In the FSA’s latest review of arrears management, published this week, the regulator says it is concerned that specialist lenders are operating a “one size fits all approach” and not assessing the circumstances of individual borrowers.
The regulator says specialist lenders are too ready to take court action and have lower systems and controls in place to handle mortgage arrears.
The Intermediary Mortgage Lenders’ Association says it “strongly contests” the FSA’s suggestion that specialist lenders operate such an approach to arrears management. It says it is not in lenders’ interests to repossess assets in the current market as losses are crystallised.
FSA figures show that the percentage of mortgage loans in arrears rose from 2.07 per cent to 2.44 per cent between the first quarter of 2007 and the first quarter this year. For securitised loans, the figures were 4.02 per cent in Q1 2007, rising to 4.47 per cent in Q1 2008.
In a separate review of responsible lending, the FSA reveals it is considering referring several lenders for enforcement action while others have been asked to undertake remedial work.
The FSA says it found certain specialist lenders in particular were not checking income where they should have reason to doubt the amount declared.
Many specialist lenders outsource their servicing to Homeloan Management Limited. Sales and marketing director Mike Perry says the firm has no internal problems in handling arrears.
He says problems are created within lenders when sales staff are transferred to the collection side of the business without proper training.
Nationwide group executive director Matthew Wyles says the last five to six years have been characterised by a “dash for growth” and lenders have failed to develop their servicing and collection process as much as their front-end business.
But Hamptons managing director Jonathan Cornell says: “There has to be a level of consumer responsibility. Brokers and lenders have to ensure that their lending is responsible but there must be a level of caveat emptor. People should not be loading themselves up with debt when they cannot afford it.”