Handling Mortgage Arrears – Terminology

Moratorium: The lender agrees to freeze the repayments on the mortgage account for a specified period, normally 3-6 months. The borrower, with the consent of the Lender, makes no mortgage repayments during this period. This is most suited to a borrower who believes that their current financial issues are short term and their situation will improve in the coming months. What happens is that the borrower makes no payments to the lender on their loan however the interest that falls due is capitalised added to the loan, so the overall debt increases.

Extension of Term: The lender agrees to increase the term from 20 years to 30 years, this reduction in the monthly capital portion of the mortgage means the borrower will pay a reduced monthly premium. however the loan will take longer to repay, resulting in a massive increase in the total cost of credit.

Interest only Facility: The lender agrees to accept interest only payments for a limited period of time. This suits a borrower who is struggling to meet their current monthly repayments but are able to …

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The Consumer Protection Code 2012 (CPC)

A few notes on the most up to date regulation is perhaps overdue, normally regulation is part of work and not something the general readers care about, but with the increased focus on it we have had people asking how it works so I’ll start to cover some of it.

The Consumer Protection Code (CPC) puts several responsibilities onto financial firms, it offers various protections to consumers and is available on the web.

One of the requirements is for the firm to have a ‘terms of business’ letter which they give to clients prior to offering advice and is covered in section 4.13 of the code.

Using the term ‘independent’ are no longer usable at will. An intermediary can only use the term ‘independent’ in their trading or company name (or in how they describe themselves) if their principle regulated activities are based on fair analysis of the market and it allows the consumer to pay for their …

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Standard Financial Statement or SFS – for people in mortgage arrears

If you go into arrears on your mortgage or you talk to your lender because you believe you are a ‘pre-arrears’ candidate then you will be asked to fill in a ‘Standard Financial Statement‘ or SFS which is part of the Mortgage Arrears Resolution Process (MARP) which started last year.

Engaging with the lender is a key tenet of this and filling in the SFS and liaising with the lender on aspects of it. The information in this is what will be used to negotiate the repayment that you will pay in cases where lifestyle adjustment does not allow you to make the full payment.

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