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Lenders Plan To Ease Home Repossessions Ahead Of Boom In Mortgage Defaults
As they brace themselves for a rise in defaults, mortgage lenders have published their plans to minimise the number of people who have their homes repossessed. The Council of Mortgage Lenders (CML) said that while mortgage arrears and repossessions were expected to remain low, the UK's deteriorating economic outlook would lead to more homeowners finding themselves in difficulties.
The CML's initiative aims to make sure that homeowners who are unable to maintain their mortgage repayments will only lose their home once all other measures have failed. Mortgage lenders are already required by the Financial Services Authority (FSA) to have policies for arrears management which aim to avoid repossessions, except where there is no alternative. But there is no one, standard approach, and repossession policies differ between lenders.
In a letter to Alistair Darling the Chancellor, the CML said its members had signed up to four measures to help keep repossessions to a minimum.
Lenders have agreed to analyse their existing arrears management policies and improve them to bring them in line with new industry guidance that have been issued by the CML. Borrowers who fall behind with repayments will also be provided with information explaining their lenders' arrears management process, so that they can understand what to expect and how they will be treated.
Lenders will also adopt what is called the "pre-action protocol" which sets out the various steps the lender must go through before taking an arrears case to court in order to ensure court action is a last resort.
Finally, building societies and banks also have to be proactive in helping people to plan for potentially higher mortgage repayments when their current deal ends. The Council wants lenders to communicate with borrowers nearing the end of their discounted deal or fixed rate in good time and persuade them to get in touch with the lender if they beleive they may have difficulty meeting the higher repayments.
The Director General at the CML said: 'We continue to anticipate that the level of mortgage arrears and possessions will remain low, as originally forecasted. With the economy worsening and an incomplete safety net for mortgage borrowers, the CML cannot be complacent about the outlook and the challenges facing lenders, borrowers and public policy makers alike. We continue to work closely with Government Ministers we and look forward to a clear statement of the Government's own position on a safety net for borrowers.' He also added that the CML also felt that the Government should urgently improve the support for homeowners who suffer a short-term loss of income.
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