FSA Reveals Plans For Sale And Rent Back Regulation
We have reported on several occasion over the course of the past few months about sale and rent back schemes, which allows a home owner who is struggling to maintain their home owner loan repayments and may be facing repossession, to remain in their home by selling it to a company, thereby clearing the loan debt and then renting it back from the same company. The Financial Services Authority (FSA) has been concerned over the lack of protection for consumers using this option and has therefore issued regulation for sale and rent back schemes.
The initial regulation was introduced in July this year and the FSA have just announced its proposals for the next phase of regulation to come into effect on 30th June next year. This includes: a cooling off period as with many loan agreements, a ban on doorstep sales and promotional literature being posted, banning the use of certain phrases such as “fast sale” and “cash quickly”, a guarantee for tenants that they may remain in the property and that the company offering the scheme ensures that the client can afford it and it is the best possible option for that individual.
Although the FSA means well with its intentions and aims to protect the most vulnerable members of the community who may be about to lose their home due to loan arrears, some industry experts believe that the regulation could do more harm than good, as many sale and rent back firms have simply disappeared from the market altogether since the beginning of regulation, leaving many borrowers with nowhere to turn to and therefore being left with their loan arrears and the prospect of repossession.
Stuart Law of Assetz said “We are not convinced that the CML (Council of Mortgage Lenders), which lobbied for the introduction of legislation, has thought through the effect of the new regulation on the sector. In the short term, regulation will mean more homeowners are repossessed, the change will have massive implications.”
