New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA).
The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders.
The FSA also wants to ensure all mortgage advisers have been approved as "fit and propoer" persons.
It has also announced new rules for staff and firms operating in the "sale and rent back" market.
Keeping records
Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:
firms must not apply a monthly charge where a repayment agreement for arrears is already in place
any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
repossessions should always be the last resort.
In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.
'Vital' changes
There are also tighter controls governing "sale and rent back" arrangements, whereby a borrower who cannot keep up repayments opts to sell their home, but stay in it as a tenant.
From 30 June, the measures the FSA are introducing will include:
a ban on high-pressure sales techniques
a 14-day cooling off period for customers to allow them to take more time over the decision
a ban on cold-calling and dropping leaflets through letter boxes
security of tenure for customers of at least five years
Lesley Titcomb, the FSA director responsible for the mortgage sector, said sale and rent back was often used by people in a hurry to stay in their homes.
"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter rules were vital," she said.
The Housing Minister, Grant Shapps, said he was reveiwing his department's support schemes for home buyers in difficulty. Meanwhile, he said, the new rules should provide reassurance: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."
'Clean game'
The consumer rights lobby group, Citizens Advice, which has received more than 100,000 enquires about lending arrears over the past year, welcomed the FSA's changes, but said a closer eye should be cast over charges levied by some companies on customers in arrears.
It says some clients of its Wiltshire bureau had reported charges of £115 for each month they were in arrears with their mortgage with a sub-prime lender.
Citizens Advice head of consumer policy, Sue Edwards, said: "Citizens Advice Bureaux regularly report cases where large fees have been levied for various arrears procedures, which have simply added to the clients' problems. In many of these cases, it is not clear to either the client or their adviser how the firm has calculated the cost."
The Council of Mortgage Lenders (CML), whose members account for 94% of all mortgage lenders in the UK, said 46,000 homes were repossessed last year, the highest number since 1995.
It picked out the requirement for an adviser to be an "approved person" as an unnecessary additional cost on lenders.
But, the CML's director general Michael Coogan conceded that overall the FSA's changes were helpful.
"While we may feel somewhat harshly treated in relation to the treatment of lenders under the approved persons regime, we do recognise that the FSA is trying to make sure there is a clean game," he said.
Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk
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