Mortgage holders in arrears receive better protection from FSA

Mortgage borrowers in arrears will receive better protection under a new package of measures from the FSA.

The Financial Services Authority (FSA) has set out new guidelines to ensure that those who have mortgage arrears are treated more fairly by their lenders.

The way in which mortgage borrowers who have fallen into arrears have previously been treated by their lenders has caused concern to the FSA who found most problems with specialist lenders.

Under these new measures lenders must not add early repayment charges on arrears charges and interest levied on those charges.  Firms will also be unable to apply a monthly arrears charge where the firm and the customer have agreed an arrangement to repay the arrears.

In addition, mortgage firms will be compelled to confirm that 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.

Perhaps of most comfort to those who have fallen into arrears the FSA intends  compel firms to consider all options for borrowers and ensure that repossessions should always be the last resort.

The FSA proposals will also include a raft of measures to reinforce its tough stand against mortgage fraud by making individual mortgage advisers personally accountable to the FSA and require them to prove that they are a “fit and proper” person for mortgage advisory responsibilities.