Repossessions Dominated By Sub-prime Market
Official figures reveal the number of repossessions is on the rise with sub-prime lenders bringing in more than half of all repossession orders.
Accounting for just 6% of all UK mortgages, the sub-prime market offers loans to people with poor credit histories. Figures published last week unveiled a dramatic rise in the number of repossessions for 2007, with 27,000 repossessions taking figures to an eight-year high. Analysts are not painting a prettier picture for this year either.
BBC Radio Five Live's ‘Wake up to Money Programme' carried out a research project examining some 1,200 repossession orders going through 18 county courts in January of this year. More than 10% of these cases were discovered to have been brought forward by sub-prime lenders owned by Lehman Brothers, a US investment bank.
The percentage of repossessions from sub-prime origin was found to be considerably high. Although some court actions did not result in property repossession, sub-prime lenders claim that default rates amongst their customers will naturally be higher due to their bad credit histories.
While Southern Pacific Mortgage Limited (SPML) and Preferred Mortgages had 148 cases amongst those under research, they maintained that the majority reached settlement without the need for repossession.
On behalf of SPML a spokesperson said, "The figures are not based on possession claims hearings and are therefore not representative of actual repossessions, which are a lot lower."
He added, "Of proceedings started, where solicitors become involved, five out of six are resolved without having recourse to repossession."
In defence of GE Money and GMAC-RFC, two of the UK's largest sub-prime lenders, a spokesman stated, "It should come as no surprise that those lenders dealing with borrowers who have past credit problems are likely to have to deal with more cases of default amongst their borrowers. Therefore comparing lenders like GMAC-RFC with high street lenders is a bit like comparing apples and pears."
Both GE Money and GMAC-RFC were discovered to have over 100 repossession orders alike from the 1,200 being researched.
As for mainstream lenders, building societies Britannia and Bradford & Bingley were both seen to be over using the courts in relation to their market share of mortgages. Likewise Northern Rock was also considered to be a heavy dealer in the number of repossession orders issued over the past year.
But once again in defence, a spokesperson for the Rock said, "We continue to treat our borrowers fairly and in the light of their individual circumstances, repossession is used as a last resort."
He said, "Our policy of forbearance is borne out by the fact that the number is lower than might be expected from our market share. Once again it is worth repeating that not all actions lead to possession."
The BBC's research was a similar study carried out in January of last year; the details of which were included in a recent report issued by the Citizens Advice Bureau. The report claimed that sub-prime lenders were less willing than most mainstream mortgage lenders to negotiate with their borrowers who had gone into arrears. It also compared the current rate of repossession actions in county courts to those of the repossession crisis in the early 1990’s.
Published on February 14, 2008
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