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FSA: ‘Forbearance could leave thousands worse off’

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FSA principal risk specialist Karen Wilshere says lenders may have left “hundreds of thousands” of borrowers in a worse position by providing forbearance when they have experienced money problems.

Since the financial crisis, the Government and regulator have pushed banks to employ forbearance measures such as payment holidays, temporary reductions in monthly repayments, temporarily switching borrowers to interest-only mortgages or extending mortgage terms for struggling borrowers to increase their chances of remaining in their homes.

The FSA estimates around 8 per cent of households are in forbearance. Statistics from the Council of Mortgage Lenders show forbearance measures have reduced the level of repossessions from around 12,700 at the start of 2009 to around 8,500 to the end of the second quarter of 2012.

Speaking at the CML’s annual conference in London last week, Wilshere said: “I would probably say some forbearance has been overused. Some forbearance has left some customers in a very difficult position – and we are probably talking about hundreds of thousands of customers in a difficult position in the future. It has been an overused tool in some circumstances.”

Crown Mortgage Management chief executive Eric Stoclet said: “I agree. Some of the conversions to interest-only meant that effectively the borrower might not be in the position to continue repaying at a further point.”

All Types of Mortgages group chairman Vic Jannels says: “It is all very well making that point but, as I understand it, the FSA was instrumental in the issue of encouraging forbearance in the first place.”

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Comments

There are 5 comments at the moment, we would love to hear your opinion too.

  1. You may have been mis sold forbearance!
    I feel a thematic review coming on.

  2. Methinks that this whole forebearance business had little to do with supporting borrowers, and everything to do with avoiding a balance sheet meltdown by owning up to the fact that mortgage book asset prices had dropped. Now that balance sheets have to some extent begun to recover, that policy is likely to go into reverse.

  3. You couldn’t make it up. The FSA (and other interested parties) have told lenders to be helpful and reasonable in cases where borrowers are having difficulty. The lenders comply using a range of measures (payment holidays, switching to interest-only, extending terms etc) and now the FSA castigate the lenders. Perhaps the lender should have simply re-possessed.

    It’s now impossible to keep this regulator happy – no matter what you do it’s not good enough or plain wrong. Dipshits !!! the lot of ’em.

  4. so helping borrowers through a difficult time mainly not of their making is wrong?..

    I sincerely hope Wilshire hits hard time very soon …

  5. Amazing FSA still not in touch with the real world. When somebody looses their home where are they going to live, I would think in rented accomodation where they never pay anything off and perhaps will never get the chance to get on the property ladder again.
    They will with this system at least have a second chance without going through repossession by getting back onto the jobs market.
    FSA pontificating over other peoples lives when they have so many times over the years completely missed the point.

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