ROOF Blog

With a growing number of Americans facing negative equity and becoming ever more pessimistic about the prospects of house prices recovering to make up that difference, they are surrendering to foreclosure even though they can still meet the repayments, according to reports. The trend is clear in recent rates of non-payment, or delinquency, on mortgages. In January, delinquencies on outstanding ‘jumbo’ mortgages - big loans granted to people with good credit histories - rose to 9.6 per cent, according to Fitch Ratings. Many of these problem loans, which have gone unserviced for 60 days or more, were taken out after 2005. And nonpayment is increasing not just in hard-hit states such as California: in New York, Florida, Virginia and New Jersey they are all on the rise too.

Reckless lending to first-time buyers remains endemic in the financial services industry. An investigation by ROOF into the practices of leading banks and a mortgage broker found a worker with an income of £28,000 could borrow more than £153,000 from one high street bank. The repayments would have put an impossible financial squeeze on the buyer, bringing a serious risk of repossession. The amount the banks were prepared to lend in relation to the value of the property was also huge. Many offered an 85 per cent loan and one went up to 95 per cent. Kay Boycott of Shelter said, ‘With latest figures showing over 270,000 mortgages in arrears, it’s shocking to see banks continuing to lend to new borrowers based on such basic checks on their ability to pay. People are being encouraged into home ownership that may not be sustainable and potentially unmanageable debt. There is absolutely no point in giving a mortgage to someone who cannot afford it - every day we see the human fall-out from the repossessions that often follow.’