New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA).

The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders.

The FSA also wants to ensure all mortgage advisers have been approved as "fit and proper" persons.

It has also announced new rules for staff and firms operating in the "sale and rent back" market.

Keeping records

Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:

firms must not apply a monthly charge where a repayment agreement for arrears is already in place
any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
repossessions should always be the last resort.
In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.

'Vital' changes

There are also tighter controls governing "sale and rent back" arrangements, whereby a borrower who cannot keep up repayments opts to sell their home, but stay in it as a tenant.

From 30 June, the measures the FSA are introducing will include:

a ban on high-pressure sales techniques
a 14-day cooling off period for customers to allow them to take more time over the decision
a ban on cold-calling and dropping leaflets through letter boxes
security of tenure for customers of at least five years
Lesley Titcomb, the FSA director responsible for the mortgage sector, said sale and rent back was often used by people in a hurry to stay in their homes.

"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter rules were vital," she said.

The Housing Minister, Grant Shapps, said he was reveiwing his department's support schemes for home buyers in difficulty. Meanwhile, he said, the new rules should provide reassurance: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."

Source: BBC News