He says firms can buy a distressed asset at 50p in the £1, look to repossess as soon as possible and then sell at auction at around 30-40 per cent less than market value. He says firms are making huge margins, even in the falling market.
Last month, Money Marketing revealed that the FSA was relying on the originating lender and the third-party administrator to oversee the regulatory demands if an unregulated body such as a hedge fund buys it.
But Bolton says: “The buyer is unregulated and in no position to be able to agree to any loan modifications with the borrower. More to the point, they do not want to because the buyer wants the borrower out as soon as possible.
“If the borrower is unlucky to have his loan traded to an unauthorised investor, he will not be given a choice of a modified mortgage arrangement. This falls outside FSA action as it is not technically breaching any rules under Mcob.”
Bolton believes that there could be as much as £30bn in mortgage assets for sale to unregulated entities.