The Council of Mortgage Lenders has published new industry guidance on mortgage arrears and possessions to help lenders ensure that their arrears management policies fulfil the objective of making repossession a last resort.
It comes at the same time as Prime Minister Gordon Brown announced that new guidance was being given to the courts to prevent actions to repossess properties until all alternatives had been fully examined.
Nearly 19,000 people lost their homes during the first half of the year, up nearly 50 percent on the same period of 2007 and the highest figure since 1996.
The level of repossessions is predicted to continue rising during the second half of the year to reach 45,000 for the whole of 2008.
Under the government guide lines, lenders will have to show that they have tried to discuss and agree alternatives with borrowers who have run into problems keeping up with their mortgage repayments.
They will also have to provide these details to courts in the event of taking repossession action.
The Government also announced that it was proposing bringing sale and rent back companies under the regulation of the Financial Services Authority, and it will be
publishing a consultation paper on the issue.
The CML guidance pulls together, and builds on, both the requirements of the FSA’s rules in MCOB 13 (which set out how lenders should treat arrears and possessions) and the FSA’s “treating customers fairly” principles. It should be read in conjunction with the consumer information on what to expect from lenders in arrears cases (see notes to editors).
The guidance is a further step in strengthening the robustness of existing practices, alongside the Civil Justice Council's pre-action protocol for court cases on repossession.
The aim of the guidance is to give lenders a practical guide to the requirements, and examples of good practice against which they can benchmark their own policies and procedures. It is not a definitive statement of what lenders “should” do in each case, but rather a reference point to support lenders’ self-assessment of their own policies and procedures.
CML Director General, Michael Coogan said: “Despite the fact that the rate of repossession is modest, we recognise that there is significant public concern about this subject. The new guidance should help to reassure consumers that lenders are genuinely committed to seeing repossession as a last resort, and that the checks and balances that protect consumers are in place.
