Receivers only called in as a last resort, claims research

LENDERS are not calling in loans that have breached their loan to value ratios and are only appointing receivers as a last resort.

Research by BNP Paribas Real Estate found that three quarters of banks look at LTV breaches on a case-by-case basis, with almost 50% saying that a breach was not reason enough to call in a loan.

A further 17% said that they would waive the breach or take no action, with 15% re-negotiating or restructuring the loan terms.

BNP Paribas interviewed Royal Bank of Scotland, Alliance & Leicester, Allied Irish Bank, Bank of Scotland, Hypo Real Estate and Northern Rock about their attitude towards defaults and LTV breaches.

Andrew Hamilton, head of BNP Paribas Real Estate’s office in Manchester, said: “It is clear that loans in breach of LTV are being judged on a case-by-case basis.  Firstly, the banks consult the client and determine if it is appropriate that the loan conditions be rewritten, bearing in mind the stability of the client’s cashflow.

“If the loan cannot be restructured, it may need some sort of cash injection by the client. If none of the above are options, the bank has to consider its own interests, but it is only then that it might turn to a receiver.  It seems banks are currently looking for any way possible other than employing the latter, but this can all change quickly, as quickly as the market can itself change.”