Finance
IS IT TIME FOR LENDERS TO REVIEW THEIR SECURITY?
Global Banking & Finance Review®
Company
By Ann Ebberson, partner in Rosling King’s Real Estate Group
By Ann Ebberson, partner in Rosling King’s Real Estate Group
The U.K is going through a cost-of-living crisis driven by a multitude of different factors including the slump in the value of the pound, high inflation outstripping wage increases and thus leading to less disposable income, as well as tax increases.
Given the squeeze on household incomes, there is a real possibility that borrowers will default on their mortgage in numbers not seen since the 2008 global financial crash. Consequently, lenders must consider whether it is now time to review their security and start preparing for, and training staff to deal with, volume defaults.
A borrower can default on their lending in many different ways and defaults are, of course, specific to each lender under the terms of their loan conditions. However, there are types of default which are most common to lenders including:
There are a number of options open to lenders to enforce their security in the event of a default or breach of the lender’s security. The options available to lenders are governed by their security and lending conditions, so it is vital that lenders are aware of their existing security and how it entitles them to act.
Some options to consider are:
Lenders should however be looking for early signs that their borrowers may be facing problems and interacting with them early to try and prevent these problems leading to default on the loans and the above options becoming necessary.
Conclusion
Lenders need to be prepared. They should take time now to review their security and corresponding documentation and consider all the options available to them. Early engagement with their Borrowers is imperative.
A mortgage is a loan specifically used to purchase real estate, where the property itself serves as collateral for the loan.
Borrower default occurs when a borrower fails to meet the legal obligations of a loan, such as missing payments.
Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability of unfortunate events.
A financial crisis is a situation in which the value of financial institutions or assets drops rapidly, often leading to widespread economic instability.
Insurance is a financial product that provides protection against potential future losses or damages, typically in exchange for regular premium payments.
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