The measures follow on from last October’s Mortgage Market Review and work carried out by the FSA which uncovered high levels of consumer detriment especially in the specialist lending sector.
In a consultation paper published today, the regulator says it will require firms not to add early repayment charges on arrears charges and interest levied on those charges.
Firms must not apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears, and they must record all arrears handling telephone calls and keep all records for three years.
The FSA will convert its forbearance guidance into rules, so that firms must consider all options for borrowers, making repossessions the last resort. Measures also confirm that payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments.
The FSA estimates the new measures will cost firms a total of £590,000 in one-off costs and between £485,000 and £1.65m in ongoing costs.
The paper also confirms that all mortgage advisers and those who arrange non-advised sales will be individually accountable to the FSA, under the approved persons regime.
FSA director responsible for the mortgage sector Lesley Titcomb says: “Today’s proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly. Lenders need to be in no doubt of their obligations to customers who fall behind with payments and must realise that such circumstances are not an opportunity to create further profits.”