Monday, December 1, 2008

Robert Peston on the 6 month repossession delay

RBS, repossessions and recovery

Stephen Hester, the new chief executive of Royal Bank of Scotland, is perhaps showing unusual common sense for a banker. It was his initiative - rather than an instruction by ministers - that Royal Bank will delay the start of proceedings to repossess the homes of those falling behind on mortgage payments.

Posted by gardeniadotnet @ 09:14 AM (1215 views)
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13 thoughts on “Robert Peston on the 6 month repossession delay

  • 2 ways of looking at it. RBS being nationalised mean they are not accountable to the shareholders, just the government who cannot be seen as forcing out families out of homes to help them move to social housing and giving them benefits.
    On the other hand, despite being in government control, RBS still has a certain number of shareholders and when a bank is reposessing it has to do what it can to recover as much money as possible from the property when it is sold. It is a duty of the banks towards creditors.
    I dont know which way is best. I doubt it come from RBS own CEO’s decision. I would say the government is calling the shots cos they are planning to call an election in 2009.

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  • planning4acrash says:

    Could this be because they don’t have capacity? I doubt its altruism. They’ve sacked people and have more volume of work. Sounds like pragmatism to me. Don’t let ANY politician fool you that this is their work.

    If you are being repossessed, remember that, absent of altruism, banks will be going for the easy targets. Give em hell, and they’ll probably leave you alone.

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  • To be honest it’s a bold move. It is in the interest of any individual bank to recover as much of any asset as quickly as possible in the case of default or technical default. 3 Months of non-payment is a clear indicator of problems, and is when a dialogue should definitely start. As an industry, however, as we have seen with other asset classes as of late, it is in the banks interest to avoid high proportions of such repossessions occurring as it forces the remaining asset prices down. RBS are a relatively small player, so I would guess that they have a relatively large exposure to the less credit worthy [or a hidden over-leverage of reserves via CDOs] and wish to slow down the pace [give themselves more time to build up reserves], so they have time to smooth their ride down, whilst being able to attempt to resolve as many cases without outright repossession as possible.

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  • More evidence that the Armstrong high/ dead cat bounce in confidence will be in April 2009.
    Expect an election in April/May.

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  • p4ac: “Give em hell, and they’ll probably leave you alone.”
    Bad advice. Seriously. If you are facing repossession you should attempt to renegotiate your debt, if you do not you’ll end up paying more in legal fees (aka repossession fees [in the media]).
    By repossessing a bank is recovering what they can from a loan gone bad, they will often recover far more if they can renegotiate the terms to a manageable level – and as I pointed out above, they do not want a fire sale.

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  • I’m sorry but 6 months isn’t radical on the whole. Most banks use repo’s as a method of ‘last resort’, and usually only after other avenues have been explored. People who literally can’t pay, or won’t pay will generally be repossessed and usually this takes longer than 6 months.

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  • @sold2rent1
    I agree that that’s what the government’s trying to achieve (with this and other measures). Not sure it’s that easy to stop the housing market tumbling though, given the conditions.

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  • Gentlemen, they really have lost the plot – prevention is better than cure – responsible lending at all times would have mitigated this crisis whivh they conveniently blame on the USA.

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  • @51ck-6-51x

    “they do not want a fire sale.”

    Call me cynical, but I suspect that that is what the six-month grace is relly about. Hester looked at the effect on the market of letting the market correct naturally and didn’t like what he saw.

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  • Peston is pretty much right – attempts by Govt to slow the rate of repos will only serve to enlarge the lenders eventual losses.

    It’s not in Brown’s interest either – if he thinks his little bounce in the polls will last the winter, and give him a chance of an election win in the spring, then he is utterly deluded.

    His best bet is to go for broke now, and hope for some green shoots to appear before the spring of ’10 – it’s a long shot, but his only chance.

    ~~~

    Don’t underestimate the Damien Green affair – this is Brown’s Watergate – if the Tories play their cards right, it could even result in her maj feeling obliged to sack Brown (she can..)

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  • Interesting that Peston thinks this will ultimately cause a greater drop in house prices. His argument is that this will prolong the agony – and while we are waiting for the bottom of the market prices will carry on dropping. Then there will be an upsurge in forced sales – and the market goes lower still.

    This is counterintuitive, but is he right ?

    Either way I don’t thing it will have a massive effect – six months is not far off the norm anyway. Banks only start proceedings after three months if the lender fails to communicate. This is more of a PR stunt than anything.

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  • I am a professional person in my thirties, earning an average wage. I was priced out of the housing market in 2000.
    Labours Pre Budget report states that any person earning over £40k PA will be taxed at a higher rate.
    {last year I earned over £40k}

    So Labour will tax me an extra, Circa 100 – 300 pounds PA in income tax. My money will go to provide a 3 month lifeline to any person facing negative equity.

    I will also be taxed to ‘bail out the banks’ who lent these people way too much in the first place.

    And yet for a decade I have lost tens of thousands of pounds because I have had to pay rent.
    I could not afford even a bedsit.

    This is a UNBELIEVABLE. Why should my hard earned savings pay for you to stay in your house, if you cannot afford the repayments?

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  • danny ! your roots?

    Jack Straw is an Habitual Liar

    Craig Murray – November 29, 2008

    Jack Straw, so called Justice Minister, denies that he had any foreknowledge of the arrest of Damian Green.

    Jack Straw denied directly to the BBC in the documentary “The Ambassador’s Last Stand”, and denied to the House of Commons Foreign Affairs Committee, that he had any part in the false accusations laid against me or in my removal as Ambassador for raising human rights concerns. Yet, as detailed in Murder in Samarkand, I have obtained documents in Jack Straw’s own handwriting, directing the process, and he held at least three meetings with Sir John Kerr to organise it.

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