We are now just past the date for submissions to the Financial Services Authority regarding the Mortgage Market Review but the regulator has not wasted any time. It is already firming up proposals in a number of important areas.
Notably, it has issued a consultation paper focussed on measures designed to ensure the fair treatment of borrowers who go into arrears, coupled with what it calls a tougher stance in its battle against mortgage fraud.
The focus on arrears seems particularly topical to us as we have just issued some heartening results highlighting improvements in the arrears picture across our buy-to-let and residential mortgage books.
Since our arrears peaked last February we have noted a downward trend to the extent that by December we had seen a 27% reduction in arrears of less than three months and a 31% fall in those of more than three months.
This sort of improvement does not happen overnight and arrears management has been at the top of our priority list for some time.
We have established specialist teams in this area which has meant we are able to work with borrowers to ensure they have satisfactory repayment plans so they can hold on to their properties.
We strongly support the regulator’s proposals but the fact that the FSA had to take this step tells you a lot about what is happening at some other lenders.
Lenders must adopt a realistic and proactive approach to helping customers in arrears
One of the proposals is to compel lenders to consider all options for borrowers – in other words, that repossession should always be the last resort.
This should be pretty basic stuff to most lenders – keeping borrowers on your books, maintaining their payments and not moving to repossession seems like the purest common sense.
But the proposal underlines the fact that some lenders continue to operate blindly and in an irresponsible manner. It clearly shows that some have poor quality collections staff and strategies. If these companies are unable or unwilling to build a rapport with their borrowers that enables a mutually satisfactory outcome to be reached, you have to question what is going on.
Of course, I’m not suggesting that customer engagement on arrears is easy. Indeed, some borrowers simply bury their heads in the sand and hope the problem goes away.
But it’s here that lenders must adopt a realistic and proactive approach. For us, it’s always been about providing practical solutions that benefit both borrowers and us.
Lenders should not be using bullying tactics or looking to move to repossession as quickly as possible as this benefits nobody.
Interestingly, brokers often have a significant role to play in this process. We have worked with advisers to help us engage with their clients and open up channels of communication to deliver appropriate solutions.
Brokers are not just there for the initial deal and clients often welcome their intervention as they can spell out how problems will escalate without dialogue.
So it’s a shame that the regulator has had to issue these proposals because for the most part they should be common sense to lenders. But the fact is that they should make arrears management clearer and fairer, which will be in the interests of all parties.
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