Lower Secured Loan Repayments Should Be An Alternative To Repossession
As the effects of the credit crunch began to properly take hold at the beginning of this year, the Council of Mortgage Lenders (CML) warned us of an increase in the number of repossessions of people’s houses.
The institution predicted that we would be likely to see around 45,000 properties repossessed by the end of this year, through individuals building up arrears and defaulting on their home owner loans and secured loans and so far the figures seem to backing up this estimate, despite the Government intervening in the secured loan market by injecting large amounts of cash into the banking system, in order to restore liquidity to lenders and help to avoid this very problem.
Now, the Home Owners Advice Centre has suggested that banks and building societies should adopt alternative strategies when a borrower gets into difficulty with their loan repayments and actually try and help them, rather than go down the route of repossession, which is clearly not in the best interests of either the borrower, or the lender, particularly in the current economic circumstances.
Al Elliott, of the Home Owners Advice Centre, has proposed that a better plan might be for lenders to allow borrowers facing financial difficulty to reduce their monthly loan repayments and in exchange for this they would take a charge over a larger share of the equity in the property, thereby increasing their level of security for the loan. This would help avoid the unpleasantness of repossession proceedings and once the market recovers, the borrower would have the option of either repaying the increased balance of the secured loan, or selling the property at a profit and repaying the debt from the proceeds of the sale.
This idea could certainly help avoid the repossession process in many cases and with the Government stating that lenders should only go down the possession route as a last resort, it could possibly make life quite a lot easier for all concerned.
