Despite recent news of an increase in repossessions, property services company Savills have suggested that banks are overlooking breaches of loan contracts. Savills’ head of valuations, William Newsom, claimed that banks are reluctant to enforce foreclosures or repossessions in order to avoid being left with assets that they could not sell. With many loans secured against a percentage of the value of the property, banks would be entitled to allow either a foreclosure or a repossession, though despite recent claims that even the slightest of missed payments could result in repossessions, property finance experts have now suggested the opposite is true.
Experts have suggested that banks will only be happy to overlook defaults on loans in cases where the property can generate sufficient income to maintain the borrower interest payments, though clearly, this will not apply to all properties . Loan defaults represent a dilemma for banks, particularly in the wake of the US subprime crisis, which illustrated the danger of having bad debts on a banks’ portfolio.
Meanwhile, JP Morgan have released forecasts predicting that London City office rents may drop by as much as 16 percent by 2010 given the job cuts being performed by many banks at present.
Loan Defaults May Not be as Severe as Suggested
Mon, 12 May 2008
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