Noon Saturday 1 November 2008 Media Statement

Banks exchange letters with Crown to support distressed mortgage borrowers

Finance Minister Michael Cullen has exchanged letters with each of the country's largest mortgage lending banks which outline the approach that banks will take into account when handling mortgage customers facing servicing problems in the challenging economic times ahead.

"The government is keen to ensure that the interests of those facing temporary disruptions to their income are protected.

"The government puts a high value on home ownership for New Zealanders, and on keeping people in their own homes, wherever possible, through temporary periods of economic difficulty.

“I welcome the assurances from the chief executive officers of the banks that have exchanged letters with the Crown. The banks have well-established procedures in place to respond positively and pro-actively to customers facing difficulties.

The banks have indicated that they will look at customers on a case-by-case basis, and where there is a reasonable expectation that mortgage-servicing could be resumed within a reasonable period, they will use their best endeavours to work with borrowers to avoid forced sales where appropriate.

They have a variety of ways of doing this such as by capitalising interest or temporarily reducing servicing obligations in order to help get borrowers get on their feet again after experiencing a financial shock.

“I welcome the assurances the bank chief executives have provided. Responsible borrowers can count on support from their banks through the challenging international economic times that will negatively impact on us here at home over the next few months,” Dr Cullen said.

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