The FSA has issued a press statement concerning its latest review of the way mortgage arrears and repossessions are being handled by specialist lending firms and third party administrators (TPAs).

Four firms have been referred to enforcement for investigation and others are being assessed for referral.

The review found that poor practice is still prevalent, among specialist lenders and TPAs including:

  • Operating an approach focused too strongly on recovering arrears without reference to the borrower's individual circumstances.
  • Being too ready to take court action.
  • Imposing arrears-related charges unfairly.
  • Specialist lenders not exercising sufficient oversight of contracted TPAs.

It also identified terms in securitisation covenants which could lead to inequitable treatment of borrowers in arrears, by restricting the scope of lenders to exercise flexibility.

Lesley Titcomb, FSA director responsible for the Mortgage Sector, said:

"In current market conditions, with our data showing more people struggling to meet their mortgage payments, it is vital that firms treat customers who get into arrears fairly. It is unacceptable that some firms are applying fees unfairly and pushing customers towards repossession without considering alternatives. The steps we are announcing today demonstrate that proper handling of arrears is still a high priority for us and will continue to be so until the necessary progress has been made.

The focus of today’s report was specialist lending but the messages apply equally to other mortgage firms. As a result of the Dear CEO letter sent to all lenders and lenders and administrators last November, follow up action is underway with a number of firms and the industry as a whole can expect continued intensive scrutiny of its arrears handling processes."

View FSA refers firms to enforcement in clampdown on poor mortgage arrears handling, 22 June 2009