Bankers refuse responsibility

BATTERED bankers are getting defensive about suggestions that – despite the billions of taxpayers’ cash being poured into their coffers – they are behaving as badly as ever and penalising members of the public caught by their policies of lending too much to people the lenders should have known would be at risk in anything other than a booming economy.

After suggesting the Chancellor wasn’t really serious when he spoke of the banks committing to a return to the 2007 levels of borrowing as part of the bail-out package, the mortgage lenders now appear to be retreating from the pledge to do everything possible to help borrowers with problems stay in their homes.

Following figures showing very clearly that the nationalised Northern Rock was leading the charge to repossess more and more homes, but still failing to sell them on, the Council of Mortgage Lenders (CML) has issued what it describes as a background briefing, which claims ‘media coverage of repossessions in general, and at Northern Rock in particular, could have the effect of creating a misleading impression’.
It seemed to think that journalists couldn’t tell the difference between figures showing the flow of properties being taken into possession, and the stock of properties in possession, when comparing Northern Rock’s figures with the wider market.

The CML publishes a figure showing the number of properties repossessed during a period and a stock figure which is a snapshot of the number of unsold repossessed properties held by lenders at the end of the same period. Those figures for the first half of this year showed clearly that the number of homes taken from their owners and the number unsold were identical.
In effect this means that the bankers are simply taking away people’s homes and keeping them empty when the government, local authorities and the public are saying very clearly that it makes sense to keep people in their homes; rather than create more homelessness and over-burden a social housing system which simply cannot cope with demand.

Observers find it particularly worrying that Northern Rock, a bank owned by the taxpayers, is repossessing homes at three times the rate of other lenders , with a repossession rate of around one per cent rather than the 0.38 per cent the CML insists is the national average.
If the government cannot even bring a bank in which it has a controlling interest to pay more attention to the needs of customers and the country as a whole, what hope is there that other bankers, who have already proven themselves to be greedy and irresponsible, will be any better, despite the cash handouts they are being given?
Overall, the CML claims it still expects a total of around 45,000 families and individuals to be thrown out of their homes this year as the banks take possession.

It claims this is a ‘ very modest’ repossession rate out of 11.7 million mortgages, and that 98 per cent of borrowers continue to pay their mortgages in full and on time, and where arrears occur these are usually because of changes in the household’s circumstances such as unemployment or other loss of income.
It is difficult to see how these figures can continue to be anywhere near accurate as unemployment rises towards two million and some predict it could hit three million before the current problems are over.
The bankers are anxious to point out that all lenders are bound by the Financial Services Authority rules on arrears management and repossessions and the CML says there is no logical rationale for a difference in approach for different lenders based purely on their ownership structure. It also admits, however, that all lenders should be making best efforts to avoid repossession except as a last resort, as required by those rules.
The bankers also say they support the mortgage rescue scheme currently being developed through local authorities and housing associations to help some households to stay in their homes on a shared equity or rental basis, but there has, so far, been no sign of that having an impact on the number of repossessions.

In the final analysis, as this briefing note shows, the lenders seem to regard those who have got into difficulties as feckless individuals who have over-stretched themselves – nowhere is there an acknowledgement that the banks’ and building societies’ policies of lending too much money to people they knew couldn’t afford it has any role to play.

Instead the CML simply notes that ‘borrowers gain significant protection too from the court process, as well as from the Financial Ombudsman Service,’ as they wash their hands of any responsibility.