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Greater protections for mortgage borrowers
enjoyed by UK mortgages borrowers are to be strengthened under new
proposals published by the Treasury today.
Under the proposals borrowers whose mortgages are sold onto third parties will be protected by Financial Services Authority regulations requiring fair treatment of customers. In addition, the Government is proposing the expansion of the FSA’s remit to include the regulation of buy-to-let and second-charge mortgages.
Exchequer Secretary Sarah McCarthy-Fry said:
"Since the onset of the global financial crisis, the Government has worked hard to ensure mortgage borrowers are treated fairly by their banks. Our focus has been to do all we can to make sure people can stay in their homes and to limit repossessions as much as possible.
"But we are aware that this crisis has raised issues around the world about the regulation of the mortgage market. We are determined to reform the system for the future, to offer both stronger protection for consumers and greater stability in the housing market."
The Government is publishing a consultation document, which sets out its proposals to:
* extend the scope of FSA regulation to include second-charge
* extend the scope of FSA regulation to include buy-to-let mortgages; and
* protect borrowers when lenders sell on mortgage books to third parties.
The consultation sets out the details of the proposed legislation and will close on 15 February 2010 and any final measures will be implemented through secondary legislation.
The consultation builds on announcements made in Reforming financial markets, which was published by HM Treasury in July of this year and set out the Government’s analysis of the causes of the financial crisis, along with a series of proposals to reform and strengthen financial regulation, and protect and support consumers. The Government will implement these proposals via the Financial Services Bill currently before Parliament.
Further details are available in Notes to Editors below.
Notes for Editors
The Government is taking action to reform banking and financial service regulation. On 8 July, the Government published Reforming financial markets, a paper setting out the Government’s analysis of the causes of the financial crisis, along with a series of proposals to reform and strengthen financial regulation, and protect and support consumers. The consultation period for these proposals closed on 30 September, and on 19 November the Government published a document setting out its response to the consultation.
On 2 July, the Government published a white paper on consumer rights, A Better Deal for Consumers. This set out proposals to provide further help to people in difficulty with their finances and proposals to strengthen the UK’s consumer credit regime, including measures to:
* tackle consumer protection issues in particular parts of the
consumer credit market;
* raise standards in decision-making across all regulated consumer credit products; and
* make the regulatory regime for consumer credit effective for all consumers.
On 19 October, the FSA published a discussion paper on its approach to mortgage regulation and a package of proposals to improve its existing regime. This paper is available on the FSA’s website.
The Government remains committed to helping households through the downturn and ensuring that there is an appropriate framework of support for mortgage borrowers. The Government's proposals in the consultation published today build on the comprehensive package of support for homeowners facing financial difficulties:
* Homeowners receive important protection from FSA regulation of mortgages, which requires lenders to treat customers fairly and treat repossession as a last resort. On 19 October, the FSA published a discussion paper on its approach to mortgage regulation and a package of proposals to improve its existing regime. This paper also expresses the FSA’s support for the proposals set out in the Government's consultation document. Stakeholders may wish to view the FSA's paper, which is available on the FSA’s website.
* The framework of mortgage regulation is supported by the mortgage pre-action protocol introduced in November 2008, which sets out the actions courts expect lenders to take before bringing a possession claim to court. The protocol applies to first- and second-charge residential mortgages. Over 116,000 households are benefiting from lender forbearance on their mortgages.
* The Government is committed to ensuring that high quality debt advice is available for borrowers who need it. Since April 2006, the Government has invested over £130m in a face-to-face money advice project aimed at the most vulnerable households. At the 2009 Pre-Budget Report, the Government increased spending on debt advice, including a further £5.85 million for National Debtline between November 2008 and March 2011, to increase provision of free telephone debt advice.
* Universal protection for borrowers from FSA regulation and the courts is supported by a number of Government schemes providing targeted help to specific groups of homeowners. For those who need direct assistance, the Government is helping through Support for Mortgage Interest. For those who have exhausted all other options, the Government has introduced the Mortgage Rescue Scheme and Homeowners Mortgage Support. Over 300,000 households have received help and advice in connection with their mortgage payments since April 2008.
* On 8 September the Government launched a new national campaign to help struggling homeowners take control of their finances and make the most of the support available for them to avoid repossessions and stay in their homes. Concerned homeowners will be able to go to www.direct.gov.uk/mortgagehelp, or contact the National Debtline on 0808 808 4000 for impartial advice, real life examples of people who have already benefited from support, and to develop a personal action plan tailored to their particular circumstances.
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