Lender sells repossessed homes at big discount

We keep our eye on the repossession situation

        

Lender sells repossessed homes at big discount

By Caroline Merrell, Banking Correspondent

KENSINGTON Group, the specialist mortgage lender, is selling repossessed property in London at 31 per cent less than the purchase price, according to Merrill Lynch.

The discrepancy between the purchase price and price achieved by Kensington on selling off repossessed property was revealed in the trading pattern of a number of Kensington’s mortgage-backed securities this month.

The analysts noted that two investment funds made up of Kensington mortgages were forced to draw on their reserve funds because repossessed properties were being sold at a large discount to the original purchase. If the reserve funds are used up, Kensington is forced to take on any losses.

Alexander Batchvarov, a Merrill analyst, pointed out that the real loss on repossessed property was about 10 per cent of the purchase price, as the average loan to purchase was 80 per cent.

 

 

News story dated 8/1/2008
Properties to be repossessed hit 14-year high.

 

 Properties marked for repossession by lenders totalled 33,442 in the first quarter of 2006, the highest level for 14 years, reports the Royal Institute of Chartered Surveyors (RICS).

The figure represents the number of homes in the early stages of the repossession process, up 29 per cent in 12 months and hitting the highest peak since the third quarter of 1992.

Repossession orders imposed by courts totalled 21,997, a 57 per cent increase over the past year.

The RICS attributes the high figures to interest rates raised during the course of late 2003 through 2004, adding pressure to indebted households struggling with mortgage repayments.

The number of repossessions is expected to rise again during the second quarter of 2006 as unemployment levels take their toll, according to RICS economist, David Stubbs.

Figures from the Bank of England, however, indicate that current rates for the average fixed five year deal are notably lower than 12 months ago, though with imminent base rate rises expected, heavily indebted mortgage-holders will feel the pinch.