, the net cost of your mortgage payments slowly increase.

 

[Brainster]

I'm not talking about an interest-only mortgage. The type of mortgage I talked about consists of a package deal of two components:
1) a savings plan where you pay in monthly a fixed amount, and which accumulates interest;
2) an interest-only mortgage
and at the end, the savings plan has just the right amount to repay the mortgage in full.

Because the bank sells (sold) it as a package deal, they can set a high interest rate on the savings plan and thus offer this with a same or even lower monthly (combined) payment as with a regular mortgage. However, as the principal is only repaid at the end, the interest paid remains constant and thus your tax deductibility remains constant.

Whereas with a regular mortgage, the interest component of your monthly payments slowly shrinks, as a (small) part of your monthly payments are repayments of the loan, and thus, the net cost of your mortgage payments slowly increase.

This only works if the bank pays you a higher interest rate on the savings account than they charge on the loan, an extremely unlikely condition, as it means the bank is losing money on the combined transaction.

 

[Giordano]

This only works if the bank pays you a higher interest rate on the savings account than they charge on the loan, an extremely unlikely condition, as it means the bank is losing money on the combined transaction.

It obviously depends on various incentives, bonuses, packages, etc. but indeed this package would be very tricky to achieve in practice. Probably emphasizing even more that you need to understand exactly what you are signing if it involves a major portion of your net worth. And you have to assume that people in financial businesses probably know more about it than you do, and will try to use that knowledge to gain money at your expense. Why, even most car dealers will use their experience and knowledge to make more money from a deal than you realize. Or as someone I knew once said ironically, "Trust no one, and that is the truth!"

 

[ddt]

This only works if the bank pays you a higher interest rate on the savings account than they charge on the loan, an extremely unlikely condition, as it means the bank is losing money on the combined transaction.

No it doesn't. It depends on the tax structure. As I already explained, the savings plan was tax exempt, while the interest paid on the loan is a tax deductible. It's trivial to see that with the same interest rate paid by the bank on the savings plan as asked by the bank on the loan, it
(a) earns the bank exactly the same amount as with a normal annuity mortgage plan;
(b) is a net win through the higher tax deductible for the customer compared to a normal annuity plan.

I've not looked in detail into the exact conditions (I've never bought a house). Probably the banks offered a slightly lower interest on the savings plan than it asked on the loan, so it would be a win/win.

 

[fezzic]

Never had an endowment mortgage.

According to wiki, it looks like it consists of two components. There is the interest-only mortgage, presumably from a bank or other lender, and a separate endowment policy, probably by a insurance company. As two separate financial instruments, it seems it was possible that the mortgagee could take the payout of the proceeds from the endowment policy but the lenders were wise to the possibility and required that they be the ones paid. Presumably any surplus would then go to the mortgagee.

The assumption was that the investment returns in the endowment policy, with the mortgagee making payments into the policy, would be sufficient to pay off the principal of the mortgage, perhaps with some money left over. Depending on when you're talking about that might seem reasonable or overly optimistic.