Since January 2013 hit us here are MPM we have seen a marked increase in repossession enquiriesfrom all sectors including landlords, residential property and commercial premises. There is a very common theme too, namely, those who have been on fixed term loans are suddenly finding a letter from the bank on their mat stating that they will not be renewing the loan, and, that if the loan is not repaid in full, repossession proceedings will begin. It does not seem matter whether the account is running fine or not.
A couple of other things have been whispered to me recently from a banking insider friend. One of those is that HSBC managers are being paid bonuses to clear off bad debt from their balance sheets.This is not a new thing, in fact I wrote on a blog 2 years ago that many banks were operating in this manner. Basically, any excuse they can find to call in the loan will be found. Landlords in particular need to be very vigilant. Those who have many loans with one or two banks could find themselves in very deep water this year.
Basel III Is Coming
So, we have had Basel I & Basel II, now enter Basel III. Basel III requires banks to comply by 2019, which is drawing ever closer. In case you don’t know, Basel III states that banks’ minimum amount of equity, as a percentage of assets, will need to increase from 2% to 4.5%. Add to this an extra 2.5% “buffer” which is also required, meaning, banks have to hold a total equity requirement of 7%. The higher their buffer, the cheaper it is for them to lend. The buffer is supposed to be for times of future banking stress, but, by using it they will face restrictions on their ability to pay dividends and otherwise use their capital. This is all to counteract a lending freeze such as we are already going through.
Bad Debts Must Die
In the meantime, what it means is that banks are on a mission to kill off their bad debt and balance their books as quickly as possible. What’s more, they really don’t care about how many people they put out of business or what your personal circumstances are. To them, you are numbers on a sheet. And, the higher your numbers, the more likely they will come after you. If your portfolio was built on “no money down’ techniques in which you have little or no equity and many mortgages with one bank, or if values have dropped significantly in your investment area, then you will be a prime target.
If your mortgages are coming to the end of a fixed term, you should start looking for possible replacements before they hit the end. If you have a large portfolio with one lender, then seek commercial portfolio finance , sell some while you can, or find ways to lessen the bank’s hold over you, before you find that you have no choice.
What We Are Doing To Help
For portfolio landlords, companies, and sometimes larger personal repossessions our banking and business turnaround specialist can help you by cutting a deal at the highest level with the bank involved. This often involves writing down commercial bank loans or getting a longer timescale to pay off loans to help keep the business afloat.
**UPDATE NOVEMBER 25th 2013**
In the news today RBS has been referred to the financial regulator the FCA & PRA for seizing assets from businesses to benefit its own property empire. A report by Lawrence Tomlinson claims that RBS put viable businesses into default ( and subsequently repossession LPA receivers) in order to make more profit for themselves.
Don’t let the government con you into believing this is all in the past, it is not. It still goes on even with the new management at RBS and other banks.