Mark Leaper

Vesta Packaging

It is easy to tar all lenders with the same brush. Rates and fees charged vary a lot between lenders, as do their policies on repossession. There have been arrears cases that have attracted a lot of publicity of late – it has to be said usually in favour of the borrower.

However, for every borrower who has been ‘unfairly’ treated by a lender, there are hundreds that are happy with the service they are getting and get treated equitably if they fall into arrears.

The Joseph Rowntree research has to be considered alongside the fact that sub-prime lenders take on a high degree of risk with many borrowers. The risk has to be reflected in the charging structure, so borrowers can expect to pay a higher rate of interest. Reduce the interest rate to that which applies to the prime market and no lender would be willing to lend to adverse borrowers. Likewise, there has to be a penalty for falling into arrears.

If borrowers fail to warn lenders of impending problems meeting their mortgage payments and then fall many months behind without demonstrating an effective plan for getting out of arrears, the lender is often left with little alternative than to repossess.

Roger Morris

Em-Financial

I agree with the statement issued by the Joseph Rowntree Foundation. Many sub-prime lenders are getting it wrong time and time again when evaluating adverse cases. These lenders could benefit from taking a more personal approach. Lenders should take into account the individual circumstances on every case and not assume information.

Take, for example, the issue of debt by association. Invariably these individuals move forward working through situations carrying scars of past County Court Judgements and defaults and maintaining a new credit file. It would seem unfair then if this person was to come up against another setback that would automatically result in accelerated repossession processes and a massive increase in rates.

If lenders adopt a more personal approach, using old-fashioned skills such as verbal communication, and react more sympathetically to individual’s situations then they are more likely to retain clients.

Rather than instantly increasing fees when arrears occur and accelerating the repossession process, lenders will have the overall benefit of client loyalty and retention, and in the long term increase their profits.

John Prust

SPML

I would be very interested to see what evidence is being cited to back these claims. SPML’s interest rates are clearly set out as percentage points above LIBOR, and these rates are adhered to throughout the life of the loan. Our arrears fees – which are set at a level only to cover our reasonable costs in accordance with the Financial Services Authority’s mortgage rules, MCOB 12 – are clearly laid out to customers prior to completion of the mortgage and at regular intervals throughout the mortgage term.

SPML also has a highly effective procedure for following up any missed payments – and I am sure that most non-conforming lenders also have similar procedures. Our collections teams in High Wycombe contact borrowers immediately when a payment has been missed, and they work with the borrower to get their payments back on track.

If appropriate, debt counsellors are employed to visit borrowers in their homes to get a true perspective of their financial situation. Repossession is always the very last resort, only used when all other efforts to help the borrower to resume regular payments have failed.

Robert Owen

London Mortgage Company

London Mortgage Company charges the same interest rate to people in arrears as to those who are not and its administration fees are the same as for any prime lender. The fact it lends to people that may have had problems in the past might point towards those same people having problems in the future. But more than 80% of the people that we lend to do not have any further problems.

The last thing a lender wants to do is to take repossession – they want borrowers to continue to make mortgage payments.

In any case, proper due process must always be carried out according to County Court requirements. Therefore, I cannot agree with the Foundation’s conclusion that sub-prime lenders are guilty of over-charging borrowers in arrears and being too quick to pursue repossession. I am not aware any evidence of such things taking place but I would be interested in seeing the evidence that has led the research team to this conclusion.

Phil Jay

BDS Mortgage Desk

I feel the Joseph Roundtree research is too general and does not, therefore, reflect a sub-prime market that has evolved post-regulation into a more sophisticated risk-based mortgage sector.

It is true that fees and charges are on the whole higher than for conforming mortgages, but the very nature of the lending would indicate that this was the case. And, providing lenders act responsibly and are upfront about charges and policy, then I do not believe, certainly in terms of the sub-prime lenders that we are involved with, that there is any guilt to place.

After criticism particularly towards sub-prime, many lenders have revisited their lending criteria to ensure that borrowers can service their debt adequately from the outset (at agreement stage) in the hope that repossession can be avoided at all costs, as no one really wants to go down this road.

The mortgage industry has enough to contend with in terms of maintaining a professional image so I cannot believe that any lender – sub-prime or otherwise – would put this at risk by behaving irresponsibly in the hope that they can overcharge – and if one did, then I doubt it would have much support for long.