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Financial Conduct Authority Fears Mortgage Forbearance Bubble

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FCA fears mortgage forbearance bubble

The Financial Conduct Authority has warned tens of thousands of borrowers could be stuck in a growing “forbearance bubble” in the aftermath of the financial crisis.

It said it is increasingly worried that some borrowers who took a mortgage before the credit crunch hit and have subsequently found themselves falling behind with their payments could find themselves “worse off” as a result of pressure put on lenders to keep them in their homes.

The FCA told finance industry professionals at the Financial Services Expo that it was looking at whether the “increasing and enhanced use of forbearance” – lender leniency when dealing with borrowers who can’t pay their mortgage on time – was in danger of creating a bubble that would eventually burst.

Linda Woodall, director of mortgage and consumer lending at the FCA, said the regulator was actively reviewing the situation so it could “pre-empt” potential damage caused for consumers.

“While the review will be looking at how lenders treat customers in arrears this is primarily a pre-emptive review to assess and mitigate the risk of a growing forbearance bubble,” she said.

“One of the issues around [new mortgage regulation] and the general economic climate is that we understand that firms have exercised a considerable and increasing degree of forbearance.”

Woodall said while “in many respects that is good because it’s sympathetic to the borrower’s circumstances” she warned that it could have potentially severe consequences for some borrowers.

“In other respects it’s not so good because it’s putting off the inevitable,” she said. “The borrower may be put in a position that is ultimately even worse than the one they started out in.”

She said anyone worried about this situation should contact their lender and discuss their circumstances as early as possible to ascertain what alternatives there are.

And she added: “This is not about throwing people on the streets but it is about understanding what the consequences are of enhanced forbearance practices and is this a problem waiting to happen?”

http://www.mortgageintroducer.com/mortgages/247704/5/Industry_in_depth/FSE_2013:_FCA_fears_mortgage_forbearance_bubble.htm

I think we're in danger of having a bubbles bubble.

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Really? Irelands is awful, the worst of te worst, Greece is not far behind and the next bailout is not far behind that either.

Screen-Shot-2013-03-07-at-12.33.13.png

[edit]

Mortgage arrears at least two years behind now total €6bn

The Central Bank of Ireland said yesterday that the number of residential mortgages in arrears of two years or more was a source of “serious concern” and that the scale of potential losses on these loans could be “quite significant”.

Enhanced quarterly statistics for mortgage arrears, published by the regulator yesterday, show that €6.04 billion of mortgages on private dwelling homes are in arrears of 720 days or more.

The report shows that the level of mortgage arrears in Ireland has almost quadruped since 2009 and totalled €18.6 billion at the end of June this year.

Now the banks could foreclose on these borrowers tomorrow releasing stock into the market for someone like me (pent up demand).

I am 100% certain this will result in yet another bailout before the end of next year, the EBC are quietly shuffling €€€ to AIB etc as peoples debt increases due to fines, interest on arrears, and interest on the unpaid interest.

Not good and I fully expect this to be repeated across the west as it is the easy solution that bankers and politicians like.

Edited by Gone to Ireland.

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Really? Irelands is awful, the worst of te worst, Greece is not far behind and the next bailout is not far behind that either.

Screen-Shot-2013-03-07-at-12.33.13.png

Strange use of planets :D

Maybe a picture of the big bad wolf being pushed back from the 'door of doom' by some scared home debt-owners would be more apt.

Edited by Reck B

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Is this forbearance because the banks are really have been told to be nice or the fact the banks don't want to accept losses on their books?

Fixed :rolleyes:

Most would probably have accepted much high losses before now...

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And yet forebearance for renters is non existent.

both types of housing result in people on the street needing help...surely the private risktakers should be the first in line...

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FCA fears mortgage forbearance bubble...

Is this forbearance because the banks are really nice or the fact the banks don't want to accept losses on their books?

Certainly in the PIGS, a full calling-in of the debts and sell off of the stock would have basically crashed the market to zero in many areas. After all, if there are 100 buyers and 200 houses for sale.. why go mad bidding?

But that would mean that common people got to live in houses without epic mortgages to service, and banks would have had to face up to their stupid lending. Better to crash whole economies, I'm sure you'll agree..

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Potentially bigger problem for the US. Millions of homeowners are presently underwater and being allowed to stay in their homes without contributing a cent towards the mortgage. The reduced inventory has thus enabled QE-rich speculators to drive up prices at bubble pace in the last eighteen months. At some point these distress sellers will flood the market looking to get out and US house prices will come crashing down again.

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And yet forebearance for renters is non existent.

both types of housing result in people on the street needing help...surely the private risktakers should be the first in line...

If you owe £600 and can't afford to pay it you have a problem.

If you owe £600,000 and can't afford to pay it they have a problem.

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I think we're in danger of having a bubbles bubble.

:lol: Yes- it does feel that way- almost every aspect of the economy seems to be in a bubble of some kind- except wages- which is a bit of a problem given that wages are the means by which all these inflated assets will be made good.

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some borrowers who took a mortgage before the credit crunch hit and have subsequently found themselves falling behind with their payments

We certainly are in the grips of a talking cr4p bubble. The credit crunch hit you see. Like a freak weather event. Everything was going fine until that pesky credit crunch, created by no-one, came along and 'hit'. We need to get back to normal. Surely everyone getting rich through not doing anything was normal? We should get back to how things were before that pesky blameless credit crunch hit so we can all get rich again by not doing anything.

'Found themselves falling behind'

Oh look I 'found myself' kicking gordon brown in the head until it caved in. Im blameless there too, I just 'found myself' in that position.

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We certainly are in the grips of a talking cr4p bubble. The credit crunch hit you see. Like a freak weather event. Everything was going fine until that pesky credit crunch, created by no-one, came along and 'hit'. We need to get back to normal. Surely everyone getting rich through not doing anything was normal? We should get back to how things were before that pesky blameless credit crunch hit so we can all get rich again by not doing anything.

'Found themselves falling behind'

Oh look I 'found myself' kicking gordon brown in the head until it caved in. Im blameless there too, I just 'found myself' in that position.

I heard the credit crunch was caused by the under 25's not taking off enough debt. They must be punished for their crimes.

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