Concerns Over Sub Prime Loan Repossessions
The credit crunch and recent recession has caused significant financial problems for many individuals with a homeowner loan, or secured loan on their property, with arrears levels and repossessions showing a dramatic increase over recent months.
This has caused concerns for the Government, particularly with regard to how banks and building societies handle cases of loan arrears with their customers. As a result of this, a Treasury committee has been established to investigate lenders procedures when borrowers run into difficulty with their loan repayments and the results of their enquiries have been published this weekend.
The report has revealed that both the level of secured loan arrears and repossessions are continuing to increase, despite more positive news in the housing and homeowner loan markets and this trend is expected to continue over the course of the next few years, due to the effects of the recession.
Whilst the majority of mainstream lenders are doing all they can to help borrowers in difficulty, the committee raised concerns over the practices adopted by some sub prime lenders and secured loan, or second charge loan companies. They claim that a number of loan companies are taking repossession action against borrowers at the first sign of loan arrears, rather than adopting this attitude as a last resort and that many are not offering the necessary help to customers, whilst imposing excessive charges and fees.
The report has described the actions of certain lenders as “intolerable” and the Financial Services Authority (FSA) is likely to take a tough approach towards those loan companies who are not seen to be treating customers fairly. The first stage in this process is to get rid of unnecessary loan arrears charges by forcing lenders to provide a detailed breakdown of how such charges are made up and how they can be justified, followed by a more helpful approach towards borrowers who are struggling to keep up with their loan repayments.
