Examination of Witnesses (Question Numbers
40-41)
MS NICOLA
HUGHES, MR
DOMINIC LINDLEY
AND MR
PETER TUTTON
23 MARCH 2010
Q40 Jim Cousins: Where are the ideas
for this?
Ms Hughes: There is lots of academic
work on the subject. I think that through partnership with advice
agencies, with lenders and, of course, with public consultation
lots of ideas can be generated. I think there are lots of different
aspects to the safety net. One side is making sure that there
is always advice available for people when they need it; that
the processes in regulation and in the courts are effective.
Q41 Jim Cousins: Can I stop you there,
because the implication of what you are saying is that we are
looking at a residual group of people that we so charmingly classify
as subprime. We are not, in fact, looking at a residual group
of people. We are looking at an aspect of the way the housing
market is now going to work in the present kind of economic situation
in which very large numbers of people are going to experience
quite volatile changes of circumstance or quite volatile changes
of income, and there needs to be a non-judgemental, non-loaded
with stereotype system of supporting them through those situations.
Mr Tutton: There are perhaps some
things that could be done quickly. In the situation you describe
the whole system of support for home owners does not take into
account that people will have flexible labour markets, that their
incomes are going to go up and down, particularly lower income
families, work will come and go. One of the things that is missing
from the FSA Mortgage Market Review is this idea about how far
do you embed forbearance? At the moment they are going to make
lenders offer a wider range of options, but it is not going to
say, "Actually, this is how much help you have to give someone
for this long." One of the big questions that is going to
come up in terms of a possible second wave of repossessions is
will lenders get forbearance fatigue and at what point should
they be allowed to. So that is part of the question. Again, in
the courts at the moment it is very much a snapshot of people
coming in. If you have lost your job, you come before the court
and they are looking at a snapshot of your circumstances, but
if you take a view that these are long-term products and if you
are going to have people with up and down incomes they might need
more time to recover, then we need the courts to have more power
to look at those things. There are things that can be done quite
quickly and quite easily that will give more help to borrowers
who are more likely to have variable incomes, more likely to face
unemployment shocks and, particularly where we are now, people
may get back into work, back into work at a lower income, they
might fall out of work again, get back into work, so I think we
can do something there. In the long-term, as Nicola said, it is
about looking at a position of "we wouldn't start from here".
Can we get the safety net to work, the articulation, for an insurance,
which has not worked particularly well, between what the state
pays through the benefit system, what lenders pay and what borrowers
pay? We need to get that thought out in front rather than in the
middle of a recession where we are now.
Chair: Thank you very much for your evidence.
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