But the truth is that some of these firms genuinely don’t know what’s in their portfolios.
How can this be the case? The following quote may be of interest.
“The past three or four years have been abnormal, with cheap money, new lenders, lenders pricing for acquisition rather than risk and customers able to borrow regardless of their circumstances,” said the managing director of a rival mortgage club in 2008.
Coupled with this must be the fact that lenders often only had a superficial idea of what they were buying when purchasing portfolios.
Parking for a moment the bad bank idea, whereby lenders would have to identity the make-up of their balance sheets, the time is surely right for lenders to analyse what they hold.
Some commentators are suggesting that we are approaching the bottom of the market. Lenders should be reviewing their books to identify the borrowers they can help through the tail of the credit crunch and those for whom swift repair actions should be initiated.