Loan lenders advised to use ‘modern methods’

Home loan lenders who use "modern methods" in determining consumers’ ability to make repayments are helping them to avoid debt, an industry expert has advised.

According to executive chairman of GMAC-RFC Stephen Knight, automated underwriting helps mortgage providers determine the attitudes of borrowers in terms of repaying debt accrued on loans.

Mr Knight claimed that lenders’ traditional methods of establishing borrowers’ income before issuing a loan does little to help those who fall behind with their repayments in the future.

He said: "Lenders have a duty to treat their customers fairly but many simply do not understand the impact antiquated underwriting systems have on arrears."

Mr Knight added that "constant communication" by home loan lenders with MPs and consumer groups is the only way they can ensure the affect their products and policies have on borrowers.

According to Credit Action, banks and building societies are set to issue some £1 billion via home loans every day throughout 2007.

Interfinancial providing you with breaking loans news.

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