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Lender alarm at EU moves towards US-style repo system

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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.”

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There are 3 comments at the moment, we would love to hear your opinion too.

  1. This sounds like a good idea, to me. Why try to extract the blood when there is clearly no more to be had. No one is suggesting that the indebted walk away with the house, but they could be freed up to start life again(never to repeat the same mistakes again of course) As to lenders being reluctant to lend, I don’t think they would be, They would be most careful to whom they did lend and how much they lent! Yes probably as a result house prices may return to sensible levels, but of course this is would be a very good thing for society as a WHOLE These lenders get to keep the profits in the good times, and in the bad times the tax payer saves their bacon, it would be great to have a more balanced outlook.

  2. Annon, I assume from the utopian twaddle you posted, being an MP does not keep you busy enough. Who do you think pays for the losses?

  3. Let the banks suck up the losses! who do you think pays to keep these zombies going in houses that they could not afford, just so that a bank’s balance sheet looks good. To keep this going you need more and more people to take on more and more debt,how is that going to work?Please do not be insulting in your comments. Proposing a solution to this problem would be good, although do appreciate that this could be difficult for you

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