Repossession and the Rules Lenders Must Follow

Repossession and the Rules Lenders Must Follow

When it comes to mortgage problems such as arrears and potential house repossession, it’s important to understand the rules that all mortgage lenders must adhere to. All mortgage lenders in the UK are regulated by the Financial Conduct Authority (FCA), which has established guidelines known as the Mortgage Conduct of Business (MCOB) rules. Let’s take a look at what these rules involve and how they protect homeowners.

The FCA and Mortgage Conduct of Business Rules

Under the supervision of the FCA, mortgage lenders are bound by the MCOB rules that govern their interactions with customers. These lender rules and restrictions aim to ensure fair treatment and responsible lending practices. The MCOB rules are particularly important when it comes to dealing with borrowers who are facing payment difficulties or mortgage arrears.

Lender’s Commitments: The Mortgage Charter

Along with the MCOB rules, many banks and building societies have voluntarily signed the FCA’s mortgage charter. By doing so, they commit to not seeking repossession of a borrower’s home within the first year of their initial missed payment, unless there are exceptional circumstances. If you’re wondering ‘how many mortgage payments can you miss before repossession?’, you have one year – or twelve payments – before the lender will consider repossession proceedings.

This charter reinforces the commitment to work with homeowners to find alternative solutions before resorting to repossession.

Fair Treatment and Consideration of Proposals

Lenders are required to treat borrowers fairly, which includes considering any suggestions made by homeowners to address payment problems and arrears. When borrowers face difficulties, lenders should explore options such as delaying interest payments, extending the mortgage term, changing the mortgage type, or adding the arrears to the total mortgage debt. If selling the home becomes necessary, lenders should allow homeowners sufficient time to arrange a sale before pursuing repossession.

Communication and Record-Keeping

Throughout the process, lenders must maintain accurate records of their contact with homeowners, including discussions about arrears or charges. Open lines of communication are essential, as it ensures that homeowners are aware of their options and can actively participate in finding solutions to their financial difficulties.

Information Provided to Homeowners

Lenders have an obligation to provide homeowners with certain information. This includes a list of missed payments, the total outstanding mortgage debt, the total amount of arrears and charges, and a clear notification that repossession action is being initiated. Homeowners should also be informed about the option to seek assistance from the council for homeless help.

Non-Compliance and Complaint Procedures

If a lender fails to operate within the MCOB rules or disregards the commitments outlined in the mortgage charter, homeowners have the right to make a formal written complaint to the lender. If the response is unsatisfactory or there is no response within eight weeks, homeowners can escalate the complaint to the Financial Ombudsman Service. The Ombudsman has the authority to review the lender’s handling of the case and can recommend that court action be halted, urging both parties to reach a reasonable repayment agreement.

Pre-Action Protocol and Court Proceedings

Before initiating court action, lenders must follow the pre-action protocol for mortgage arrears, which includes providing homeowners with information about their arrears, past payment, interest or charges, and the total mortgage debt. Homeowners making repayment proposals should have their offers duly considered by the lender, who must respond to the proposal within ten working days. If a court hearing is imminent due to a broken agreement, homeowners must be given 15 working days’ notice.

Considerations for Special Circumstances

Lenders may delay court action if homeowners are awaiting benefits such as Universal Credit or disability benefits. Similarly, if homeowners are actively taking steps to sell their home or have a complaint pending with the Financial Ombudsman, lenders must consider postponing court proceedings.

Compliance with Court Rules

During repossession hearings, lenders must demonstrate that they have followed the pre-action protocol rules. Failure to comply with these rules may lead to adjournment of the hearing, allowing the lender time to fulfil their obligations.

What to Do if You are Facing Repossession

Homeowners facing mortgage arrears and potential repossession should consider seeking professional debt advice. It’s important to get guidance and support as soon as possible. The sooner you seek help and support, the easier it will be to come to an agreement with your lender and avoid repossession.

If you are at risk of having your house repossessed, contact Homekeep Solutions today. Whatever your situation, our specialists can work with you to identify your options, negotiate with your lender, and keep your home. We’re available around the clock and there are no upfront fees to pay – we make it as easy as possible for you to get the professional help and support you need in such a stressful situation.

It's never too late to stop repossession. No matter where you are in the process, call us today on 020 3856 4040, email or fill out the form here to discuss your situation and stop your house from being repossessed.