Banks win in EU tussle over default time limits

Banks have secured a victory after successfully lobbying against plans to force them to crack down on forbearance by repossessing a borrower if they are more than 90 days in arrears.

In final negotiations over CRD IV earlier this month, ministers, MEPs and European commissioners agreed to define a mortgage default limit of 180 days, doubling initial proposals for a 90-day limit.

Speaking to Mortgage Strategy, Conservative MEP and lead CRDIV negotiator Vicky Ford says a 90-day limit was too low.

She says: “At 90 days you effectively start a process of bringing the bailiffs in after two missed mortgage payments.

“The large majority of people who miss two mortgage payments get back into full payment and do not need their keys taken away. It could be because someone has lost their job or a death in the family, it does not mean they are insoluble. It was an utterly critical point and we fought really hard for it.”

A British Bankers’ Association spokesman says: “The industry was keen that a 180-day definition of default was included instead of a 90-day definition so borrowers get more time and forbearance on financial matters to ensure they are not removed from their home. We are very pleased it has been changed and it is very much in the consumer’s interest.”

John Charcol senior technical manager Ray Boulger says: “A 90-day limit was clearly ridiculous but even 180 days is a blunt instrument and only a win for the UK because the original rules were so stupid.

“Any rules that ignore loan-to-value ratios do not seem sensible.”