Complex Prime Lending in the U.K.

[Milton Kuo]

This article from Bloomberg talks about FIRE economy players trying to restart the securitization engine for less-than-prime mortgages in U.K. real estate. It seems that GE, Morgan Stanley, and Bank of America are anxious to lose their asses again.

May 20 (Bloomberg) -- U.K. mortgage lenders are offering loans to “almost prime” and “complex prime” borrowers with “minor historic credit issues” who may have experienced financial “blips.” They don’t use the word subprime.
Three years after defaults on U.S. subprime mortgages sparked the worst financial crisis in almost 80 years, General Electric Co.’s GE Money unit and Investec Plc’s Kensington division are once again lending to British customers rejected by mainstream banks. This time, they say they’re offering less money to clients with better credit histories.

Even if lenders are taking greater precautions in lending out money versus 2006, it seems reckless to be lending into an unpricked bubble (Jeremy Grantham states that the U.K, along with Australia, are two markets where real estate bubbles are ongoing.) I'm not clear if mortgages are non-recourse in the U.K. but the lenders here seem to be setting themselves up to lose money.

“‘Subprime’ sends messages out that people are lending money to individuals who can’t repay it,” said Gerry Bell, marketing director for GE Money’s U.K. mortgage unit. “Our customers have clear track records” though some may have had “minor credit blips,” he said. Now loans are less risky, he said. “It’s very different from where we were in 2007.”

Subprime/complex prime: "A rose by any other name...." "It's very different from where we were in 2007": "It's different this time." Egads.