Latest figures for May show CHL experienced a 15% reduction in its total arrears since a peak in February this year. The lender expects the trend to continue for the foreseeable future with all indicators for June pointing towards a further fall in total arrears numbers.
One of CHL’s key indicators of potential future arrears – the number of unpaid direct debits – has also fallen substantially from its peak in last quarter 2008.
CHL puts the improving situation down to a particularly pro-active approach from its strengthened Specialist Servicing Team which includes a focused approach to borrower engagement and collections. It also believes it is benefiting from the cautious underwriting approach it adopted during the so-called ‘boom years’.
Bob Young, Managing Director at CHL Mortgages, said: “We at CHL are pleased to announce an ongoing positive position with regards to our overall arrears situation. Our latest figures show a major drop-off from previous peaks and we fully expect this trend to continue going forward. From a very early point we recognised the need to reconfigure the business to deal with an anticipated rise in arrear levels. This internal move involved a major expansion of our Specialist Servicing Team with a focus on re-training staff in the arrears and recovery process. Our focus on customer contact, negotiation and agreement can be seen to have produced a real impact on controlling and then bringing down the level of arrears on the CHL mortgage book. In a market short of positives, we believe that these falling arrears levels can be seen as a sign of our competency in the collections department and the strength of our underwriting in what have been particularly difficult market conditions.”
CHL also welcomed the FSA’s ongoing review into the way specialist lending firms and third-party administrators are handling mortgage arrears and repossessions following this week’s announcement that four firms have been referred to enforcement and others are being assessed for referral.
Bob Young continued: “We welcome the FSA’s work in this area and this week’s announcement. It is certainly right and proper that the FSA continue to review and take action against those specialist lending firms who were only geared to front-end origination of loans and had no thought about their back-end operations such as servicing and collection. Most lenders who will be caught up in the FSA’s operation were too ‘forward facing’ on origination with no real experience or understanding of collections. This proves that real lenders not only originate well but collect well. The FSA’s announcement also shows the level of lending that was originated to wholly unsuitable borrowers; unfortunately many of these loans have been moved on to ‘vulture funds’ which prey on those who have ended up in tranches of non-performing loans. It is positive news that we seeing the regulator act in this area.”
