FSA to protect mortgage holders in arrears

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by Kay Murchie

Under new proposals by the Financial Services Authority (FSA), mortgage holders who are in arrears will be better protected.

The FSA said it wants lenders to guarantee they will use repossession a last resort and they will not be able to add early repayment charges on arrears charges and interest levied on those charges.

Commenting on the proposals, Lesley Titcomb, FSA’s director responsible for the mortgage sector, said: “Today’s proposals underline the standards that firms must meet and will help to ensure that homeowners in financial difficulties are treated fairly.

“Lenders need to be in no doubt of their obligations to customers who fall behind with payments and must realise that such circumstances are not an opportunity to create further profits,” she added.

The proposals also follow research carried out by the FSA which found high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules.

The new proposals will also affect mortgage advisers and those who arrange non-advised sales, making them individually accountable to the FSA.