The UK faces a 'tsunami' of housing repossessions if banks do not begin to more actively manage their portfolios of mortgages in arrears ahead of a rise in interest rates expected next year.
Richard Banks, the head of UK Asset Resolution, the body which handles £80 billion of mortgages bailed out during the housing crisis, said UK banks were storing up greater problems for themselves and their customers by continuing to kick the can down the road.
In an interview with the Guardian, Banks said: 'You can see if you don't do something about it, you can see a tsunami," he said. 'If you don't get into the hills you could get drowned by this. If you don't manage this properly it could get very messy.'
While the problem was concentrated within the body's own portfolio, primarily sourced from the non-performing books of Bradford Bingley and Northern Rock, he warned that problems were industry wide.
A leaked Bank of England report obtained by the FT at the weekend showed that Lloyds has the greatest exposure to distressed loans through its acquisition of HBOS in 2008.
While repossession has remained low relative to past recessions, the figure has begun to trend upwards in the past six months. The UK banking sector has largely opted to work with homeowners in arrears, rather than swiftly move to repossess and take properties onto their balance sheets.
'We as an industry, as a kneejerk reaction in the emergence of the crisis, and because the government asked us to be forbearing to customers in the hope it would all go away, we have been too lenient with some customers,' added Banks,
'It's a tough love approach. It's treating customers fairly, not nicely, because if you can't afford your mortgage you are only increasing your indebtedness. If we allow you to increase your indebtedness, that's not really fair to you.'
Article Source KBG Test Blog (http://rc.kbg.me)
