Tag: mortgage default
Lenders plan to ease home repossessions ahead of boom in mortgage defaults
by admin on Sep.09, 2009, under Debt Advice
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, mortgage lenders have published plans to minimise the number of households who have lost their homes. (CML) said that while mortgage repossessions and arrears were expected to remain low, the UK’s worsening economic future may cause more households finding themselves in difficulties.
The The Council of Mortgage Lender’s initiative aims to make sure that homeowners who are unable to retain their mortgage repayments will only lose their home after all other measures have been unsuccessful. Mortgage lenders are already obliged by the Financial Services Authority (FSA) to have policies for arrears management which aim to avoid repossessions, except where there is no other option. But there is no standard policy, and repossession schemes alter between lenders.
In a letter 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 audit their current arrears management schemes and improve them to bring them in parallel with new industry policy that have been issued by the The Council of Mortgage Lender’s. Borrowers who fall behind with repayments will also be provided with council explaining their lenders’ arrears administration guide, so that they can be clear on what to expect and how they will be treated.
Lenders will also adopt what is called the “pre-action protocol” which lays out the various steps the lender must follow through prior to taking an arrears case to court inorder to ensure court action is a last resort.
Finally, banks and building societies also have to be assertive in assisting people to plan for possible higher mortgage repayments when their present 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 anticipate they may have difficulty meeting the higher repayments.
The Director General at the CML said: ‘We continue to anticipate that the level of mortgage arrears and possessions will remain low, as originally forecasted. 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. 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.’
