Tweet
The City watchdog has written to the head of every mortgage lender asking them to review the way they treat borrowers who have fallen behind with their repayments.
The Financial Services Authority (FSA) said the letter was a second warning to lenders that customers who are in arrears must be treated fairly. It has asked them to "critically review" their arrears policy and procedures and to look at a sample of cases to assess whether, in practice, borrowers in arrears are being treated fairly.
The FSA's guidelines say a lender should make reasonable efforts to negotiate a repayment plan with borrowers who have fallen behind with repayments, and only repossess a property when all other attempts to reach a resolution have failed.
Lenders have been given until January 31 to tell the FSA the conclusions of their reviews and give details of what actions they intend to take if their systems are not up to scratch.
The warning follows a review by the FSA earlier this year that revealed weaknesses in the way some lenders dealt with arrears and repossessions, and comes at a time when repossessions are rising.
Earlier this month, the Council of Mortgage Lenders said 168,000 borrowers had fallen at least three months behind on repayments by the end of September, and more than 30,000 had lost their homes.
These figures are set to rise next year as rising unemployment and household costs squeeze peoples' budgets.
FSA retail managing director, Jon Pain, said in the letter: "Conditions in the mortgage market are difficult and it seems likely that these conditions will persist for sometime.
"In such a challenging operating environment it is particularly important for senior management to ensure the fair treatment of customers, including when they go into arrears."
On Monday, the chancellor announced that major mortgage lenders had given a commitment to try to not repossess properties until a borrower had been in arrears for at least three months, but not all lenders have signed up to the deal and there is no rule banning swifter action.
A spokesman for the FSA said rules on mortgage lending were being reviewed, which could eventually lead to tougher restrictions on repossessions.
However, in the meantime he said repossessions and arrears were "a very, very important priority" for the watchdog in 2009.
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
Comment