MMR 2012: FSA defends delayed implementation

Customers who are paying a reduced amount on their mortgage do not currently qualify as being in arrears meaning lenders do not have to treat them with the same forbearance as borrowers fully in arrears.

But MMR rules out this morning will mean from 26 April 2014 these borrowers must be given the same level of protection as those failing to make any payments.

Lynda Blackwell, mortgage policy manager at the FSA, said the decision not to implement this rule until April 2014 reflected the systems changes lenders would have to make.

She said: “These are major policy changes we’re asking lenders to make and we understand that will take time in terms of systems, IT and training.

“Having said that just because this is the deadline doesn’t mean we wouldn’t expect some firms to start complying sooner than this.”

The FSA has made a small amendment to the definition of “payment shortfall” so that it more clearly reflects the policy intention - to prevent firms from front loading arrears charges on payment shortfalls that occur during the term.

The majority of the MMR proposals will not need to be put into practice until the 26 April 2014 but it has accelerated implementation of the fair treatment of mortgage prisoners with immediate effect.

The FSA said: “This is a new evidential provision aimed at protecting those borrowers who find themselves ‘trapped’ with their current lender.

“We are switching this provision on with immediate effect as it is aimed at protecting not only those borrowers who may find themselves trapped in future following the implementation of the MMR, but also those borrowers who find themselves trapped today because they do not meet current tightened lending criteria.”

On the timing of the rest of the MMR the FSA said: “Allowing an extra six months for implementation will not introduce significant consumer protection risks. Therefore we are giving firms 18 months to implement the MMR reforms.”

Forbearance will remain exempt from the advice requirements and the regulator said firms should refer to MCOB 13 and the guidance on mortgage forbearance for further clarity.