FSA in clampdown on poor mortgage arrears handling

The Financial Services Authority (FSA) has found continued weaknesses in the way specialist lending firms and third party administrators are handling mortgage arrears and repossessions.

The arrears review is part of the FSA’s ongoing work to monitor the effectiveness of its regulation of mortgage lending, to address key issues in the mortgage sector and to ensure that consumers are treated fairly and can make informed decisions.

As a result of the investigation, four firms have been referred to enforcement for investigation and several more firms are being assessed for referral. The FSA has stated that it found “a high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules.” All firms investigated will now be required to take action to address any failures identified in the review.

Lesley Titcomb, FSA director responsible for the Mortgage Sector, said:

“In current market conditions, with our data showing more people struggling to meet their mortgage payments, it is vital that firms treat customers who get into arrears fairly. It is unacceptable that some firms are applying fees unfairly and pushing customers towards repossession without considering alternatives. The steps we are announcing today demonstrate that proper handling of arrears is still a high priority for us and will continue to be so until the necessary progress has been made.”

“The focus of today’s report was specialist lending but the messages apply equally to other mortgage firms. As a result of the Dear CEO letter sent to all lenders and lenders and administrators last November, follow up action is underway with a number of firms and the industry as a whole can expect continued intensive scrutiny of its arrears handling processes.”

The FSA requires lenders to send its What to do when you can’t pay your mortgage guide to any consumers who fall into arrears. The FSA advises that consumers who are having difficulties meeting mortgage payments should talk to their lender immediately.

If you believe that you have been treated unfairly, the FSA recommends that you pursue your complaint through you lender’s internal complaints procedures and only contact the Financial Ombudsman Service if you are not satisfied with the firm’s response.