Following Michael Coogan of Deloitte’s comments about how the increased number of mortgages in forbearance could provide long-term damage to borrowers, we asked whether the increased use of forbearance had been good for the industry.
37% of respondents said that increased forbearance had been positive in the industry compared to just 8% who agreed with Coogan’s comments. 55% said its usefulness must be judged on a case-by-case basis.
Coogan claimed that despite 8% of UK mortgages being in forbearance, the idea remained ‘risky’, commenting: “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.
“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.”
Matt Hildon, HML’s senior programme manager for regulatory change, said that all cases needed to be evaluated based on their own merits.
“Treating customers fairly and forbearance should go hand in hand because borrowers are always going to be in a better position by building equity in their homes; it could allow them to downsize later in life for example.
“It’s impossible to say whether forbearance has been a good or bad thing for the industry as all cases should be evaluated on their individual merits.
“However, in this market the last thing anyone wants is a long term agreement that leaves both lender and borrower with substantial shortfall debt should the property be repossessed.
“Negative equity and stagnant house prices mean both sides are at risk of being left out of pocket at the end of it.”
