In a staggering display of ineptitude, the hopeless and hapless FSA have taken umbrage at banks allowing some of their struggling mortgage debtors to switch to interest only deals, extend their mortgage term, or permit payment holidays (aka debt restructuring).
Why is the FSA so worked up over this?
It seems that the FSA is worried that banks are using this restructuring to flatter their bad debt provisions.
However, the FSA may care to actually engage its brain before castigating the banks.
- Mortgages are secured on property.
- The property market is fucked!
- Were banks to sit back and allow struggling debtors to default on the mortgages, the banks only resort would be to either write the debt off and/or repossess the home.
- A repossessed home in a failing market is unlikely to clear the debt, plus the family that the bank dispossess from their home would still have to find somewhere else to live. This is not good for the economy, the bank or the family.
Why does the FSA not see this?
It is a rare occasion that banks are actually seen to be doing the right thing. However, the FSA has its head up its arse and refuses to see the bigger picture.
As I have asked before, why is the FSA still in existence?