FSA outlines new mortgage arrears proposals

A package of measures designed to ensure fair treatment for mortgage holders in arrears has been set out.

The Financial Services Authority FSA has reinforced its tough stance in the battle against mortgage fraud by strengthening existing rules on arrears handling.

Under the proposals, lenders must not add early repayment charges on arrears charges and interest, and must not apply a fee if they have settled on a payment arrangement with the customer.

In addition, lenders must consider repossession to be the last option, use payments to clear missed monthly bills before applying them to charges, and record all arrears handling telephone calls and keep the records for three years.

Lesley Titcomb, the FSA director responsible for the mortgage sector, said the 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," she stated.

Earlier this month, the Council of Mortgage Lenders reported that borrowing increased by 14 per cent to £13.7 billion during December 2009.

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2010-01-27 13:02:15 © Moneyextra.com