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Citizens Advice and Shelter back MMR

National charities Citizens Advice and Shelter are backing the Financial Services Authority’s mortgage lending proposals.

The charities are urging the government not to allow a return to the irresponsible lending that caused misery for thousands of homeowners.

In a joint letter to housing minister Grant Shapps, the charities are supporting the FSA’s proposals to introduce affordability and income checks.

Failure to stamp out reckless lending for good, say the charities, would be a missed opportunity and potentially a costly mistake.

They add that it is vital that the government does not allow a return to the soft-touch regulation of the past that devastated the housing market and put thousands of homeowners on the brink of homelessness.

Gillian Guy, chief executive at Citizens Advice, says: “We saw 115,000 problems last year relating to mortgage and secured loan arrears and see countless ongoing problems resulting from vulnerable borrowers given mortgages they could never have afforded to pay from the outset or once the discounted periods ended.

“These proposals are about the FSA ensuring that mortgage lenders and borrowers take proper care to consider whether a mortgage is affordable and sustainable over time before entering in it.”

Kay Boycott, director of campaigns, policy and communications at Shelter, says: “From our research we know that millions of people are already struggling with their mortgage payments and every two minutes someone faces the prospect of losing their home.  We urge the government to support the FSA’s proposals to ensure we prevent even more people from living on a knife edge.”

The charities highlight the case of a Somerset man who came to the CAB for advice about his mortgage possession in 2009.

He and his wife had taken out a mortgage less than a year earlier with a sub-prime lender.

The mortgage repayments were £981 per calendar month, but their combined monthly income net of disability benefits was only £987.

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  • Leo 30th November 2010 at 2:17 pm

    CAB are staffed with unqualified volunteers who has no understanding of long term economics. FSA seem to have no problem with unregistered and unqualified people giving advice on mortgages and other debts.

  • Paul 25th November 2010 at 1:55 pm

    “Angie | 23 Nov 2010 1:31 pm

    Irresponsible lenders maybe but irresponsible customers who lie about their earnings are worse”

    They are, but responsible lenders would catch this lie, not giving the person a chance to become a customer, let alone an irresponsible one.

    I hear the SFO are going to start going after self-certified mortgage fraud soon; time to grab some popcorn.

  • Mike The Mortgage Man 23rd November 2010 at 4:47 pm

    The CAB and Shelter commentators must be ex FSA employees or also failed their entrance exams to Woolworth. All the debt issues that came to my office were the result of unsecured borrowing and a remortgage often gave the client breathing space to sort out already spent money. Furthermore there is a LIMITED role for at least a partial self certification mortgage particularly for the self employed. Killing the mortgage market is not in anybody’s interest but that is where we are going.

  • Steven Balmer 23rd November 2010 at 4:20 pm

    I doubt the charities spokespeople have the insight to see the true implications of these proposals. Of course the charities want to see an end to irresponsile lending, which has already happenned, but they will find more people knocking on their door when interest rates start to rise and many people are locked in to expensive deals and no hope of moving. Hardly inspirational or aspirational governance. These proposals do not offer any long term flexibility that could benefit the public. More interest should be paid to all types of loans given higher rate CC’s and personal loans are the root cause of most peoples need to seek charitable advice. No offence to these charities, I know their volunteers do a lot of good work, or at least try to. What hope have these charities got of understanding wider implications when the FSA obviously have such little understanding themselves, or just choose to further assist bankers feeding at the trough. The same charities champion consumer choice and financial freedom and as such these comments lack true insight and are a little too contradictory to be taken seriously.

  • David 23rd November 2010 at 2:19 pm

    I hope both organisations really understand the implications of the proposed rules. In order to protect a few applicants who should never have got a mortgage in the first place, a very substanstial number of customers will now be excluded from ever owning their home.

  • David 23rd November 2010 at 2:19 pm

    I hope both organisations really understand the implications of the proposed rules. In order to protect a few applicants who should never have got a mortgage in the first place, a very substanstial number of customers will now be excluded from ever owning their home.

  • Angie 23rd November 2010 at 1:31 pm

    Irresponsible lenders maybe but irresponsible customers who lie about their earnings are worse

  • Trevor Johnston 23rd November 2010 at 12:56 pm

    Can’t wait until a member of staff from CAB walks into my office looking for a mortgage and I tell them they can’t get it because the FSA deems it not affordable. ‘Sorry sir but the £600 per month mortgage is not affordable so you will still have to rent at £600 per month and have no stability and lack the potential for a great long term investment’. CAB ‘advisers’ are jack of all trades and masters of none. Of course we don’t want irresponsible lending but don’t back a campaign that prohibits sensible lending. Of course we know the horror stories but those days have gone anyhow. I suspect CAB have been asked do they want the FSA to stop irresponsible lending as laid out in the MMR and they have just stuck their name behind it. The FSA must be getting desperate for some sort of support.

  • Maurice Edgington 23rd November 2010 at 12:50 pm

    Agreed there are aspects of the MMR that both charities should endorse so to say that CAB and Shelter back MMR is not quite correct as there are a great number of issues that do not impact on their clients.
    Further I notice that there is no mention of irresponsible borrowing by consumers. Prior to the credit crunch my firm received a number of ‘self-cert’ enquiries where the customers had given details of their incomes in an on-line enquiry form but the incomes shown were not sufficient for the requested mortgage amounts. When told, “sorry we cannot help” the almost universal reaction was “ok I’ll self-cert then”. No way!

  • Bobby Welsh 23rd November 2010 at 12:47 pm

    I agree that it is important to look after the clients best interests in terms of affordability – in all forms of lending. I do however have issue with CAB putting their twopence worth in when advising potential clients to go into some form of debt management/trust deed where there are several other options available to a client that would NOT destroy their credit rating and prevent them from ever getting a mortgage regardless of affordability