What are the requirements on lenders when dealing with borrowers that are in arrears with their mortgage?

Lenders are required to have a written policy and procedures in place to ensure that consumers in financial difficulties are treated fairly.  These should include taking reasonable efforts to reach agreement with you, adopting a reasonable approach to the time over which any shortfall in payments can be made good and only taking repossession action where all other reasonable attempts to resolve the position have failed.

The FSA also expects arrears charges to be a fair reflection of the additional administration costs faced by the lender, not a way to increase profits or offset costs from other parts of their business.

In its Mortgage Market Review Discussion Paper published in October 2009, the FSA stated that “it is clear that many firms have not exercised forbearance but moved quickly to repossess properties” and reported that it had found “evidence of lenders looking to recoup costs through arrears charges for activities that are not related to the additional cost of arrears handling.”

If you’ve experiencing difficulties with mortgage payments and have incurred excessive charges then contact us to see if we can help you to reclaim these.

I’ve heard something about Mortgage Exit Fees. What are these?

Mortgage exit administration fees are charged by lenders when you exit your mortgage, even if you are not repaying it early. Lenders charge the fees to cover the costs of the administration services they incur when you exit your mortgage contracts. They can include costs such as deed release fees and changing the registration at the Land Registry.

However, in 2007 the FSA found that some lenders had increased their exit fees unfairly and this led it to issue a Statement of Good Practice.  This required lenders to review their policies on charging exit fees and decide which one of the following they would adopt for their current customers:

• charge no exit fee;
• charge the original exit fee that was detailed in the mortgage contract;
• charge a revised exit fee; or
• charge their current increased exit fee.

If the lender charges a revised exit fee that is higher than specified in the contract or charges their current increased exit fee then the FSA expects it to be able to justify why this is appropriate.
If the lender decided to charge the original fee for all customers after the Statement of Good Practice was introduced, it should have done the same for existing customers that may have been charged a higher amount.  In this case, you may be entitled to a refund of the difference between the two amounts.