Rock says it's going easy on strugglers

Dec 2 2008 by William Green, The Journal

NORTHERN Rock yesterday appeared to reject following the Royal Bank of Scotland in automatically giving six months’ grace to homeowners before launching repossession action.

The North East lender said it was “comfortable” with its repossession procedures, stressing that in the majority of cases it had worked with customers for at least 15 months.

Less than 1% of repossession cases related to homeowners that the company had worked with for under six months, added a spokeswoman.

The company held 4,201 repossessed homes at the end of September, with the stock built up over the last 18 months. It expects to have made one in 10 repossessions by the end of the year.

But Rock chief executive Gary Hoffman has promised to lead the way in developing mortgage rescue schemes to minimise the impact of the economic downturn.

Downing Street, campaigners and MPs are continuing to push for other banks to act after the Royal Bank of Scotland (RBS) doubled the three-month breathing space offered to borrowers falling behind with mortgage repayments.

The developments come days after the Government effectively brought RBS – which owns NatWest – under state control after buying 58% of the bank’s shares for £15bn.

RBS chief executive Stephen Hester said the bank was “conscious that many people face anxiety” about repayments in the tough economic climate.

MPs are also reportedly working on plans for statutory codes of practice in the banking industry, which could replace the current voluntary system.

David Clelland, Labour MP for Tyne Bridge, said: “All banks and building societies ought to be taking a more flexible view of these things in the current circumstances. And I am sure they can all improve their performance in that regard.”

Leslie Morphy, chief executive of housing charity Crisis, said banks had to be more understanding, with 45,000 repossessions predicted by the end of the year.

“The six-month grace period will provide a lifeline for those facing the prospect of repossession and appears to go further than recent Government proposals. We urge other mortgage lenders to follow this lead and do everything in their power to prevent those in financial difficulties from experiencing the trauma of homelessness.”

Prime Minister Gordon Brown’s spokesman welcomed the move by RBS on repossessions. “There is some progress being made in how the banks are operating and how they are fulfilling their commitments, but clearly we need to see more,” he said.

A Northern Rock spokeswoman said: “We are comfortable that our practices and procedures ensure we are working with customers who may be facing repayment difficulties for an appropriate amount of time before taking repossession action.”

Earlier this month, Rock chief executive Gary Hoffman told MPs that he wanted to ensure customers stayed in their homes wherever possible, with repossession being used as a last resort.

But he acknowledged the Rock was “somewhat above” the industry repossession average due to its Together mortgage which offered up to 125% loans against the value of properties. Three-quarters of its repossessions come from this area.

Page 2: Minister priases lender for its 'heroic efforts'