New protection for struggling homeowners - Mortgages - News - Moneyfacts

News

New protection for struggling homeowners

New protection for struggling homeowners

Category: Mortgages

Updated: 25/06/2010
First Published: 25/06/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.
New rules are to be introduced which will ensure there are proper protections in place for vulnerable homeowners in arrears on their mortgages or people entering sale and rent back agreements.

The Financial Services Authority (FSA) has said customers in arrears must be treated fairly by firms and in particular that:

• firms must not apply a monthly arrears charge where an agreement is already in place to repay the arrears;
• payments by customers in financial difficulties must first be allocated to clearing the missed monthly payments, rather than to arrears charges, which can be repaid later; and
• firms must consider all options for borrowers, with repossessions always the last resort.

A new rule has also been introduced requiring firms to record all arrears handling telephone calls and to keep the records for three years.

More stringent regulations have also been introduced to help protect so called 'sale and rent back' customers who sell their home at a discounted price because they can not keep up their mortgage repayments, but remain living in it as a rent-paying tenant for a fixed period of time.

The new rules include:

• a ban on exploitative advertising and high-pressure sales techniques;
• a 14-day cooling-off period to give consumers more time to make decisions on sale and rent back;
• a ban on cold calling and the dropping of promotional leaflets through letter boxes;
• security of tenure for customers for a minimum of five years;
• measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process.

"With cases of vulnerable homeowners evicted from their homes after six to twelve months after selling to unscrupulous sale and rent back companies, tighter controls were vital," said Lesley Titcomb, FSA director responsible for the mortgage sector.

"Sale and rent back is often used by those who want to sell in a hurry to stay in their home, and so it is vital that they are better protected during what is usually a difficult period financially.

"We also think it is wrong that arrears charges should be taken from customers already in difficult circumstances and trying to get their finances back on track. Today's rules make absolutely clear the standards we expect of firms, and we have already taken tough action against some of the worst offenders."

Find the best mortgage rate - Compare best selling mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

The time is now for remortgaging

Mortgage borrowers have been urged to review their existing deals after it was revealed that remortgage opportunities continue to flourish in the post-Brexit vote world.

Goodbye to the Help to Buy Guarantee

On 31 December, phase two of the Help to Buy initiative will be withdrawn from the market. It’s certainly done wonders for the high loan-to-value sector, so we thought we’d take a closer look at the significance of the scheme and the effect it’s had.

Remortgaging bounces back

Remortgaging has been enjoying a welcome boost in recent months, despite September’s slight dip, with many homeowners capitalising on record low mortgage rates to boost their finances.
 
Close