Tide may be starting to turn
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Of particular interest were issues surrounding cost-efficiency, the role and future of the mutual sector and wider issues in the industry.
But what really characterised the round table debate was a striking sense of positivity.
The lending community has been through one of the most torrid periods in living memory but its leaders are still able to look to the future with a degree of hope.
Companies coming through the recession are emerging better and stronger, with a renewed sense of focus, revitalised business strategies and new ways of approaching their customer base.
Certainly 2008 and 2009 won't be remembered as outstanding years for the financial services industry.
We have seen some important structural changes at several major lenders while a number of other players have left the market, in some cases temporarily.
The effect of the Financial Services Compensation Scheme was a big issue at the conference, as was the disparity between what lenders are experiencing on the ground and what they are reading in the national press.
Nevertheless, there was an underlying sense that the tide has started to turn and the lending community is looking to the future rather than picking over the past.
Green shoots
It is noticeable that there have been significantly more positive stories about the housing sector in the national press recently.
Nationwide and Halifax have reported a rise in the price of houses which nudged the average property price up to around £154,000.
And for the seventh month in a row the Royal Institution of Chartered Surveyors reports that the number of new buyer enquiries has risen.
The regular Hometrack monitor indicated that last month saw a rise in house sales and in May the Bank of England stated that there had been a rise in the number of mortgage approvals.
Selected areas of the UK have reportedly seen house price increases over the past 12 months - notable examples being the 9% rise in Windsor and the 5.7% increase in Pembrokeshire.
These figures may not be astounding individually - or indeed proof that the market overall has returned to growth - but together they present an encouraging indication of the way things are moving.
This is all positive for the market. The BSA itself has commented that the property market is seeing a few green shoots of recovery although this statement is tempered by the fact that the market is still facing downward pressure.
BSA director-general Adrian Coles mentioned at the conference that although it is too early to call this a recovery there has been a slowing in the rate of house prices falls along with a rise in estate agent enquiries.
He believes we will have to see a slowing of recessionary pressure before any recovery manifests itself and at the moment we are at the slowing of the downswing rather than the upswing.
Repossessions in focus
The Financial Services Authority's Treating Customers Fairly initiative means lenders are required to prove with a clear audit trail that repossession is truly the last resort.
Fair treatment does not necessarily equate to leniency but in the current environment of falling house prices, foreclosure holds little benefit to either lender or customer. So as a starting point lenders are delaying the timeline for commencing repossession proceedings.
In the past this might have happened automatically after three months of missed payments. Today we are seeing proceedings being delayed by up to six months. Indeed, many lenders go much further to keep loans performing and customers in their homes.
Lenders are working with the government's various schemes to improve liquidity and ensure repossession is the last resort. This has been evident in recent figures from the Council of Mortgage Lenders which cut the number of properties the organisation expects to see repossessed this year by 10,000 to 65,000.
One way lenders have been helping to encourage this trend is through increased analysis of accounts - not just accounts in arrears but also those that have a propensity to default.
By keeping a close eye on accounts in the danger zone lenders are able to give borrowers the support they need.
Talking to attendees at the conference, it soon became apparent that most arrears departments have been investing in retraining collections staff and upgrading their processes to allow more negotiation and forbearance.
One of the words that was repeated throughout the conference and again used regularly by the participants at the round table was flexibility.
Many lenders are prepared to accept a wider range of payment options from customers and loan modifications are becoming more commonplace.
These options range from paying outstanding arrears over longer periods to payment holidays and partial payments.
But simply delaying the payment of debt isn't always the best thing for customers, as interest will still accrue on the balance outstanding.
At the conference lenders discussed the fact that treating a customer fairly does not always mean keeping them in their home. Allowing a customer to remain in a property they can no longer afford can contribute to an even more difficult situation in the future, as debt will continue to grow. The industry is increasingly advising firms to use reliable independent national advice agencies such as Citizens Advice Bureau.
Lenders need to be proactive when it comes to arrears management. Prevention is better than cure and some servicers and lenders now contact custom- ers even when accounts are up-to-date, advising them to get in touch if their circumstances change.
The conference looked at ways in which servicers such as HML deal with arrears cases on behalf of lenders. One seminar explored the way servicing has had to evolve to ensure systems can handle the higher number of individuals falling into arrears, and to a standard that not only complies with TCF but also results in the best outcome for borrowers and lenders.
Increasingly, lenders are looking to reduce their risk by loans with sophisticated analytics techniques.
Arrears management is no longer a case of managing loans that have already defaulted. In the present environment it is just as important to review performing loans for propensity to default.
An increasing number of what were previously assumed to be low-risk borrowers are defaulting due to changes in personal circumstances.
The Baseline arrears analytics capability recently integrated into HML includes a number of discrete scorecards including propensity to default, propensity to self-cure, probability of arrangement, affordability breach and property optimisation.
It covers the spectrum of credit management activity from identifying at- risk accounts in performing portfolios through to aiding sale decisions on repossessed properties.
Societies want to lend but they are facing some significant obstacles, one being that despite them offering suitable products many consumers simply don't want to borrow. The media may be full of tales of desperate consumers looking for mortgages but some lenders at the conference reported finding customers steering clear of long-term financial comm- itments such as mortgages.
Government rescue and support schemes also attracted some discussion but the general conclusion was that it's too early to say how much these schemes will help. The criteria for qualification are quite complicated and not all lenders have signed up.
Indeed, some lenders are offering a level of forbearance that matches the government's Homeowner Mortgage Support Scheme but without the same reporting requirements.
These measures will undoubtedly help customers who qualify but only time will tell their impact on the wider market.
Meanwhile, it was mooted that lenders and servicers need to continue to work with the FSA, the government and even debt charities on ways to not only keep repossessions to a minimum but also cut the numbers falling into arrears in the first place.
The FSCS question
The consensus at both the conference and the round table was that the FSCS levy was an unfair burden on societies. But it was also considered that the society sector has been able to make its point about this and that the moral argument had been won.
This led to a recurring theme - the need to distinguish banks from mutuals.
Coles believes BSA research has detected a gulf in the way the two types of institutions are viewed by the public and he argues that societies should try to distinguish themselves and promote their unique selling points to consumers.
Although it was inevitable that discussion would focus on events of the recent past, enough was made of plans and positive views to provide participants with evidence that the mutual sector still has an important role to play.
So what could have been a rather gloomy round table discussion proved to be considerably more upbeat than expected. While the tide has not yet fully turned, at least there seems to be a glimmer of light on the horizon.
Source:
Lending Strategy
