Borrowers offered money from lender to redeem their loans
September 18, 2008
Hundreds of borrowers who have taken their mortgages from the sub-prime lender, Edeus, which was set up a couple of years ago, are being offered money from the lender in exchange for redeeming their mortgage loans. Many banks have been suffering huge financial difficulties over recent months as a result of the global credit crunch, which has affected all financial markets, and have been putting in place various strategies and tighter lending conditions in order to try and weather the storm.
Edeus is offering many of its sub-prime mortgage borrowers an 8% discount in exchange for redeeming their mortgage loans and finding a mortgage elsewhere. Around four hundred borrowers with the lender are being offered the incentive, and Edeus is no longer offering mortgage loans to new customers. This will result in the lender taking a loss on each mortgage, but officials from the firm said that it was the best option for the firm.
One official said that the firm was keen to get the loans off the books, but due to the current financial climate was unable to sell them on to investors. Therefore the best option was to offer customers the chance to get a discount in order to redeem their mortgage loans.
An official from the firm said: “It’s the lesser of two evils. Over the last 10 months the only way we have been able to raise fresh loans is by offering steep discounts to multi-national banks. So instead of offering that to the bank we are dealing with customers directly.”
Edeus will also be waiving the fees that are attached to the mortgage, such as exit fees and redemption penalties, but consumers are urged to remember that they may need to pay costly arrangement fees to the lender that they take the new mortgage from.
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