An interesting piece of news has reached me which, although from last week, is worth reporting here nonetheless. 

A new mortgage product has been launched whereby applicants do not need to be credit scored. This is the only such mortgage available in the UK (that I’m aware of). 

The mortgage is offered by the Legal & General Mortgage Club, is a two-year fixed-rate mortgage and has a rate of 3.35%.  

The company says that the mortgage is a response to many borrowers who are perfectly creditworthy generating a low score on the rating mechanisms. 

The press release uses some hyperbolic and contradictory language which describes the new mortgage as both ‘innovative’ and ‘back to basics’ but it is clear that the product will be competitive in the current market. 

Of course, after the recent economic events there are some caveats to the provision of the product. These include a £100 booking fee, a £1,399 administration fee and a maximum loan-to-value (LTV) of 75%. 

There are thought to be other caveats as well. Since the Legal & General are not using formulaic credit ratings but rather judging on a case by case basis they are likely to be tougher on such matters as other debts and loan multiples. 

This underlines that the new product is not simply a catch-all for people who have failed to get a mortgage elsewhere. 

The new product is interesting in that, with a background of increasing mortgage approvals and rising house prices, it is further evidence that the
UK housing market is returning to health. 

The nuanced emphasis on examining applicants’ financial suitability for a mortgage is also refreshing, considering the unbridled ‘sub-prime’ lending that got us all into the mess in the first place. 

It remains to be seen how successful the new Legal & General mortgage will be, but its introduction marks a continued note of optimism for lender and borrowers alike.

At long last it seems that the regulatory bodies in the US and UK are taking to task the financial institutions through whose reckless speculation and disregard for other people’s money we all ended up with the credit crunch and consequent recession. 

The story started at the weekend on the far side of the Atlantic when Goldman Sachs, the Wall Street powerhouse, was accused of defrauding investors by America’s financial regulator.  

The Securities and Exchange Commission (SEC) alleges that Goldman failed to disclose conflicts of interest regarding the marketing of sub-prime mortgage investments just as the US housing market faltered.  

Specifically, the SEC says Goldman failed to disclose vital information that one of its clients, Paulson & Co, helped choose which securities were packaged into the now infamous mortgage portfolio of securities which were sold to investors in 2007.  

Goldman neglected to inform investors that Paulson, one of the world’s largest hedge funds, had bet that the value of the securities would fall.  

Apparently, investors in the mortgage securities lost more than $1bn (£650m) in the US housing collapse.  

Goldman has, unsurprisingly, rejected the SEC’s allegations and said that it will defend its reputation ‘vigorously’. However, the howls of protest and squeals of innocence looked less than convincing when, a few days later, the UK Financial Services Authority (FSA) announced that it too is beginning an investigation into the activities of the troubled behemoth. 

There is some degree of defence for Goldman in that the two investors that lost the most money, German bank IKB and ACA Capital Management, are top flight financial institutions themselves that should have been aware of the risks having researched what they were investing in. 

Anyway, the whole affair is of interest not only because crimes may have been committed on UK soil. In fact, another of the big losers from the transaction at the centre of the controversy was our very own Royal Bank of Scotland.

This means that the UK taxpayer could, with very much emphasis on that could, be in line to receive a payout of close to one billion dollars.

The whole affair is gripping the financial world in a way, I accept, it is unlikely to do for everyone else. This is because Goldman, possibly the world’s most prestigious investment bank, escaped relatively unscathed from the global financial meltdown.  

For many who have been wondering how Goldman managed to beat the recession this case has provided the answer, they did it by cheating.