The CML said: “In the challenging times ahead, we need to maintain a balance of responsibilities between borrowers, lenders and the government for resolving payment problems.”
The two groups want the government to commit to keeping support for mortgage interest terms unchanged with a 13 week qualifying period and a capital limit of £200,000.
Secondly, they want free debt advice to remain on offer to struggling borrowers.
And thirdly, they have called for the existing mortgage rescue scheme that gives borrowers the choice to become tenants in their own home, to stay in place.
The government has already cut SMI by 40% earlier this year and closed down the team set up to ‘fast track’ applications through the mortgage rescue process, though the latest figures suggest nearly 1,000 families have been helped by the scheme.
The CML also suggests borrowers could be encouraged to consider voluntarily selling their property to avoid court action if continued homeownership was unsustainable for them.
It said the government should set up a Communities and Local Government working group to look at instances in which it might be advisable to recommend that owners should consider selling their homes voluntarily.
“In our view, borrowers must not be pushed into this position,” said the trade body. “But we believe that in some cases a voluntary sale may be in their best interests, enabling borrowers to avoid building up long-term arrears and eroding their equity when owner-occupation is no longer a sustainable option for them.
“In these cases, advice agencies would have a crucial role to play in helping borrowers focus on their long-term prospects for sustaining home-ownership. They are in a much better position to present this voluntary option to the borrower, particularly where there are multiple debts.
“But for voluntary sales to be a workable option in the right circumstances, it is crucial that both local authorities and borrowers understand that agreeing to sell is not perceived as an act of “intentional homelessness.”
The CML also said the government should explore the future options for a new form of insurance, possibly jointly funded by borrowers, lenders and the government, covering vulnerable borrowers who are not currently protected by the safety net but who still aspire to become home-owners.
The CML asserts that this sort of targeted approach would be much better than the blunt instrument of the FSA’s current affordability proposals.
“The government recognises that putting resources into managing arrears is justified because there is a personal, social and economic cost in re-housing people whose homes are taken into possession, which is much higher than the contribution from short-term state support,” said the CML.
“Keeping people in their homes delivers a number of tangible benefits for families and communities, and economic benefits for the government.”
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