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Four firms face FSA action over mishandling arrears

The regulator has referred four firms to enforcement for mishandling mortgage arrears.

The FSA’s latest review on mortgage arrears handling has found a high incidence of mortgages moving straight into arrears and potential brea- ches of responsible lending rules among former specialist mortgage lenders and third-party mortgage administrators.

Four unnamed companies have been referred to enforcement and several more are up for referral.

The FSA says specialist lenders that are not currently lending are failing to exercise sufficient oversight over their contracted administrators. It warns that lenders and servicers have been focused too strongly on recovering arrears and have been too ready to take court action.

It says there is also evidence of some firms imposing arrears charges unfairly.

The regulator has been concentrating on the details of securitisations, many of which are made up of defaulting specialist loans. It says the securitisation contracts between lenders and investors are restricting abilities to be flexible and show forbearance if someone falls into arrears.

FSA director responsible for the mortgage sector Lesley Titcomb notes: “It is unacceptable that some firms are applying fees unfairly and pushing customers towards repossession without considering alternatives.”

Intermediary Mortgage Lenders Association chief executive Peter Williams says the FSA must recognise there is considerable strain on the specialist lenders.

“These are the very institutions neglected by the Government credit guarantee schemes. Consequently, the borrowers for whom they are responsible have been left to struggle unaided.

“The Government should not ignore the detrimental effect that a constricted mortgage market is having.”

Exact Mortgages managing director Alan Cleary comments: “Third-party servicers are still applying a one-size-fits-all approach to arrears management and it is inexcusable. Lenders and servicers must stop burying their heads in the sand”

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