Mortgage Arrears Borrower and Lender Perspectives

The squeeze on borrowers and longer term arrears continues to harden. The Borrowers Position on Arrears and the lenders perspectives have not changed significantly and it seems to be an issue of confidence that is holding everyone in the housing market back at the moment.
Time and a few good results will put that too rights in due course now is not the time to panic.

The Council of Mortgage Lenders (CML) reports today that the squeeze on borrowers and longer term arrears continue to harden. It seems the economic outlook looks increasingly uncertain despite David Cameron trying to boost the housing market.

Borrowers Position on Arrears

• For those already struggling to pay or with established arrears the first action must be to talk to your lender. Borrowers can become over extended for many reasons.
• Lenders are likely to vary and may take different views depending if your problems are long or short term.
• Depending on your payment history and your circumstances your lender might agree to:
• Reduce your payments for a set period
• Charge you interest only for a while if you’ve got a repayment mortgage
• Allow you to pay off the arrears gradually, alongside your usual payments
• Give you a ‘payment holiday’
• Extend your mortgage term or add your arrears to your mortgage
• Let you stay in your home while you try to sell the property and find somewhere else to live
• Suggest other assistance, such as one of the government schemes to help with mortgage difficulties

If you have other debts on top of your mortgage payment problem then read this on debts and not panicking and talk to an adviser.

You can be referred to the Mortgage Rescue Scheme by the Citizens Advice Bureau or Shelter, your mortgage lender or the courts. Your Local authority in England will be able to point you in the right direction.

Shelter offer a range of advice ‘If you’re struggling to pay, you need to act quickly, even if the problem is only temporary – as you could lose your home. Use Shelter’s directory to find face-to-face advice services in your area.’

More Government advice.

Lenders Perspective on Arrears

With firms under ever-intensive pressure to treat customers fairly whilst mitigating loss risks The Council of Mortgage Lenders have dedicated there forthcoming conference to looking at the arrears landscape, forbearance and emerging issues for managing properties in possession.

Topical sessions at the conference on 9th February 2012 in Manchester will cover

• The policy context for arrears and possessions
• Trends of arrears customers
• Lender forbearance
• Compliance
• Mental health training for collections staff

In 2011 a total of 27,500 properties have been taken into possession – fewer than in the equivalent period last year. There is still a stock of cases with significant arrears. According to CML 27,300 loans have arrears of more than 10% of the outstanding balance. This is still a dramatic improvement on the last two years. see Mortgage default rates

Impact of Arrears on Lenders

• Repossession, arrears and write-offs detract from current and future lending.
• If financial performance deteriorates due to arrears then confidence and the ability to raise new funds stalls.
• ‘Ongoing pressures remain and the economic backdrop represents a significant challenge to the recent improving trend in arrears.’CML November 2011
• Confidence is still the key issue from valuers, surveyors, vendors, purchasers and throughout the housing chain.