The Council of Mortgage Lenders report that guidance has been published to try to draw together in a single document a composite summary of requirements for lenders on mortgage arrears and possessions emerging from a number of different sources.
It summarises for lenders the implications of:
- FSA thematic reviews, published in 2008 and 2009, which uncovered both good and poor practice;
- the regulator’s policy statement on arrears and approved persons, published in 2010, which reinforced the rules in chapter 13 of the mortgage conduct of business (MCOB) rulebook, covering arrears and possessions;
- final guidance from the FSA on forbearance and impairment provisions, published earlier this month;
- the pre-action protocol applying to court cases for possession; and
- requirements and recommendations emerging from bodies including the financial ombudsman, assorted advice agencies, and the courts and tribunals service.
The guidance seeks to set out:
- What lenders need to cover in their arrears management policies. This includes the prudential requirements a lender should consider when extending forbearance to borrowers in arrears. In its prudential guidance, the FSA recommends that firms’ policies should be more joined-up across different teams and management functions.
We are therefore urging lenders to re-assess arrears management policies and involve in the process not just collections and litigation managers, but those working in credit risk, finance and internal audit functions, as well.
- What lenders should consider in day-to-day management of forbearance policy and arrangements, including capitalisation, the treatment of shortfalls and upholding the principle that possession is only ever considered as a last resort.
- Other day-to-day practices to ensure that lenders comply with MCOB chapter 13 and TCF obligations, including record-keeping.
- Good practice in the litigation process.
- Obligations that are not specifically prescribed in MCOB chapter 13 but which affect arrears handling.
