Market disruption has been scrutinised from every angle, yet despite – or perhaps because of – all the millions of words written about recent developments, some borrowers are still apparently confused about their continuing mortgage commitments.
Some have even asked: does the fact that my lender has gone into administration mean that I no longer have to pay my mortgage? The reality is, of course, that borrowers do need to continue to meet their repayments for the duration of the mortgage contract.
As the Financial Services Authority (FSA) reminds consumers, a mortgage is simply a loan secured against a property – your home – and if you do not make regular repayments, you risk losing it. To suggest otherwise, or even to pose the question at a time of such uncertainty without providing the facts to consumers – as some irresponsible bloggers have done – does not help anyone.
Some companies within the Lehman Brothers group were placed into administration last week. But the UK mortgage subsidiaries and the specialist servicer, Capstone, are not in administration and are currently operating as usual.
Mortgage contracts remain valid if a lender goes into administration or merges with another firm. The name of the lender may change if the firm merges, and customers may receive mortgage statements in the name of the new lender. There may also be a new organisation managing the mortgage, if the firm goes into administration or the mortgage book is sold on.
But the original mortgage contract is unaffected and the charge on the property still exists, so borrowers should continue to make their normal monthly payments. Borrowers who are unable to keep up their payments should contact their lender immediately.
Mortgage lending is a regulated activity and the consumer protection measures overseen by the FSA will also continue to apply, regardless of the trading status of the mortgage lender. Lenders and their servicers must also still uphold the FSA’s mortgages conduct of business rulebook and adhere to the principles of treating customers fairly.
