Summary
The UK Government have put pressure on mortgage lenders to minimise the levels of repossessions due to payment defaults. This article discusses how the lenders are responding.
As they prepare themselves for a rise in defaults, mortgage lenders have published plans to decrease the number of familys who have lost their homes. (CML) said that while mortgage arrears and repossessions were expected to remain depressed, the UK’s deteriorating economic future could cause more familys finding themselves in difficulties.
The CML’s plan aims to ensure that familys who are unable to retain their mortgage repayments will only lose their home after all other measures have failed. Mortgage lenders are already obliged by the Financial Services Authority (FSA) to have schemes for arrears handling which aim to avert repossessions, except where there is no alternative. But there is no standard policy, and repossession policies differ between lenders.
In a advisory to Alistair Darling the Chancellor, the The Council of Mortgage Lender’s said its members had signed up to four measures to help keep repossessions minimal.
Lenders have agreed to reassess their present debt management plans and refine them to bring them in parallel with new industry guidelines that have been relased by the The Council of Mortgage Lender’s. Borrowers who are late with repayments will also be provided with information explaining their lenders’ arrears administration manual, so that they can understand what to expect and how they should be treated.
Lenders will also adopt what is known as the “pre-action protocol” which sets out the distinct stages the lender must follow through before taking an arrears case to court inorder to ensure court action is a last resort.
Finally, building societies and banks also have to be assertive in helping people to plan for potentially higher mortgage repayments when their current deal ends. The Council wants lenders to communicate with borrowers towards the end of their discounted deal or fixed rate early and encourage them to get in touch with the lender if they think they may have difficulty making the higher repayments.
The Director General at the The Council of Mortgage Lenders said: ‘We continue to anticipate that the level of mortgage arrears and possessions will remain low, as originally forecasted. With the economy worsening and an incomplete safety net for mortgage borrowers, the CML cannot be complacent about the outlook and the challenges facing lenders, borrowers and public policy makers alike. We continue to work closely with Government Ministers we look forward to a clear statement of the Government’s own position on a safety net for borrowers.’ He also added that the CML also felt that the Government should urgently improve the support for homeowners who suffer a short-term loss of income.
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