The Financial Services Authority (FSA) has written to the chief executives of all mortgage lenders and mortgage administrators giving them until January 31 to ensure that their customers facing arrears are being treated fairly.
The letter is the second warning to lenders from the FSA in recent months. It comes in light of its earlier review which found weaknesses in arrears and repossessions handling, particularly in the impaired credit sector of the market, and the fact that increasing numbers of households are at risk of repossession.
Jon Pain, FSA retail managing director, says: “Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for some time. In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers, including when they go into arrears. The fair treatment of consumers in arrears will continue to be a priority for the FSA throughout 2009.”
The major mortgage lenders have committed not to repossess homes within three months of the owner-occupier going into arrears.
The FSA's mortgage arrears rules require firms to have a written policy and written procedures in place that can be used to ensure that customers in financial difficulties are treated fairly. This requirement is intended to ensure that a firm has properly addressed the need for internal systems to deal with each customer in financial difficulties. The rules set out a number of factors which the FSA considers central to such a policy and procedures. These include using reasonable efforts to reach agreement with the customer, adopting a reasonable approach to the time over which any shortfall in payments can be made good and only taking repossession action where all other reasonable attempts to resolve the position have failed.
The Civil Justice Council's new pre-action protocol for courts in mortgage repossession cases (currently applicable to England and Wales only) sets out clearly the steps that lenders are expected to take before bringing a claim to the courts to repossess someone's home. Repossession should be a last resort and lenders are now required to demonstrate to the courts that they have tried to discuss and agree alternatives to repossession.
All this is good news for those who face mortgage problems due to accident, sickness or redundancy - but an income/mortgage protection policy is still essential.