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Optimising Distressed Loan Books: Practical solutions for dealing with non-performing loans by John Michael Sheehan

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6. Borrower solutions

6.1 Dealing with defaulted borrowers

Debt is emotive and personal; financial institutions are impersonal. People are sensitive to other people’s emotions; institutions either don’t acknowledge emotions or avoid them.

As a result, it is no surprise that banks struggle to deal effectively with defaulted borrowers and fail to optimise all potential opportunities. The depersonalised securitised lending era has raised even more barriers for defaulted borrowers and lenders to join together for mutual commercial advantage.

The easiest situation for a bank to deal with is for a defaulted borrower to walk away from their collateral so the institution can liquidate the security quickly and efficiently. This brings in cash ...

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