Lenders new strategy to combat repossessions
Posted on Wednesday, September 16th, 2009 at 9:31 amSummary
The UK Government have put pressure on mortgage lenders to minimise the levels of repossessions due to payment defaults and high mortgage debt. This article discusses how the lenders are replying.
As they steady themselves for a rise in mortgage debt, mortgage lenders have published plans to minimise the number of households who have their homes repossessed. The Council of Mortgage Lenders (CML) said that while mortgage repossessions and arrears were expected to stay depressed, the UK’s deteriorating economic future would cause more households finding themselves in difficulties.
The The Council of Mortgage Lender’s strategy aims to make sure that homeowners who can not maintain their mortgage repayments will only lose their home after all other options have failed. Mortgage lenders are already required by the Financial Services Authority (FSA) to have plans for arrears management which aim to reduce repossessions, except where there is no alternative. But there is no standard method, and repossession policies vary between suppliers.
In a brief to Alistair Darling the Chancellor, the CML’s said its members had signed up to four measures to help keep repossessions minimal.
Lenders have agreed to reassess their current arrears administration strategy’s and polish them to bring them in parallel with modern industry guidance that have been issued by the CML’s. Borrowers who are late with repayments will also be provided with council explaining their lenders’ arrears administration process, so that they can understand what to anticipate and how they should be treated.
Lenders will also adopt what is referred to as the “pre-action protocol” which lays out the various points the lender must go 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 enterprising in assisting people to plan for potentially higher mortgage repayments when their present deal terminates. The Council wants lenders to communicate with borrowers nearing the end of their discounted deal or fixed rate in good time and persuade them to get in contact with the lender if they believe 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.
