FSA sends warning shot on new lending and respossessions

| December 5, 2007 | 0 Comments

The Financial Services Authority (FSA) has warned mortgage lenders that the credit crisis could yet worsen.

The Authority is urging lenders to be mindful of their financial strength and reduce the amount of new lending.

With regard to repossessions, the regulator acknowledges that arrears and repossessions had “increased significantly, albeit from a very low base” and is asking banks to give customers in financial difficulties time.

Clive Briault, the FSA’s retail managing director, stated that: “lenders were taking a blanket approach to customers in difficulty”, in a recent speech to the Council of Mortgage Lenders.

Under FSA regulations, banks have to treat their customers fairly but Mr Briault reported that: “A fairly consistent picture is emerging of some lenders … appearing to be unwilling to consider cases on an individual basis, unwilling to agree a tailored solution to the borrowers’ individual circumstances and apparently adopting a one-size-fits-all approach to arrears recovery.”

The Authority plans to inspect the approach of up to a dozen major lenders by the end of March next year.

Banks that have breached the rules over arrears can expect to face fines and public sanctions, and could even be barred from conducting further business.

The FSA has also pointed out the potential difficulties for the 1.4 million borrowers on short-term fixed-rate mortgages who will need to be refinanced in the coming months.

The CML is asking the FSA to support its call to the Bank of England to help reopen the specialist securitisation market by putting more cash into the financial system.

The market helps fund mortgage lending and has practically dried up since the Northern Rock crisis.

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