Category: Mortgages

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HM Treasury publishes written answers to questions on mortgages and the impact of COVID-19

It may just be me but one of the things I’ve found interesting are the questions being put to the Government (and their answers) about the response for mortgage and credit customers being impacted by COVID-19.

Earlier today, HM Treasury published three written responses to questions 74750, 74751 and 74752. All of the questions were asked by a Labour MP, Kate Osborne. She asked:

– what recent discussions the Chancellor has had with representatives of the mortgage lending sector on easing the financial pressures faced by people paying “double interest” on their mortgage during covid-19 outbreak and what plans he has to help those people switch to new mortgage lenders;

– what assessment the Chancellor has made of the effect of the modified affordability assessment on the number of mortgage prisoners unable to access new mortgages; and

– what recent discussions the Chancellor has had with representatives of the mortgage lending sector on tackling the situation affecting mortgage prisoners.

All three questions received exactly the same answer:

“The Government remains committed to supporting these borrowers, which is why the Government and the FCA have taken action to remove the regulatory barriers that previously prevented switching.

Lenders are currently making the necessary adjustments and system changes to enable them to use the modified affordability assessment for borrowers looking to re-mortgage. Due to the operational constraints caused by Covid-19 there was a temporary retraction of mortgage products in the market, therefore it would not have been of benefit to contact borrowers when meaningful options were not available to them. We expect lenders to start offering these borrowers switching options by the end of the year.

Earlier this year I wrote to UK Finance outlining my expectation that as many of its members as possible should move quickly to offer new deals to borrowers that are eligible to switch under the new FCA rules. You can read the letter here.

The Government continues to work with the mortgage lending sector to ensure support is available for consumers.

The FCA also recently noted that firms should be reviewing their variable rates to ensure they adhere to regulations regarding the fair treatment of consumers. The full statement can be found here.”

Without wanting to be a pedantic lawyer, these answers do not really respond to the MP’s questions. Perhaps that’s the point. But I think I’ll continue to keep reading these answers as they give a useful insight into the Government’s views, and an insight into the issues being raised by consumers with MPs.

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FCA says mortgage firms must do more to make sure appropriate equity release advice is given

On 17 June 2020, the UK Financial Conduct Authority published a press release saying firms must do more to make sure they are always giving appropriate advice to equity release consumers.

The FCA’s review says the equity release market works well for “many consumers“. But there are three “significant areas of concern” which increases the risks for consumers:

-advice given by firms did not always sufficiently take into account consumers’ personal circumstances;

– consumers reasons for looking at equity release were not always challenged by firms; and

– firms weren’t always able to evidence that their advice was suitable.

The detailed rules on equity release are in Chapter 8 and Chapter 9 of the Mortgages and Home Finance: Conduct of Business Sourcebook.

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FCA publishes updated finalised guidance for mortgages

On 4 June 2020 the UK Financial Conduct Authority published further guidance for customers who are unable to make their mortgage payments because of the impact of COVID-19.

However, and on 16 June 2020, the FCA revised this guidance. These changes say:

– firms should try and give as close to personalised information as possible (following lobbying from the industry that there are likely to be practical problems with providing personalised information);

– there are some changes to the guidance for (a) customers who have not yet had a payment deferral (to suggest a representative example relevant to the customer’s circumstances could be provided instead), (b) customers unable to resume full payments (with a similar suggestion of a representative example) and (c) the interactions with MCOB (particularly on variations and MCOB 7.6.28R and MCOB 7.6.28AR).

The guidance is set to expire on 31 October 2020 but the FCA may review and update before then.

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Financial Ombudsman Service publishes latest edition of ‘Ombudsman News’

On 5 June 2020, the Financial Ombudsman Service (the Ombudsman Service) published its latest edition of ‘Ombudsman News’.

The Ombudsman Service sets out things it will consider when looking at:

– claims by customers under Section 75(1) of the Consumer Credit Act 1974;

– complaints by customers in financial difficulties;

– complaints about motor finance agreements (including expecting businesses to “listen and proactively look for signs of financial difficulties“, expecting firms to be “even more flexible in their forbearance measures” and expecting firms to “fully inform consumers of their options to exit the agreement where necessary/appropriate“); and

– complaints about mortgages.

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Court decides an email signature is sufficient to mean a document is ‘signed’ for the purposes of the Law of Property (Miscellaneous Provisions) Act 1989

On 20 September 2019, the High Court handed down judgment in Neocleous & Another v Rees [2019] EWHC 2462 (Ch) on whether a footer, containing a name, role and contact details, was sufficient to constitute a signature for the purposes of Section 2(3) of the Law of Property (Miscellaneous Provisions) Act 1989.

After hearing submissions, HHJ Pearce decided that it was sufficient:

– There were a series of emails between the parties solicitors which amounted to a single document that was signed for the Defendant by her solicitor.

– While the email footer was created ’automatically’ and sent without any action by the sender, the sender (in setting up the signature) took a conscious action.

– The recipient also had no way of knowing if the signature had been automatically or not.

– Taking an objective approach, the presence of the sender’s name indicated a clear intention to associate the sender with the email, to authenticate it or to sign it.

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FCA sets up an implementation group to help the mortgage industry deal with proposed new rules for ‘mortgage prisoners’

On 27 August 2019, the UK Financial Conduct Authority set up a working group to help the mortgage industry deal with the implementation of its proposed new rules, set out in consultation paper 19/14, to deal with so-called ‘mortgage prisoners’.

The FCA has published a website (which it will update) summarising the discussions with the working group.

The current members of the group are:

– Building Societies Association
– UK Finance
– Ipswich Building Society
– Buckinghamshire Building Society
– Furness Building Society
– Tipton and Coseley Building Society
– West Bromwich Building Society
– OneSavings Bank
– UK Asset Resolution Ltd.
– Leeds Building Society
– Kensington Mortgages
– Yorkshire Building Society
– Link Asset Services
– Mortgages Plc

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FCA publishes research report on buying mortgages without advice

On 7 May 2019, the UK Financial Conduct Authority published a report it had commissioned by Revealing Reality on the way consumers buy regulated mortgages without advice.

There’s some interesting findings from the research including:

– execution-only customers generally understood they wouldn’t receive any advice on the mortgage;

– there was a lack of understanding (both for advised and non-advised sales) of the documentation given to customers;

– the difference between an advised and a non-advised sale was not generally understood;

– repetition helps make sure the customer understands the message;

– customers don’t like the look and feel of disclosure documents; and

– plain English, bullet points and Q&As, help get your message across better.

If you’re drafting mortgage documentation, this is likely to be a helpful bit of research. Depending on the outcome of Brexit, there may be an opportunity to simplify some of the documentation and procedures to tackle some of the problems found in this research.

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Banking (Consumer and Small Business Protection) Bill 2017-19 has its first reading in the House of Commons

On 7 May 2019, the UK House of Commons had its first reading of a private members’ bill, sponsored by Charlie Elphicke MP, called the Banking (Consumer and Small Business Protection) Bill 2017-19.

There is little information on the detail at this stage: Parliament’s website says the Bill is “being prepared for publication”. But the summary is interesting: “A Bill to make provision to enable consumers to transfer mortgages between providers; to prohibit the sale of mortgage debt to unregulated entities and the foreclosure of certain loans; to establish financial services tribunals; and for connected purposes”

There may, of course, be overlap with the UK Financial Conduct Authority’s consultation paper on helping so called ‘mortgage prisoners. Private Members’ Bills are also notoriously difficult to pass into law. It’ll therefore be interesting to keep a close eye on the Bill’s progression.