New Year’s Resolutions for Lenders

The last year has been one consumed by political and economic uncertainty, but the FCA have remained focused on more practical matters, among these being the recently published thematic review (TR18/5) on how mortgage lenders manage customers with long-term mortgage arrears and provide forbearance to affected customers.

Whilst the review itself has not been unexpected, it will be incumbent upon lenders to take notice of the findings and indeed ensure that they are developing the appropriate policies, and executing them in the right way.

The review comes as the Bank of England published its most recent mortgage lenders and administrators return (MLAR). This confirmed that mortgage arrears have increased for the first time since 2016.

The key question, ultimately, for all lenders, is what they can do to assist their customers in managing their finances in a year which could bring further uncertainty and difficult moments for mortgage borrowers.

Well, this time of year is one of renewed commitment and ambition and it may not do any harm to emphasise some New Year resolutions, based on the thematic review, which will stand lenders in good stead for the year ahead.

Guidance for 2019:

1. Keep detailed and complete records of all calls you have with customers. This avoids customers having to repeat information and their personal circumstances on multiple occasions.
2. Identify vulnerable customers and provide sufficient support to them.
3. Review payment arrangements which have been entered into to ensure that they remain suitable for the customer.
4. Always check correspondence before issuing to the customers to ensure the information provided is accurate.
5. Don’t always assume a payment arrangement is the best option. Consider whether an alternative arrangements would be more suitable for repayment of a customer’s arrears.
6. Ensure the process for completing income and expenditure forms and detailing vulnerability is easy for customers to use and assist customers where possible with completing such forms.
7. Remember the primary aim of forbearance should be to enable the complete recovery of the mortgage through the full repayment of arrears.
8. Where this cannot be achieved, the secondary aim should be to recover the customer into a sustainable terms position on their mortgage.

Adhering to these key principles could help manage a range of risks, not least financial and reputational, never mind compliance!

Given the aim should be to encourage complete recovery of the mortgage through full repayment of the arrears, we hope these New Year’s Resolutions will help lenders to ensure 2019 sees mortgage arrears decreasing, an outcome that should bring relief to lenders and borrowers alike.