Summary
The UK Government have put pressure on mortgage lenders to minimise the levels of repossessions due to payment defaults. This article looks at how the lenders are replying.
As they steady themselves for a rise in defaults and mortgage related debts, mortgage lenders have published plans to minimise the number of familys who have their homes repossessed. The Council of Mortgage Lenders said that while mortgage arrears and repossessions were expected to remain low, the UK’s deteriorating economic outlook would cause more homeowners finding themselves in difficulties.
The The Council of Mortgage Lender’s initiative aims to make sure that households who cant’ maintain their mortgage repayments will only lose their home after all other options have been unsuccessful. Mortgage lenders are already obliged by the Financial Services Authority (FSA) to have policies for arrears management which aim to reduce repossessions, except where there is no other option. But there is no standard policy, and repossession schemes differ between suppliers.
In a letter to Alistair Darling the Chancellor, the CML’s said its members had signed up to four measures to help keep repossessions to a minimum.
Lenders have agreed to audit their existing arrears management policies and amend them to bring them in parallel with modern industry policy that have been issued by the CML’s. Borrowers who fall behind with repayments will also be provided with information explaining their lenders’ arrears management process, so that they can clarify what to expect and how they will be treated.
Lenders will also adopt what is called the “IVA protocol” which sets out the various stages the lender must follow through prior to 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 assisting people to plan for possible higher mortgage repayments when their present deal terminates. The Council wants lenders to talk 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 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 The Council of Mortgage Lenders also felt that the Government should urgently improve the support for homeowners who suffer a short-term loss of income.
