In the November 24 issue of Mortgage Strategy, we recommended that banks and lenders become stakeholders in the homes of borrowers close to repossession, taking for example a 25% stake to significantly reduce borrowers’ monthly mortgage payments.
And in Michael Coogan’s speech today at the CML’s annual conference he recommended a “backstop scheme” to kick-in after the arrears management process which would enable the customer and lender to agree to sell and lease back a property before court action takes place.
He says: “It would resolve the mortgage arrears issue, provide stability and certainty for the consumer and support local communities, as well as underpinning property prices.
“However, it cannot be done purely as a private sector solution – it needs government support.”
The government also came under attack for failing to increase the provision of income support for mortgage interest to more borrowers.
While Coogan welcomed the fact that from January 2009 ISMI would kick in after 13 weeks rather than 39 and that the scheme had been extended to mortgages up to £200,000, he says more needs to be done.
He says: “Its failure to provide state support when one borrower’s income is reduced, rather than the household as a whole, means that the vast majority of people who will fall into arrears as a result of unemployment will not qualify for income support.
“The government needs to address ISMI’s weaknesses as a matter of urgency.”
Coogan also dismissed the government’s plea to lenders that lending should return to 2007 levels as a political pipe dream.
He adds: “Can this downwards trend in the last 12 months be reversed so that we reach 2007 levels of lending next year as the government has insisted? The simple answer is no.
“While there is pent-up demand in a number of areas of the market, consumer borrowing will simply not return to the levels seen in 2007, even if funds increased and a wide variety of lenders were to become active in the market again.”