Increase In Loan Repossessions Possible
Earlier this week, we reported on how the Financial Services Authority (FSA) had effectively closed down the sale and rent back industry in the UK, due to poor practices and not treating loan customers in a fair manner.
The news did not really come as much surprise to the financial services industry following the announcement last Friday (3rd February) and many are happy to see the back of an industry which takes advantage of vulnerable home owner loan customers who are desperate to do anything which might stop them having their home repossessed through home owner loan arrears and defaults.
However, Ray Boulger of the home owner loan and mortgage broker John Charcoal, warned that the closure of sale and rent back schemes may lead to an increase in the number of loan repossessions in the short term, as desperate loan customers now have nowhere to turn as a last resort.
Despite the fact that the FSA recently introduced regulation for the sale and rent back market which was designed to offer more protection for home owners and bad credit loan customers, in an investigation into the sector, it found that many of the plans which were set up were either unaffordable or unsuitable for the loan customer and should never have been done in the first place.
In other cases, the sale and rent back company bought up properties through buy to let loans, but then never kept up with the loan repayments, eventually defaulting on the loan. In such cases, the property would be repossessed and the original home owner would end up losing their home anyway, but would not have received the full value of their property from the sale.
Mr Boulger commented on the potential problem for home owners who currently have high loan arrears levels, he said “They will now have a problem as they will now have no last resort. In the short term, this may mean that we will see more repossessions. It will have some impact on the repossession level, but it won’t be massive.
