You are here: Home - News -

Forbearance can treat customers “unfairly” – Deloitte

by:
  • 30/05/2012
  • 0
Forbearance can treat customers “unfairly” – Deloitte
With an estimated 8% of UK mortgages in forbearance, finance consultants Deloitte said the tactic remains risky and in some cases may undermine the upside of avoiding repossession.

Poor use of these strategies can put customers at greater financial risk and treat borrowers unfairly, while lenders also suffer lower returns on capital making them less able to lend.

Regulatory risks are higher, as the FSA looks at the prudential implications for the firms of forbearance as well as the conduct risks for consumers and impairment accounting and disclosures become trickier, said Deloitte.

Michael Coogan, ex-CML director general and strategic adviser at Deloitte’s financial services practice, said: “During the 1990s lenders were much quicker to repossess homes when people had fallen behind on their mortgages because of the level of interest rates and the speed at which arrears rolled up. This time mortgage lenders have responded to the downturn by making much greater use of forbearance, where a lender and borrower renegotiate how a mortgage will be paid.”

Coogan said forbearance gives struggling borrowers a breathing space to solve financial problems and ensuring mortgage repayments over the long term.

“However, lenders must ensure that they do not make borrowers’ situation worse in the long term, and that their collections, credit and finance teams can deal with the complex demands of forbearance strategies which should be tailored to borrowers’ individual circumstances,” he added.

Related Posts

There are 0 Comment(s)

You may also be interested in