In a review last year the FCA set out to understand whether customers with long term mortgage arrears were experiencing harm through lenders exercising extended forbearance.
The conclusion was that customers were generally being treated appropriately. Some good practices were identified but the FCA also identified some issues.
Here, we look at the findings and consider steps that lenders may take to review the accounts of their own customers who have long term arrears.
Where a customer is in long term arrears, it is likely that they will have had many touch points with their lender. It is this engagement over a prolonged period of time which appears to be the cause of a number of the issues which the FCA identified. These include -
The FCA observed:
The FCA expects lenders to review their practices in line with published rules, guidance and examples of good and poor practice. Relevant changes to procedures should be made where appropriate.
Lenders are reminded of FG11/15 which states that the primary aim of forbearance should be to complete recovery of the mortgage through full repayment of the arrears. Where the primary aim cannot be achieved, the secondary aim is to recover the customer into a sustainable terms position – sustainable terms is revising contractual terms so the mortgage can be serviced over its full life.
The FCA reviewed accounts where the mortgage arrears were greater than 12 months. In reviewing your long term arrears accounts, consider the following points –
It is worth remembering that in 2011, the FSA (as it then was) commented that "where support or forbearance is provided without careful consideration of the customer's individual circumstances it can place them in an even worse position….this outcome is in the interest of neither the customer or the firm".
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2019. Specific advice should be sought for specific cases. For more information see our terms & conditions.