AVS – broadly defined as a means by which mortgage lenders can help a borrower in difficulties exit homeownership. In the Bank of England’s Financial Stability Report 2011, the FSA estimated around eight per cent of households were in receipt of some form of forbearance.
Borrowers have been put off the concept of AVS in the past on the basis the market may improve or that a local authority may rule them to have made themselves ‘voluntarily homeless’ and so ineligible for public housing entitlement.
While the BSA agrees with in the FSA in noting that forbearance can be both contrary to the borrowers’ best interests and uneconomical for the lender, there are promising cases where the sale of the property can be in the best interest of both parties.
Consequently, the use of AVS can be encouraged on a case-by-case basis and lenders could stand to benefit from expanding the range of options available to them in the event of borrowers running into payment difficulties, says the BSA.
The BSA says: “What is clear is that arrears and possessions is a complex topic and what is appropriate for one borrower is not necessarily suitable for another, so it pays for lenders to have a number of options in the toolkit and AVS may be a useful and constructive way for some borrowers to get out of mortgage payment difficulties.”