The FSA has today announced it will begin a review into whether mortgage lenders are complying with TCF rules when handling mortgage arrears and repossessions.
The FSA also urged lenders to protect themselves against a potential worsening of liquidity and credit risks.
Speaking at the Council of Mortgage Lenders’ annual conference, Clive Briault, retail managing director at the FSA, announced an urgent review into how lenders are complying with TCF when dealing with mortgage arrears and repossession.
He says the number of repossessions has increased significantly from a low base and says the FSA expects lenders to meet its requirements set out in its mortgages conduct of business sourcebook.
The FSA says it has seen some lenders consistently refusing to treat cases on an individual basis and is launching a thematic work to see if there is a problem of non-compliance with TCF rules.
Briault says: “A fairly consistent picture is emerging of some lenders across the market appearing to be unwilling to consider cases on an individual basis, unwilling to agree a solution tailored to the borrower's individual circumstances, and apparently adopting a one-size fits all approach to arrears recovery.”
The FSA expects the initial phase of its new investigation to be complete by the end of March 2008.
The regulator also called on lenders to undertake robust stress testing, reflecting current and potential market conditions, and create contingency plans against the worst outcomes.
Briault says there is a real prospect that conditions in the UK mortgage market will worsen further during 2008 and lenders should be prepared.
He says: “There is a very real prospect that conditions will worsen further into next year, in terms of both liquidity and credit risks.
“Firms should therefore be assessing their funding and liquidity positions; undertaking robust stress testing to reflect current and prospective market conditions; reviewing and assessing their medium and longer term strategies and the options open to them; and considering contingency plans against the worst outcomes.”
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