Growth in Secured Loan Lending Market

During the month of July, the secured loan lending pulled off a three-year high after going beyond the £30 million mark for the first time ever since December of the year 2009.

Loans Warehouse is the first in United Kingdom to make public a secured loans index in July. It released its first ever results and revealed to the public that secured loan lending increased by 22 percent in the month of June to achieve £32.3 million.

This latest growth in secured loan lending activity is the largest monthly increase ever since November of the previous year, with lending for borrowers with poor credit increasing by 18 percent on the same month.

According to Matt Tristram, joint managing director of Loans Warehouse, Shawbrook Bank improved its secured loan product offering to borrowers with poor credit as the bank declared that they were opening its products initially intended for those with poor credit to a bigger number of consumers.

Moreover, this proves that lenders are exerting a lot of effort to loosen their requirements or standards and the results for August represent the effect of these lenders ever since they joined the lending market.

In addition to Tristram’s statement, David Johnson, managing director of Shawbrook Bank said that it is please to witness that the secured loan market is finally getting bigger and they are delighted to take part in that development. Johnson further said that as consumers gain more hope in entering the lending the market, they discover that mortgage lenders constantly refuse to consider refinances so secured loan products are becoming more attractive to consumers.

Also, it is anticipated that the secured loan market will further grow especially with the expansion of loan product offerings and an increasing acknowledgement from brokers that secured loan products are a practical alternative to the conventional mortgage products.

Homeowners’ Emergency Mortgage Assistance Program Back to Life

Because of money from a lawsuit settlement, a state mortgage assistance program is being revived.

The Homeowners’ Emergency Mortgage Assistance Program is again offering help to struggling homeowners. It offers loans to those were not able to make their monthly mortgage payments, nor bring their balance current, nor subsidize payments for up to three years.

In order for borrowers to qualify for these loans, they should be living in the property as their primary residence, is struggling from financial problems that were not their fault, and have an acceptable probability of being able to continue paying.

Roughly 45,000 households have received assistance from the program since its start three decades earlier. In the last few years, the HEMAP program received funds of approximately $11 million every year, allowing it to give loans ranging from 1,500 to 1800 loans annually.

In Allegheny County, the number of loans dropped during the last half decade, from 212 in the year 2007 to 109 in 2010, and 92 in 2011. However, new loans from the Pennsylvania Housing Finance Agency, which is in charge of running the program, were stopped following the budget cut in the previous year to $2 million.

Fortunately, a multistate settlement collected a total $25 billion from the five biggest mortgage loan services in the nation. This means that a total of $66.5 million will be given to Pennsylvania as funding for the program.

According to a measure that the state Legislature accepted in June, 90 percent of the funds, or roughly $60 million, must be spent on the HEMAP program over the next three to five years. The rest will used to fund housing-related consumer protection programs, with the help of the state attorney general’s office, and also for legal assistance in terms of housing.

Gov. Tom Corbett said that the funding for HEMAP will mostly help struggling homeowners, and at the same time, it is important in the recovery of the state’s housing industry.

More Young People and Old Generations Live in Family’s Home

According to a recent research, there have been an increasing number of cash-strapped households that choose to let the younger generations and senior family members to stay at home in order to save money and resort to ask for loans from friends and family rather than from lenders.

The research conducted by Aviva has revealed that families are taking drastic measures just to make the ends meet since the double-dip recession still continues.

Because of the higher cost of care costs, elderly relatives opt to live with their children. In contrast, the impossibility of several first-time buyers entering the property market indicates there will be more young people staying longer in their family homes.

73 percent of people aged above 18, which is equal to 36 million, have lived with their families even into adulthood. Generally, they save £225 every month by staying in their family home. However, it still costs the family £107 every month.

The key is to assist young people and couples save money in order for them to buy and move into their own home.

More or less 18 percent of people living with their families are students, and 17 percent are older generations returning to their children’s family home.

According to Louise Colley, head of protection sales at Aviva, nearly 20 percent of inter-generational living is because of families welcoming back the older generations into their homes. Moreover, since the population is rapidly aging, this will more likely be customary in the future. Thus, it is important that families consider this factor especially when purchasing and renovating their homes.

The Family Finances Report of Aviva also discovered that there is an increase in the amount of money being borrowed by cash-strapped families from their friends and family. The usual size of these loans was twice as much in the past three months and reached £1,545 in August, which is currently a record high.

Growing Number of Over-Indebtedness Households

The start of the economic crisis in the year 2008 has lead to an increase in the number of households that are over-indebted on a constant basis.

While over-indebtedness is seldom brought about by a single factor, most of the debate on over-indebtedness seems to be concentrated on mortgage debt, since it is typically the largest financial commitment in terms of a consumer’s finances.

It is important to note that almost every member state in the EU has legislation offering protection for consumers in cases of possible foreclosure, together with voluntary lender forbearance schemes.

However, consumer groups are claiming that these are special times and special actions must be taken in order to solve the increasing over-indebtedness.

In addition, legislators at national and EU member state level seems to be dedicated to solve this problem. Their main objective is to attempt to avoid foreclosure. However, the solutions presently being considered at EU level in particular, might lead to several legal, economic and ethical issues.

One of these solutions is commissioned by DG Internal Market and Services’ financial services user group. London Economics is the consultant in charge and must conduct a mapping exercise of the legal environment in 17 member states to determine all formal debt reductions solutions, which permit consumers to go back to a financially sustainable life by removing some or all of their debts.

The research will concentrate on the following as possible alternatives to foreclosure like the availability and use of personal bankruptcy and datio in solutum of mortgages as legal solutions to over-indebtedness. Datio in solutum is, in other words, payment in kind and basically like the system of non-recourse mortgage loans, in which the return of the property is enough to pay back the outstanding debt.

However, advocates of non-recourse mortgage loans claim that the cause of the economic crisis in 2008 was widespread irresponsible lending and not non-recourse loans.

Increasing Parental Assistance in Buying Homes

In recent times, there are many couples who do not have enough money to buy their own home, which resulted to an increasing number of pensioners with large mortgages. Considering the rising home prices, these couples are losing hope of buying their own home without financial assistance from their parents.

According to a recent report from Migdal Capital Markes, it would take 24.5 years for young couples earning the average wage to save NIS 450,000 for a deposit, assuming they set aside 10 percent of their net monthly salaries. This amount of money is only sufficient for a deposit on a NIS 1.5 million mortgage. The couple would still need money for their monthly payments.

The two main financial problems in terms of buying a home are the deposit, which is typically equivalent to 30 percent to 40 percent of the home’s cost, and the monthly payments.

Idan Elkabetz, a partner in consulting company Atid Mortgages, said that involvement of parents in buying a home is greater now than in the past. Due to the recent increases in home prices, there are a few options for young couples. It’s either they pay excessive prices or move away.

Parental assistance is especially needed for apartments that cost NIS 1.5 million or higher, which need deposits of NIS 500,000 to NIS 600,000. In several cases, this money comes from the parents.

David Meizlik, head of the mortgage department at Mercantile Discount Bank, said that the major challenge is to come up money for the deposit. They can get money from their savings, wedding presents, loans from employers and lastly, their parents.

Meizlik added that parental assistance is mostly significant in among the ultra-Orthodox public and the national religious because members of these communities marry at a young age. In contrast, secular couples typically marry later, so they have higher amounts of savings, they’re not dependent from their parents anymore, and have been working for many years that a few have attained management positions.