Send for the taxpayer!
In those long-gone antediluvian years before electronic calculators, personal computers, Subway sandwiches, alcopops , female managers and the morning-after pill, there were dusty institutions with mahogany desks, huge ledgers, pound notes and dour-looking men in shiny suits with fountain pens in the breast pocket.
Those venerable institutions were called Building Societies.
They took money from their saving members and lent it to their borrowing members who wished to purchase a home. That’s what they did – and they did it all with real money. Leveraging (borrowing), Gearing (borrowing) and Bonds (borrowing) had not been invented – and if they had, it wasn’t the sort of thing that they needed (or wanted) to know about. Life was simple plus there was the bonus of a typing pool full of straight-backed sexy young typists whose drumbeat was set by the old crone at the front!
Here’s how money was lent and how they managed to lend MORE than the 70% maximum that Banks are currently lending. In those days, banks weren’t even allowed to lend for house purchase (just washing machines and refrigerators).
The mortgage underwriter (in those days, they he was called the mortgage “assistant” ) would decide on whether the “basic” maximum loan that the Building Society was willing to lend was 70% or 75%. Simple! (In very extreme cases – for instance, for properties which were only standing because the woodworm were holding hands – the maximum could be as low as 65% of the valuation).
However, there were MANY occasions when a borrowing member would be granted a mortgage of 90 or even 95%.
“How did they manage that?” I hear you ask.
Let us say that the borrower wanted to buy a nice big five-bedroomed house for £10,000 but could only find a 10% deposit. That meant that the Building Society needed to lend him £9000 (90% of the valuation).
The valuer would recommend a basic loan of say 75% which was £7,500. If the Building Society wanted to lend the borrower the full £9000, it would lend – but only after arranging a form of insurance for the difference – in this example £1,500. In this way, the risky top-part of the mortgage was insured by the Building Society.
So, if the mortgage went wrong, the insurance company would stump up any shortfall if the Building Society needed to dispose of the property in a forced sale.
It used to be called the Insurance Guarantee or I.G.
Why all this rheumy-eyed nostalgia?
David Cameron has just announced a new scheme in which banks will be able to lend more than they are comfortable with – and presumably, borrowers will be able to borrow more than they are comfortable with.
The risky top-part of the mortgage will be insured but, in keeping with modern ways, it will be the taxpayer (who else)? and not an Insurance Guarantee company who will accept the risk.
( I wonder who is advising Cameron these days? I bet he has a couple of fountain pens in the breast pocket)
Have I got a deal for you!!
“Mr Starling. If you were ever accused of understanding all of the issues surrounding the collapsing house market – would there be enough evidence to convict you?”
For instance, there are only two reasons why house prices are falling and why the house market is moribund.
Moribund? Just look up New Labour.
The market is at death’s door because:
1. Obtaining a mortgage at a decent interest rate with a good Loan-to-Value is becoming increasingly difficult. It has nearly got to the stage when the only people who can obtain a mortgage are the ones who do not really need one.
2. House prices are falling at an ever increasing rate.
House values are likely to fall by 15% in 2008 and probably about 12% in 2009. (Source: Howard Archer, Global Insight, Sept 2008)
Let’s do a quick calculation:
Assume that I buy a house for £175,000. If the value drops by 15%, after one year, I will have a house worth £148,750.
Then if the value of my £148,750 house drops by a further 12%, my house will then be worth £130,900.
That means that in two years I will have made a paper loss of (£175,000-£130,900) which is £44,100.
So, Mr Starling what you are saying is that you want to encourage me to go ahead and buy this house by removing the Stamp Duty which will be £1750?
I am no Einstein but that does not look like a good deal to me.
Oh, I know that you will help me when I get into arrears by making my home a part-council house and there may be a small bung to help me with a deposit. But no thanks.
I realise that life on Planet Westminster is a bit different to the real world but I would suggest that you change your advisers because the “suits” who are advising you at the moment appear to be tragically out of touch.
Mervyn? Mervyn King?
Great darts player. You should get advice from Eric Bristow as well while you’re at it.
Can’t do any more harm.
Give us a clue
“1-across is SWAT TEAM”
“I’ve got ‘T’ as the first letter”
“That doesn’t surprise me.”
The latest desperate initiatives of an increasingly desperate Prime Minister and a Chancellor who is already packing his parachute have just traversed the laughable and blundered into the surreal.
The plot so far: The banks rip each other off by granting a mortgage to anyone with a pulse – irrespective of whether or not they can repay the loan. The banks then tart-up these dodgy mortgages by packaging lots of them up them up into a fund (securitisation) and then they flog shares in these funds to each other.
The money rolls in and is lent to more dodgy individuals until someone realises that selling shares in “funds” that are not producing any income because no-one seems to be paying their mortgage is not a good thing.
(The American banks started it but we aped them and then blamed them.)
The banks then decide that there is a crisis and the only way to deal with it is to stop lending – to each other and to the public.
This strange new situation is given a name – Credit Crunch.
Then these privately-owned banks go cap in hand to the Bank of England which has been “advised” to bail them out. Others, such as the Northern Rock are given money directly by the Government.
That does not seem to do the trick because the banks decide to sit on their (our) money because they don’t want to take any more risks. Why not? Because these ersatz corporate entrepreneurs can only function when things are going well.
They have no real idea what to do next – except perhaps to rip off existing customers by increasing interest rates on anything that they can get away with.
When they did play at being entrepreneurial with these so-called “securitised ” mortgages, they messed up – big time. They should all be standing shoulder-to-shoulder in the dock.
However, the banks know that if they do nothing for a few months, the desperate government will be forced into action. They know that the New Labour government has only two ways of doing business:
1. No Crisis = No Action.
2. Crisis = Panic = Action = Handouts = Big Bucks.
Today we have the announcement that the government will lend money to first-time buyers and there will also be a package for those who cannot repay their mortgage and for good measure, Stamp Duty for properties with a purchase price of £175000 or less will be suspended for a year.
So the government lends to the banks then it lends to the borrowers so that the banks can lend some more to the borrowers.
Why doesn’t the government cut out the middle-man and give the money to the builders to build houses which can then be rented out with a post-dated option to purchase.
When will we all wake up to the fact that the “owner-occupier” skirmish with hard capitalism has not worked and that we have to be re-educated into thinking of a house as a home and not as a commodity.
This is what Gordon Brown had to say:
“No-one in this country who works hard and plays by the rules should be left alone to bear the impact of the current global economic downturn, and I am determined to see the government do everything we can to help British families weather these difficult times.
I understand what it means to see people struggling to get mortgages or homeowners who, through no fault of their own, suddenly find themselves unable to keep up with their repayments. And it’s not just families who are finding it tough but businesses as well, with house-builders now experiencing difficult conditions after years of extremely favourable circumstances.
So to address these issues, the government’s new £1 billion housing package will give first-time buyers a leg-up onto the housing ladder, help homeowners in difficulty and support the UK’s housebuilding industry.
First-time buyers are one of the groups hit hardest by the credit crunch and are crucial to driving the wider housing market. They would usually benefit from falling prices, but a combination of the higher cost of borrowing, bigger deposit requirements and weakening consumer confidence means this has not happened.
To do everything we can to support them, there will be a one-year stamp duty holiday for all properties sold for up to £175,000 – helping to restore market confidence and giving first-time buyers the extra help they need. And, alongside this, 10,000 more first-time buyers will benefit from a new £300 million shared equity scheme called “Homebuy Direct”.
The current housing market difficulties are also leading to increased repossessions, so we are introducing a new £200 million mortgage rescue scheme that will help thousands of vulnerable families to stay in their homes.
And to do more to encourage social rented housing, we are bringing forward £400 million of government spending to deliver up to 5500 new social rented homes over the next 18 months.
Taken together, I am confident these measures and the other new steps we have announced will help create the best possible environment for the housing market to come through these challenging times – and I invite you to read more about our proposals on the Number10 website. “
Le Crunch and Hedge-cutting
The primary driver behind the financial Chernobyl that we are currently experiencing is promiscuous lending by irresponsible mortgage “securitisers”.
The term Credit Crunch has been on our lips for several months now but it has joined phrases such as ” learning curve” , ” hedge fund” and “police intelligence” : phrases which we like the sound of but have no real idea what they mean.
Most of us survived the crash of 1987 and since then, Governments all over the world have become very adept at bailing out financial institutions and corporations by means of subsidised credit, warm words and as we have seen with Northern Rock – panic bailouts. The mere whispher of “Credit Crunch” instills blind panic – especially in politicians.
This is how a Credit Crunch works. Firstly, there is a shortage of money and the banks begin to run out of hard cash. Secondly, as a result , credit dries up. Thirdly, a recession takes place and inflation cools. If you think about it – it is bound to cool – unless other unforeseen events conspire to upset the economists’ models.
However, in a Global Economy a Credit Crunch can lose some of its crunchiness because there is always money to be found somewhere. It is unusual NOT to be able to find money and until recently, you were able to buy-in money from somewhere in the world.
It would cost you but the money was there. Unfortunately, several credit disasters soon put paid even to that.
Even those beacons of turbo-charged capitalism, the Hedge Funds are suffering. Here’s a quote from one:
“Current market volatility and lack of market liquidity with respect to subprime lending markets have caused adverse conditions with respect to the liquidity and market-risk exposures on the company’s underlying portfolio of investments.”
“We are in the shit because we cannot find any cheap money to buy any more dodgy investments and so we will have to rely on emergency funding which is expensive and we will also have to sell off some assets. That means that we’re not going to have much of a profit this year.”
There is a God!
Here in the UK, as well as the USA the situation has been complicated by two opposing forces which are muddying the picture and giving both politicians and economists a head pain:
The collapse in the property market is deflationary, whereas the rises in fuel and food costs are inflationary.
Logically, if you take a long-enough time line, exceptional scenarios such as the current one are BOUND to occur from time-to-time.
The fan is being hit from all directions.
Economists all over the world panic because they still do not realise that the whole system is self-adjusting and like 1987, will soon become a mere blip on a chart .
The first thing that will happen is that OPEC will open the oil tap to “MAX” and everyone will fell a bit happier.
In years to come, reminiscent of the Normandy veterans of WW2 ; bankers, traders and economists will go all misty-eyed as they sit round the patio-heater and recount the camaraderie and individual acts of gallantry during the “troubles” of 2008-2010. By then, these hard days will be remembered as but a fleeting moment when a large cloud temporarily blotted out the sun .
95% of the world has bought into democratic capitalism as the way forward. This current crunch will test the ideology and durability of the world’s political and economic will. Capitalism is not a stable entity and by its very nature will bite occasionally.
We are all now all riding the tiger. Currently, the tiger is unhappy and hungry.
Best not to climb off just yet.
Lower “Swap Rates”
“Moneyfacts.co.uk is claiming there is a “faint glimmer of hope” that the fixed rate mortgage market is returning to some sort of normality.
It says that new mortgage borrowers are now finally benefiting, as lenders pass on a string of welcome interest rate cuts on their popular fixed rate deals.
Darren Cook from Moneyfacts.co.uk, said: “Moneyfacts.co.uk has used a key barometer of the average two-year fixed rate over the past few months to analyse the trends of the overall fixed rate deals against the volatility of the swap market, the borrowing fixed rates used between financial institutions. The average two year fixed rate peaked at 7.08% on 11 July ’08, its highest in over a decade after swap rates also peaked at 6.52% on 16 June ’08, reflecting the lag time for swap rates to reach the mortgage market is normally around two to three weeks.”
Cook notes that several lenders, such as Halifax, C&G, Nationwide BS and HSBC have trimmed their mortgage rates over the past two weeks, which has resulted in the average two year fixed rate dropping to the current 6.95%.
Halifax, C & G, Abbey, Nationwide and HSBC , which supply the majority of overall mortgage lending, have a collective average two year fixed rate currently at 6.76%.
He added: “It is encouraging that, at long last, lenders are responding to the easing in wholesale borrowing costs and passing a discount on to the consumer. There is a sense that competition is finally returning to the fixed rate mortgage market, which will benefit the borrower. “Two year swap rates are continuing to fall and yesterday’s closing price of 5.74% is the lowest since mid May of this year, when the overall average two year fixed rate was 6.63%. If these downward trends continue unabated, we will see further fixed rate cuts by our top high street lenders in weeks to come, which just might be that glimmer of hope that we are all endlessly seeking.”
Buy to Let Rents begin to stabilise
Buy-to-let yields remained stable at 6.4% for the second consecutive month in June, according to Paragon Mortgages’ latest Buy-to-Let Index.
Average UK rents, which had been rising rapidly, have stabilised just short of £1,000 a month, and remain 9.3% higher than a year ago.
Regions achieving the highest yields in June were Wales (7.6%), the North (7.4%) and the North West (7.3%).
Over the coming months, the buy-to-let market will be a vital source of stability in an uncertain housing market. Returns remain attractive and strong tenant demand encourages landlords to retain property, whilst also looking for opportunistic purchases. The average portfolio gearing is less than 40% – giving landlords plenty of room to free up equity for further investment.
The managing director of Paragon Mortgages, said: ‘For the vast majority of landlords, a slow housing market is nothing new. They recognise the counter-cyclical nature of buy-to-let and many landlords have held property through previous housing cycles. Falling prices are spooking first-time buyers and they are delaying house purchase, with tenant demand at high levels as a result.”
He added: “During the downturn of the early 1990s we witnessed mass possessions because there was little alternative to house purchase and young buyers had borrowed above their means. Today’s modern and vibrant private rented sector provides people with a viable alternative to owner occupation and buy-to-let provides housing for young people who would otherwise have little choice but to buy and be financially stretched.”
CRUNCH BANKS COIN IT.
Banks will unveil billions of pounds in profits next week, while their cash-strapped customers battle with the credit crunch.
The banking giants are raking in up to £350 every SECOND in profit- more than a MILLION pounds an hour, according to analysts.
The eye-watering sums prove hard-up Brits are shouldering the cost of the credit crunch, as greedy banks protect their profit margins by hiking up interest.
David Kuo of money website Fool.co.uk said: “The one thing that banks are good at is making money. After all it’s dead easy to make money when you already have lots to begin with. With the credit crunch, banks can’t easily lend more cash, so they are charging more for what they do lend.
“They are they are hiking the cost of mortgages, credit cards and loans to try to sort out their balance sheets.”
HSBC is expected to win the income war by revealing profits of £5.5 BILLION in the first six months of the year- or £350 every second.
And next week Royal Bank of Scotland group, which includes NatWest is expected to report profits of £3.68 BILLION, or £234 a second.
Lloyds is predicted to notch up a £1.9 BILLION surplus, which is more than £10 million a day, or £120 every second.
And HBOS – which includes the Halifax and Bank of Scotland – is expected to reveal profits of £1.78 BILLION. That’s 9.76 million every day, or £113 every second.
Reproduced by kind permission of SOPHY RIDGE – News of the World
Answer: “A Wunch.”
Yesterday, the Chancellor was snubbed by the bankers.
Several of the biggest players in the banking system were invited to come along an talk to the Chancellor about how they were going to help the poor borrowers who are unable to repay their mortgages.
Would he manage to persuade them to lower their interest rates or maybe tell them to be gentle with borrowers in arrears and not throw them out of their homes?
When the meeting finished, the follow-up publicity from the Treasury PR machine was very muted. It was muted because effectively, the Chancellor had been told to bugger off.
The banking fat-cats are untouchable plus Alistair Darling had made a very basic negotiating error. He had already asked the Bank of England to arrange a £50 billion handout and then expected something in return. What he should have done is to have had the meeting with some sort of “ace in the hole”. For instance:
” Listen guys – you lower the rates, give the “genuine hardship” mortgage borrowers a short payment holiday and I shall arrange to bail you out and promise to pay off your collective gambling debts.”
Instead, this former Edinburgh Solicitor, up against some of the biggest sharks in commerce gave them the help that they needed and then thought that he could appeal to their good nature. It was a no-contest.
The wunch knew that the Government could not afford another U-turn so they went into the meeting with the Chancellor knowing full well that he would not risk the threat of withdrawing BoE support. They had him by the shorts.
Mr Darling was told it will take ‘quite some time’ for the BoE rescue package to make a difference.
and ‘For now, mortgage pricing will remain high. If anything, it will increase in the short term.’
The ‘stubbornly high’ cost of raising money in the money markets was blamed.
This was from the guys who make the money markets.
Let’s get one thing straight – LIBOR is the London Inter Bank Offered rate and is the rate at which the Banks borrow money from each other. The rate is set by the British Bankers Association. It is a rate which is controlled by the banks and could be changed at any time. Once again, they have stitched-up the Chancellor.
Alistair Darling said he hoped that lenders would ‘continue to take their responsibilities towards customers seriously’.
While Alistair is “hoping”, the fat-cat banker is lighting up another Monte Cristo as the houseboy counts the bonus. The banker is not thinking how he can help Mr “In the Shit” Borrower. He has far more important things on his mind. Those share options are not looking as attractive as they did a few months ago. Perhaps he should wait before cashing them. After all , once this free gift from the BoE takes effect, the share price should rise quite nicely……….
Crunch or Squeeze?
“Credit Crunch” is one of those phrases which has gone into common usage but in common with “learning curve” “carbon footprint” and, believe it or not “interest rate”, it is a phrase that is often used but not always understood.
The Credit Crunch is a new phenomenon. In the old days, we had a credit “squeeze” which simply meant that credit was only available to those who did not really need it – those with a gilt-edged credit rating. In other words, you had to have a near-perfect credit rating in order to obtain credit. The tap was on but only slightly.
When the tap is turned off, it is a credit crunch. It means that for whatever reason – the banks will not lend to you. By that definition, we are NOT in a credit crunch – we are in a severe credit squeeze. That is because you can still borrow money – you just have to look harder and maybe pay more.
The banking system is a bit of a con. You may be surprised to hear that your money is not kept in a shoebox in your bank’s safe. If you go to your bank today and ask to see your investments, they will not be able to show them to you because they do not physically have them. Your investments are abstract as is your overdraft: “Can I see my overdraft, please?”
Everything is a paper transaction.
Banks borrow money from each other in order to lend to you and me. Hence another mnemonic that you have seen and wondered what the hell it meant- LIBOR.
Libor is the London Inter-Bank Offered Rate. That is the rate at which banks borrow money from other banks so that they can lend to you and me. When we borrow from a bank, we have to produce some sort of collateral. The Banks are the same. Their value is also measured in terms of the assets that they own.
The Americans who started the collapse of this very unstable house of cards lent money to people who had very little chance of repaying the money. These are the so-called NINJA mortgages: (No Income, No Job or Assets).
Nowadays, it is quite common to “securitise” mortgages. That simply means that a whole bunch of the mortgages are packaged into one large financial lump . Because a mortgage not-only has a value which is backed by the value of the bricks and mortar, it also produces an income (or cash-flow) it represents an ideal investment. All assets can be securitised so long as they are associated with a cash flow.
The cash-flow in the case of securitised mortgages consists of the mortgage repayments that are made by the borrowers. If the borrowers “en masse” are unable of unwilling to make the repayments, the value of the securities falls very sharply.
Many of our own banks invested in these securitised mortgages so they now are holding investments which are nigh-on useless because those investments are no longer producing the income generated from those American mortgage repayments.
The next stage is simple. The properties which contained these NINJAS have to be sold so that some losses can be recouped. At the same time, lending has slowed down which means that the only way that the properties can be shifted is for them to be sold so cheaply that they cannot fail to sell.
That is just one of the ways that house prices can be driven downwards.
Brian Reade has recently written about our collective obsession with the housing market – specifically the misguided belief that somehow our wealth is measured by the value of our home. (NO SYMPATHY NOW YOU’R BRICKING IT – Daily Mirror 10th April 2008).
I still remember those far-off Seventies when every day was sunny and our financial life was so blindingly simple.
The Bank issued chequebooks and dished out overdrafts and small loans, the Building Society lent you money so that you could buy a house (after you had spent several years saving up for a deposit), and the Insurance company insured your life so that your wife and kids would be provided-for in case you died .
The Bank, the Building Society and the Insurance Company each stood at its own apex of the Financial Triangle. Then something happened . The dark clouds of financial greed scudded in, fanned by the hot air of Thatcherite rhetoric. Laws and Rules were changed.
The Bank decided that as well as being a bank it would become a Building Society and Insurance Company. It would provide bank accounts, mortgages and insurance.
The Building Societies’ Act was changed , allowing the Building Society to become a Bank and also provide chequebooks, overdrafts as well as mortgages. It also started selling insurance.
The Insurance company also had a go at everything and all three institutions even had a go at becoming Estate Agents.
Three venerable institutions had become indistinguishable. Three Frankensteins.
New technologies meant that they could all invent new financial products which evolved from being difficult but not impossible to understand, to totally incomprehensible.
Thatcherism had also imported the American corporate concept of “optimising the client base”, “cross-selling” and the word “synergy” was added to the corporate Thesaurus. Or to put it simply – if you had a list of clients, you designed more products and sold them to your existing clients and then you sold your clients’ details to another company who sold some more and gave you a rake-off.
What happened to the original building society concept? In those days, members would pay a small regular amount of money into a fund. When the fund was big enough to buy a house, all the members’ names would go into a hat and one lucky saver became a house owner. Then they all repeated the process until they all had a house. Savings drove the process – not borrowing.
Banks were originally paid a fee to look after our money and their profit margins were quite small.
Insurance companies used to work on a similar principle to the Building Societies. Members paid a small amount into a fund on a regular basis. When one of them died, the family received a bit of money from the fund so that they could keep going.
The root cause of the current house-market predicament has been Change. Let me explain.
For the last thirty years we have grown to believe that all change is good. For instance read the Executive Recruitment pages and count how many times you see the word “change”. A good example is our education system. By the mid seventies it had reached what can be described as “Steady State”. It worked and it was simple. Teaching Assistants, Dyslexia , Exclusion and BMW-driving Education Authority Execs had not been invented.
Then the Agents of Change trained their rheumy eyes on the whole system. You know the rest.
The Financial Services industry, just like the Education industry has evolved too many sub-strata of cost-centre. (A cost-centre is part of an organisation that adds to the cost of running the organisation).
Imagine a finite pool of money sloshing about within the housing sector. Currently, there is not enough to satisfy demand because that pool of money is hemorrhaging in the direction of the various non-productive cost-centres. A cost-centre can be anything from an over-paid Chief Executive (yes,yes, we know all the arguments), a bonus-fuelled City barrow-boy to an inept financial regulator.
We have created a composite financial Frankenstein yet we continue to worship it and the perceived riches that it has brought to our mortgaged doorstep.
Brian Reade was right (“You over-borrowed and overheated the market”) but much of the blame lies with Thatcher’s financial love child that was handed to us after conception. We embraced it, loved it and believed its increasingly outrageous promises for 30 years.
It has now matured and is ready to screw us.
Time for a mortgage change.
There was reference on the TV News yesterday to homeowners being “hit” by negative equity. What the hell does that mean? You cannot be “hit” by negative equity.
The value of a house is not real money and borrowing more money on a mortgage is exactly like selling shares. When you borrow more money on your house, you are selling a share in your house to a money lender (or Bank, as they prefer to be called).
Negative equity should not be houseowner’s problem – it should be the moneylender’s problem. It would mean for instance, that if a moneylender is owed £100,000 and the property that he is lending money against has dropped in value to say, £90,000 – it should be him and not the borrower who is in trouble. Sure enough, he would not lend you any more money but that is not necessarily a bad thing.
One of the reasons that moneylenders will not lend you more than say 90% of the value of the property is because they need to see some “slack” just in case the value of the property falls and there has to be a forced sale.
I am now going to suggest something so radical that it will probably result in my arrest.
Banks, Building Societies and the various Financial bottom feeders who are now writing to us all offering more loans should share risk with the borrowers. I will explain it very simply.
If a Bank lends 90% of the value of a property – it should remain at 90%. That would have the dual effect of discouraging them from forcing a sale because they would incur a loss in a falling market but conversely, in a rising market they would be making a profit.
For instance, you borrow £90,000 on a £100,000 property . In other words 90%. Assume that the value of your house then falls to £50,000. Nowadays, you still owe the Bank £90,000. Under the new system, the Bank’s share of your house would only be worth £45000, so it is in both yours and the Bank’s interest to sit tight and wait for the house market to turn.
For a rising house market, we could add a clause into the mortgage deed to take care of any profit split between you and the Bank in the event of you selling the property and making a profit.
For example, you buy a house for £100,000 and then sell it a few years later for £150,000. The Bank lent you 90% and they still own 90% which is £135000. You are now thinking that this is not fair because they have made a bigger profit that you have.
How about adding a clause to the Mortgage Deed which pre-agrees a profit split between you and the Bank. The interest rate that they charge is adjusted accordingly.
Because of very sophisticated accounting systems, there are far too many complicated mortgage products on the market: Fixed, variable, LIBOR-linked, discounted, offset, interest-only etc. etc. The same sophisticated systems could easily administer this new type of mortgage.
It is time to simplify and take some of the pressure away from the borrower.