CML To Launch Home Loan Arrears Guide For Lenders
We reported last week that the Financial Services Authority (FSA) is to launch an investigation into lenders practices with regard to handling arrears on borrower’s loans and mortgages, to ensure that customers are being treated fairly following the effects of the credit crunch on those home owners who may be struggling with their monthly repayments.
Now, the Council of Mortgage Lenders (CML) has announced that it is to provide guidance notes for its members, to assist them in offering practical help and support to borrowers in arrears with their home loans and fitting in with the FSA’s principle of “Treating Customers Fairly”, so that it may be possible to avoid taking
Repossession proceedings against those in financial difficulties, wherever possible.
The CML has introduced a number of measures which it expects lenders to adopt, so that repossession will be considered as a last resort. CML members have agreed to look into their existing arrears handling procedures and make any changes which may be suggested. Information will also be provided to those individuals with home loans and mortgages, outlining the arrears handling procedure in detail, so that borrowers will have a better understanding of how they can avoid problems.
Lenders will also take on additional processes to ensure that arrears cases only go to court where it is absolutely necessary. Lenders are also being encouraged to keep borrowers better informed, giving them additional notice of when their initial cheap rate is due to expire, for example.
The hope is that these procedures will reduce the number of repossessions being implemented and improve the situation generally both for lenders and borrowers alike. However, there are concerns that as these plans are only intended as a guideline, some lenders will not sign up to the plan. The fears are that some sub-prime lenders are not as likely to embrace the new procedures as eagerly as many mainstream lenders and ironically, this is the sector of the market which is likely to face the worst problem with loan and mortgage arrears. As a result, the Liberal Democrats have called for the guidelines to be made law, to ensure that all lenders adhere to the principles.
