Mortgage holders offered new protection from FSA

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Homeowners with mortgage arrears have been offered a lifeline of more protection provided by the Financial Services Authority (FSA). With the recession and the many redundancies it brought, many homeowners are now struggling to pay their mortgages and are falling behind on mortgage payments. But the FSA is urging lenders to treat mortgage customers fairly and has set out a list of new rules for handling borrowers with mortgage arrears.

Firstly, if a repayment of mortgage arrears arrangement is already in place, then the payments made must be prioritised towards clearing missed mortgage payments and not the arrears charges.

Mortgage companies will be obliged to record all telephone conversations regarding mortgage arrears, and they must keep those recordings for three years, offering hope to anybody who feels they have a good case to claim compensation for flawed mortgage advice.

The FSA has stated that repossessions should be the absolute last resort for people who can’t pay the mortgage and all mortgage advisors must be approved as 'fit and proper' persons.

The ‘sale and rent back’ market has also been targeted – this is where a borrower has missed mortgage payments and so opts to sell their house and stay in it as a tenant on a rental agreement. In this instance the FSA has banned high-pressure sales techniques and insisted on a 14 day 'cooling off' period. There will be a ban on cold calling and direct mail leaflets, and customers must be given the right to rent their former home for at least 5 years.

Many sale and rent back companies are known to be unscrupulous, often evicting former homeowners in under a year of the agreement being struck. Housing Minister Grant Shapps said: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."

The Citizens Advice Bureau has handled over 100,000 enquiries from worried homeowners who have missed mortgage payments. Their professionals are very worried about the charges some companies put in place for people already struggling with mortgage debt, with charges of an additional £115 per month reported. This, quite obviously, simply adds to the pressure facing people unable to pay their mortgage.

In 2009, 46,000 homes were repossessed – the highest number since 1995.


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