The Association of Mortgage Intermediaries has warned of growing arrears threat as it says lenders are being prevented from helping borrowers due to over-zealous regulation.
The trade body also warns of a strained relationship between the industry and the FCA.
In its latest Quarterly Economic Bulletin, AMI says: “Regulation has got it wrong in that it is nearly impossible for lenders, unless they use fully qualified advisers, to have a reasonable conversation with borrowers in difficulty without it straying out of generic guidance into fully regulated debt counselling.
“AMI is of the view that an arrears problem could be brewing in the banks given this context.”
It adds: “Generic guidance in these situations is woefully insufficient for the borrower’s needs and there is the danger that conversations almost immediately stray into the regulated advice arenas of debt.”
On the relationship between companies and the regulator it says: “The industry’s relations with the FCA are under strain – the regulator fails to communicate with firms resulting in a sort of ‘blind examination’
“AMI is hopeful that supervision of advisers can become more akin to the supervision overseen by the Prudential Regulation Authority as these relationships appear more adult and collaborative.”
AMI also suggests that lender forbearance may have gone on too long as the number of repossessions are relatively low compared to the number of people in arrears.
The number of repossessions fell in the second quarter to 1,900, down from 2,100 in the first three months of the year.
The CML said that on the basis the present trend continues, the number of mortgaged property repossessions this year is on course to be the lowest since 1982 when there were 6.5 million mortgages compared to 11.1 million today.
AMI says: “This is a potentially disproportionately low proportion of possessions given the number of borrowers in fairly serious arrears.
“The question it raises is whether there is a problem brewing in banks. Nobody wants to lose the roof over their head but if they are in serious arrears and have little to no hope of getting back in control of their payments, AMI would ask whether it would be fairer for the customer to agree a faster possession process and minimise the debt outstanding by reducing the penalties in arrears.”