Summary
In the current finacial climate the British government have pushed lenders . This article discusses how the lenders are responding.
As they prepare themselves for a rise in defaults, mortgage lenders have released plans to decrease the number of households who have their homes repossessed. The Council of Mortgage Lenders said that while mortgage repossessions and arrears were expected to stay depressed, the UK’s worsening economic future may lead to more households finding themselves in difficulties.
The CML’s plan aims to make sure that familys who might not be able to maintain their mortgage repayments will only lose their home after all other options have been unsuccessful. Mortgage lenders are already required by the Financial Services Authority (FSA) to have schemes for arrears administration which aim to reduce repossessions, except where there is no other option. But there is no standard approach, and repossession schemes differ between suppliers.
In a advisory 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 analyse their existing arrears handling plans and amend them to bring them in accordance with modern industry policy 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 and debt management process, so that they can understand what to expect and how they will be treated.
Lenders will also adopt what is referred to as the “pre-action protocol” which lays out the distinct points the lender must proceed through before taking an arrears case to court inorder to ensure court action is a last resort.
Finally, banks and building societies also have to be proactive in assisting people to plan for possible higher mortgage repayments when their current arrangement ends. The Council wants lenders to communicate with borrowers facing debt and nearing the end of their discounted deal or fixed rate early and persuade them to get in contact with the lender if they think they may have problems 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 CML also felt that the Government should urgently improve the support for homeowners who suffer a short-term loss of income.
