On 20 March 2020, the Financial Conduct Authority (FCA) published guidance for mortgage lenders, mortgage administrators, home purchase providers and home purchase administrators as to how their customers should be treated during exceptional circumstances such as the coronavirus pandemic.
The need for this guidance stems from Principle 6 of the FCA's Principles for Businesses which states that a firm must have due regard for its customers interest and MCOB 2.5A.1R which requires firms to act in an honest, fair and professional manner.
What does the guidance say?
If a customer is struggling financially, they are entitled to a payment holiday for the next three monthly payments. A payment holiday means you temporarily stop paying all or part of your monthly mortgage payment without being in payment shortfall. This can apply to regulated mortgage contracts or regulated home purchase plans.
Requests for payment holidays should be determined on an individual basis, and so the three-month recommendation period is not fixed. If a customer requires a payment holiday fewer than three months and it is in their interest to do so, this should also be granted.
The FCA's guidance also refers to other assistance measures, such as reducing or waiving interest.
Following a payment holiday offer:
The FCA has also advised that repossessions during this time of uncertainty may not be in the customers' best interest, and therefore firms should not commence or continue repossession proceedings.
In cases where a repossession order has already been obtained, firms are advised against enforcing them.
The above reflects guidance as at 20 March 2020. The guidance will be reviewed by the FCA in the next three months following subsequent coronavirus updates and if appropriate, amended guidance will be issued extending the period of payment holidays available to customers.