Wed, 06 Aug 08
Mortgage lenders have been criticised by the Financial Services Authority (FSA) for being too quick to repossess homes.
The comments by the city watchdog have been made after its latest figures revealed a 41% increase in the number of repossessions.
From January to March this year 9,152 homes were repossessed, compared to 6,471 during the same period last year.
Mortgage lenders are being urged to be more flexible and make sure they consider customers’ individual circumstances. Court action to repossess a home should only be used as a last resort, the FSA says.
Lesley Titcomb, the FSA director responsible for the mortgage sector, said: “More people are struggling to meet their mortgage payments and it is vital that firms treat them fairly.
“This means paying attention to their individual circumstances and not repossessing their homes when there may be an alternative solution. Repossession has to be the last resort.”
Research carried out by the FSA found a number of weaknesses in the way some mortgage lenders dealt with customers facing financial hardship.
Particularly those in specialist sectors too often operated a “one size fits all” approach to recovering arrears, making little reference to individual circumstances.
Others were too ready to take court action and paid too little attention to training staff in arrears handling.
The Council of Mortgage Lenders says it is “surprised” by the criticism of specialist lenders.
In a statement it says these lenders, “have been working extremely hard to manage arrears.”
The CML urges the FSA to work “constructively” with lenders to ensure they can improve.
“The mortgage lending industry is making strenuous efforts to ensure that repossession is only taken a last resort, when other realistic alternatives cannot be found that balance the interests of the borrower and the lender,” the statement adds.
The FSA warns the number of repossessions could escalate further unless lenders take a softer stance.
It estimates that around 302,000 mortgage holders have failed to meet repayments for the last three months.
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