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CML gives advice on arrears for unregulated loans

The Council of Mortgage Lenders is warning members to protect consumers by treating unregulated mortgages as if they are regulated when borrowers fall into arrears.

Its guidance, which Money Marketing has been shown, says members must inform customers on which basis their arrears are being treated. If a non-regulated mortgage is being treated as a regulated mortgage, the information required by MCOB must be included.

It encourages lenders to comply with its statement of practice in handling arrears and repossessions, which was withdrawn in October 2004 so as not to clash with mortgage regulation, or treat all home loans as regulated. It has now made the guidance available again amid concerns over rising numbers of repossessions.

Last month, the CML revealed that it expects 15,000 homes to be repossessed this year compared with 10,310 in 2005. It blames the rise on the growing sub-prime market because lenders are taking a tougher stance on arrears and specialist borrowers are more likely to default.

The CML says: “The expectation is that members will continue to comply with the statement when dealing with arrears and possessions on unregulated mortgages.

“Alternatively, members may prefer to treat unregulated mortgages in arrears as if they were regulated mortgages and apply the requirements set out in MCOB.”

Mortgage Advisory Service head Stuart Wilson says: “You would be hard pushed to find a lender that would deliberately cause problems for customers and 99.9 per cent treat non-regulated mortgages as if they were regulated when it comes to repossessions and arrears.”


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