In a statement released this morning IMLA executive director Peter Williams says: “IMLA strongly contests the suggestion made by the FSA that all specialist lenders systematically operate a “one size fits all” approach to arrears management. MCOB 13 sets out a rigourous set of requirements regarding arrears and possessions.”
The FSA report into arrears, published today, investigated 13 mainstream and specialist lenders. The regulator says it found mainstream lenders largely complying with FSA requirements but it has particular concerns with specialist lenders.
These include operating a “one size fits all model” too strongly focused on arrears recovery, being too ready to take court action and lower standards of systems and controls.
William adds: “At the heart of it is the onus on the lender to work hard to reach a reasonable agreement with the customer in difficulty. All IMLA members adhere to MCOB 13 rules and regulations as set out by the FSA meaning they treat borrowers in difficulty as sympathetically as possible. Particularly in troubled times when arrears are mounting, it is in the interests of all parties to find an effective solution to overcome homeowners’ problems.”
Williams goes on to argue that under TCF even borrowers facing repossession must be given the best advice and assistance at all times. He also argues that keeping people in their homes is almost always preferable given the current market.
He adds: “By repossessing assets and selling them at a discount to their book value because of falling house prices, lenders could crystallise their losses. In some situations, however, delaying an inevitable sale of the property means the debt will continue to rise with no realistic chance of the borrower ever clearing it.”
Many banks have indicated increasing arrears in their latest results. This morning Northern Rock arrears over three months reached 1.18 per cent which have more than doubled since the start of the year when it was 0.45 per cent. The CML average as at March 31 2008 was 1.21 per cent for arrears over three months.
The report found some issue with all lenders, suggesting they could do more to consider customers’ individual circumstances, that unfair charges are levied in some circumstances and that lenders are not exercising sufficient oversight of third parties contacted to carry out mortgage arrears and repossessions.