New Protections for Mortgage Borrowers

HAMISH_MCTAVISH

New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA).

The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders.

The FSA also wants to ensure all mortgage advisers have been approved as "fit and propoer" persons.

It has also announced new rules for staff and firms operating in the "sale and rent back" market.

Keeping records
Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:

• firms must not apply a monthly charge where a repayment agreement for arrears is already in place
• any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
• repossessions should always be the last resort.

In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.
'Vital' changes

There are also tighter controls governing "sale and rent back" arrangements, whereby a borrower who cannot keep up repayments opts to sell their home, but stay in it as a tenant.

From 30 June, the measures the FSA are introducing will include:

• a ban on high-pressure sales techniques
• a 14-day cooling off period for customers to allow them to take more time over the decision
• a ban on cold-calling and dropping leaflets through letter boxes
• security of tenure for customers of at least five years

Lesley Titcomb, the FSA director responsible for the mortgage sector, said sale and rent back was often used by people in a hurry to stay in their homes.

"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter rules were vital," she said.

The Housing Minister, Grant Shapps, said he was reveiwing his department's support schemes for home buyers in difficulty.

Meanwhile, he said, the new rules should provide reassurance: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."


The consumer rights lobby group, Citizens Advice, which has received more than 100,000 enquires about lending arrears over the past year, welcomed the FSA's changes, but said a closer eye should be cast over charges levied by some companies on customers in arrears.

It says some clients of its Wiltshire bureau had reported charges of £115 for each month they were in arrears with their mortgage with a sub-prime lender.

Citizens Advice head of consumer policy, Sue Edwards, said: "Citizens Advice Bureaux regularly report cases where large fees have been levied for various arrears procedures, which have simply added to the clients' problems. In many of these cases, it is not clear to either the client or their adviser how the firm has calculated the cost."

The Council of Mortgage Lenders (CML), whose members account for 94% of all mortgage lenders in the UK, said 46,000 homes were repossessed last year, the highest number since 1995.

It picked out the requirement for an adviser to be an "approved person" as an unnecessary additional cost on lenders.
But, the CML's director general Michael Coogan conceded that overall the FSA's changes were helpful.

"While we may feel somewhat harshly treated in relation to the treatment of lenders under the approved persons regime, we do recognise that the FSA is trying to make sure there is a clean game," he said.

http://news.bbc.co.uk/1/hi/business/10413107.stm

Quite interesting.

Reposession just got harder, and the secure tenure clause for sale and leaseback should stop some abuses.

But of course, the most interesting part of this is that I don't think BTL loans are covered by it. So banks may well decide in the future that BTL loans are a sfaer bet than loans to FTB's. More protection for the bank in the even of default, and better lending ,margins.

Dirk_Rambo

boil yer head wee man

silvercar

Security of tenure of at least 5 years. Hmm. Does that include when the tenant gets into arrears? Lets face it, the people who do sale and rent back do so because they are in the !!!!!!; they probably have loads of other debts and are quite likely to get into problems paying their rent.

How are the FSA going to deliver this security of tenure, given that most BTL mortgages only allow 1 year (renewable) ASTs.

silvercar

But of course, the most interesting part of this is that I don't think BTL loans are covered by it. So banks may well decide in the future that BTL loans are a sfaer bet than loans to FTB's. More protection for the bank in the even of default, and better lending ,margins

The irony being that a tenant would be safer with a landlord letting on his residential mortgage (and so protected from quick repossession by these measures) than by a landlord with a BTL mortgage.

HAMISH_MCTAVISH

silvercar wrote: »

Security of tenure of at least 5 years. Hmm. Does that include when the tenant gets into arrears? Lets face it, the people who do sale and rent back do so because they are in the !!!!!!; they probably have loads of other debts and are quite likely to get into problems paying their rent.

How are the FSA going to deliver this security of tenure, given that most BTL mortgages only allow 1 year (renewable) ASTs.

No, it's for owners that have been in the place for 5 years when it's sale and leaseback. No AST's allowed, as I understand it. Only the old secure tenure leases.

HAMISH_MCTAVISH

silvercar wrote: »

The irony being that a tenant would be safer with a landlord letting on his residential mortgage (and so protected from quick repossession by these measures) than by a landlord with a BTL mortgage.

Yes, that will certainly be the case from now on.

silvercar

HAMISH_MCTAVISH wrote: »

No, it's for owners that have been in the place for 5 years when it's sale and leaseback. No AST's allowed, as I understand it. Only the old secure tenure leases.

Then it will be a very restricted market. Any lender won't be interested in lending on those terms.

chucky

This won't be a popular thread :rotfl: