Tuesday, October 9, 2012

Debt forgiveness ? WTF

Financial regulation new frontline for growth

Much of that is down to forbearance, the practice of giving struggling borrowers easier terms on a temporary basis. The Bank has estimated that as much as 8pc of UK mortgages are in forbearance, equivalent to about £100bn of debt. On commercial real estate loans, it reckons a third are in forbearance – or roughly £75bn.

Posted by happy mondays @ 08:51 AM (1451 views)
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3 thoughts on “Debt forgiveness ? WTF

  • stillthinking says:

    Very interesting post. Sounds a bit difficult to introduce in practise, probably everybody wants to qualify for debt forgiveness. You might have borderline people calculating how to get on the right side by actions of dubious merit (and who knows what they are at the moment).

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  • mark wadsworth says:

    HM, it’s the Home-Owner-Ists last line of defence.

    The banks want to squeeze out as much as possible in interest, and they know that people in nequity are less likely to pay anything at all, so from the banks’ point of view, a combination of propping up house prices, waiving a small amount of debt off the top and extending payment terms maximises the amount which they can collect.

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  • The management of bank money and credit and the recognition of its pivotal role was for centuries central to public policy, but economists’ and BoE/Treasury models over the past few decades have largely ignored the importance of finance (asset prices, aggregate money, credit and bank balance sheets) in formulating monetary policy, concentrating instead on inflation targeting. This was part of the reason for the ballooning of bank balance sheets and leverage since the 1970s. Forty years too late the authorities are now getting back to concentrating on financial regulation.

    MW – yes, and how long before we go the US route – bulk selling of properties to financial spivs, with easy government loans/guarantees, for renting (with the majority already tenanted)….and of course the low prices of those bulk sales ignored in the construction of house price indices.

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