A total of 13 mainstream and specialist lender brands (including impaired credit, buy-to-let, and self-certification, which account for a small portion of active and back books) were reviewed for the FSA’s thematic work which looked at arrears and repossessions practices over the last few months. Mainstream lenders were largely complying with FSA requirements and have policies and practices that should ensure that customers are generally treated fairly.
But the FSA said there were particular concerns with specialist lenders, including that they:
• operated a ‘one size fits all’ approach, focused too strongly on recovering arrears according to a strict mandate, without reference to the borrower's circumstances;
• were too ready to take court action; and
• had lower standards of systems and controls in place to control mortgage arrears handling, including training & competency arrangements.
The review also found issues with lenders in general, including that some:
• could have done more to consider customers' individual circumstances and offer more options to resolve the arrears position;
• imposed charges in circumstances that could result in the unfair treatment of customers; and
• did not exercise sufficient oversight of third parties contracted to carry out mortgage arrears and repossessions handling activities on behalf of lenders.
IMLA’s Peter Williams said: "IMLA strongly contests the suggestion made by the FSA that all specialist lenders systemically operate a ‘one size fits all' approach to arrears management. MCOB 13 sets out a rigorous set of requirements regarding arrears and possessions. At the heart of it is the onus on the lender to work hard to reach a reasonable agreement with the customer in difficulty. All IMLA members adhere to MCOB 13 rules and regulations as set out by the FSA meaning they treat borrowers in difficulty as sympathetically as possible. Particularly in troubled times when arrears are mounting, it is in the interests of all parties to find an effective solution to overcome homeowners' problems.”
The Council of Mortgage Lenders welcomed the FSA's confirmation that mainstream lenders are largely complying with its arrears and repossessions requirements. However, it said it is surprised at the FSA’s observations on specialist lenders because it feels they have been working extremely hard to manage arrears. It has urged the FSA to work constructively with those lenders to ensure there is shared understanding and agreement about the FSA’s requirements.
In a letter from the CML to the Chancellor Alistair Darling on 4 June, a whole range of voluntary initiatives that the industry is taking were outlined. It pointed out that the credit crunch has affected the mortgage lending industry in different ways depending on whether the lender is large or small, retail or wholesale funded, traditional or specialist. From a lender's perspective, in the current commercial environment, it is important to differentiate arrears management processes according to a range of factors.
