Banks resisting efforts to stop wave of repossessions

So the Financial Times says:

Ministers are struggling to secure more protection for homeowners facing repossession, with the judiciary and banks resisting pressure to show leniency that goes beyond existing law.

Some judges are opposing requests from Jack Straw, justice secretary, to give more leeway to people defaulting on their mortgages and permit them to change their repayment terms, according to Whitehall sources.

Judges on the side of the banks? Well, I never…

The FT goes on:

Yvette Cooper, chief secretary to the Treasury, said on Sunday that repossessions should be a “last resort” by the banks.

She called for alternatives such as “re-profiling” payments, repayment holidays – where only interest is paid – or schemes where banks or housing associations buy stakes in homes.

But the FT has learnt that efforts to allow borrowers to soften their repayment terms have foundered in recent weeks.

The dispute comes as the civil justice council drafts the first “pre-action protocol” for mortgage arrears, setting out guidelines for settling disputes before the matter is taken to court.

A key point of contention is whether struggling borrowers should be given the right to request a “reasonable” extension to the period of their loan and arrears to reduce their monthly payments.

Credit card borrowers are presently offered stronger protections under UK law than mortgage holders, allowing them to request that courts adjust interest rates or extend loan periods via so-called “time orders”.

By contrast, powers of judges are much more restricted by case law on home loans.

Whitehall insiders say there have been forthright discussions between the representatives of the judiciary, banks and ministers over what actions can be taken to prevent a wave of repossessions.

The consultation period on the new protocols, which is led by the Master of the Rolls, is nearing its end. “Jack Straw is very keen to speed this up and put in place as much protection as possible,” said one Whitehall source. “There is a general sense that this is the right thing to do. The question is how quickly it will happen.”

The draft protocol put out for consultation in February says lenders and borrowers should try to agree affordable sums for borrowers to pay towards arrears.

It adds that “lenders should accept a reasonable request from borrowers to change the date of payment [within the same payment period] or the method by which payment is made”.

One Whitehall adviser said an emergency bill was a possible option to break the deadlock, although allies of Mr Straw denied this.

Here’s Andrew Fisher, of the Left Economics Advisory Panel, speaking on the BBC News channel: