From Credit Creation to Claiming Possession – A Critical Analysis of UK Mortgage Finance

This thesis aims to empirically test the Credit Creation Theory of Banking by examining the practices at each stage of UK residential mortgage lending, from the sale of the loan to litigation following default, in order to probe whether banks literally lend money.

In examining this chain of events, I employ a modified variant of Renner's (1949) theory of legal concepts as empty frames. This involves an evaluation of the legal concept of the mortgage based on its origins, juridical content and the related contemporary social, economic and procedural practices.

This evaluation is paired with positive law analysis and an ethnomethodological approach combining a Latourian perspective with that of Lynch and Bogen (1996) to analyse fieldwork observations of possession action litigation.

I find that legislative non-compliance by brokers, lenders and solicitors gave rise to four causes of action for mortgagors which I conclude altered the juridical content of mortgages.

My findings in respect to the Credit Creation Theory are consistent with those of Werner (2014a; 2016), and though I have not established proof positive in support of the theory, I have not found evidence of a pre-existing source for the loaned funds, and contend that the absence of evidence of such an origin point is tentative evidence of its absence. I therefore conclude that the observations are weakly supportive of the Theory. However, the absence of a signed letter of offer in many cases means that a key element of Minsky's (2008[1986]) variant of the theory is absent. An alternative view is speculated upon; that the legally invalid power of attorney universally present in loan terms and conditions is used by the lender to execute such a monetary instrument on behalf of the borrower.

I argue that the findings present a moral imperative wherein possession proceedings are unfairly prejudicial to mortgagors.