by Calculated Risk on 11/16/2008 10:56:00 AM

From the Independent: Rock makes Damascene conversion on repossessions

Northern Rock ... has been roundly criticised for keeping its mortgage rates punishingly high and repossessing a disproportionately large number of homes, is overhauling the way it approaches bad debts.
...
"We are looking to work through problems with our customers on a case-by-case basis. Where appropriate, we will offer payment holidays, reduced monthly repayments and conversion to interest-only mortgages," said Jemma Rundle, a spokeswoman for Northern Rock.

In addition, Rock debt advisers will call people who are in arrears to see what extra help can be offered, rather than simply writing letters to them. ....

The Rock and four of its biggest mortgage rivals have admitted that they have seen a dramatic rise in the numbers of people voluntarily giving up their properties because they are unable to meet their mortgage repayments.

Ahhh ... more jingle mail. However in the U.K. mortgages are recourse and the lenders can pursue the borrowers for six years in the event of a short fall.

But entering voluntary repossession is no solution, said [Beccy Boden Wilks from the debt charity National Debtline]: "It can take months to sell the property and it could be at a knockdown price, so there could be a shortfall to pay. The lender can come back years later and ask for its cash."

Of course some mortgages in the U.S. are recourse too, but historically U.S. lenders have rarely pursued homeowners for any losses.