Repossession has to be the last resort, FSA warns lenders

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Loan firms will face heavy fines or be barred from markets as part of regulatory crackdown

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Re: Repossession has to be the last resort, FSA warns lenders

Repossession has to be the last resort, FSA warns lenders


Mortgage lenders could face heavy fines or be barred from particular markets as part of a regulatory crackdown on firms that put excessive pressure on home owners falling behind on loan repayments.
The Financial Services Authority issued its warning, targeted particularly at high-risk and specialist lenders, as it published figures showing the number of home loan arrears grew by 15% for the year to April, totalling 302,000. Repossessions for the first three months of the year rose by 41% to 9,152.
FSA figures came as the government's own mortgage bank, Northern Rock, itself a specialist in high-risk loans, revealed it had repossessed almost 1,500 homes in the first six months of this year.
Adam Sampson, chief executive of the charity Shelter, said tough action from the FSA was overdue. "At Shelter we see many homeowners owing very small amounts of money whose lives are wrecked by some, particularly sub-prime, lenders racing to repossess. We are particularly concerned by the report's new evidence that there is a huge disparity in lending, and arrears management, which leaves many homeowners at risk of repossession in cases where a solution could have been found.
"The FSA's call for fair treatment of customers is a good first step, but as the regulator it must now put its money where its mouth is and clamp down on merciless mortgage lenders who are robbing people of their homes."
The Council of Mortgage Lenders, which predicts repossessions could rise to 45,000 by the end of the year, yesterday insisted its members were taking extra steps to try to help customers who were falling into arrears. For instance, lenders are trying to contact customers coming off initial loans and on to higher rates.
The CML said it was "surprised at the FSA's observations on specialist lenders, who have been working extremely hard to manage arrears".
Lesley Titcombe, the FSA director overseeing mortgage regulation, said: "Our data shows in these current market conditions more people are struggling to meet their mortgage payments and it is vital that firms treat them fairly. Repossession has to be the last resort."
The FSA said its detailed review of the mortgage market had unearthed a number of aggressive practices among loan firms, and said it was considering referring some instances for further investigation and regulatory action.
The regulator declined to name those firms about which it had concerns, but said a number of companies specialising in high-risk loans focused too strongly on recovering arrears, were too ready to take court action, imposed controversial charges, or had low or inconsistent standards of arrears handling.
A second FSA research paper based on the experiences of those in arrears found that in many cases "consumers generally arrived at the belief that lenders were not in a position or possibly not willing to take account of personal circumstance".
In some cases, borrowers in arrears told the FSA they felt the tone adopted by lenders was threatening; in others, the number of calls or letters bordered on "harassment".
"One or two examples of intimidating contact were cited from customers of sub-prime lenders, including having experienced frequent phone calls at inappropriate times of the day demanding payment, or calls warning of bailiff action."