The European Mortgage Federation has expressed alarm about the possibility of a US-style system of mortgage repossessions being introduced in the EU.
The EMF, which represents mortgage lenders in the EU, says the concept of datio in solutum, which allows struggling home owners to return the property to lenders and wipe off any debt, is being taken “very seriously” at EU level.
The European mortgage directive, which is set to come into force in September, will allow member states to introduce datio in solutum for the first time. The US operates a similar system of debt forgiveness.
In March, the European Commission’s influential consumer body, the Financial Services User Group, said a system of debt forgiveness must be available to all borrowers and could be monitored by the Office for Fair Trading in the UK.
FSUG chairman Mick McAteer says the measure should be introduced as an option for consumers as a last resort.
He says: “We think it should be a last resort option but there are other steps that lenders should be required to go through.”
EMF senior policy adviser Jennifer Johnson says: “Consumers would only use the option if the property is in negative equity which means lenders will be saddled with higher losses. It would unpick the mortgage industry.”
Conservative MEP Vicky Ford says: “I don’t want it in the UK. If you are going to give everyone the right to hand the keys back then lenders will be much more conservative.”