Council of Mortgage Lenders (CML) Statement of Practice

Handling of Arrears and Possessions CML Statement of Practice January 1997 Introduction

1. This Statement provides an overview of how mortgage lenders currently deal with mortgage arrears and possession cases. The facts of each arrears and possession case are unique, and each case needs to be treated individually. Mortgage lenders adopt flexible procedures for the handling of arrears and possession cases which are aimed at assisting the borrower as far as possible in his or her particular circumstances. Individual practice will, of course, vary between lenders depending, in particular, on whether they operate on a centralised or decentralised basis. This Statement describes how lenders deal with mortgage arrears; the procedures adopted when handling possession cases; the subsequent sale of property in possession and finally the recovery of any outstanding debt. Individual circumstances might arise in which action outside those referred to in this Statement may need to be taken.

Mortgage Arrears - General Principles

The following general principles are relevant to the question of mortgage arrears:

(a) When a borrower falls into arrears, the problem should be handled sympathetically and positively by the lender. The lender's first step will be to try to contact the borrower to discuss the matter.

(b) As soon as financial difficulties arise, the borrower should let the lender know as soon as possible.

(c) Once contact has been established, a plan for dealing with the borrower's financial difficulties and clearing the arrears will be developed consistent with the interests of both the borrower and the lender.

(d) Possession of the property will be sought only as a last resort when attempts to reach alternative arrangements with borrowers have been unsuccessful. The borrower will remain liable for the full mortgage debt. The Handling of Arrears - Initial Action taken by Lenders Mortgage lenders or their agents may use the following administrative procedures for dealing with arrears:

(a) The lender's first step will be to try to contact the borrower, for example, by letter or telephone.

(b) The lender may seek a meeting with the borrower to discuss the situation and examine ways to resolve the problems. Alternatively, this may be done via the telephone or letter.

(c) Once contact has been established, a plan for clearing the arrears will be developed consistent with the interests of both the borrower and the lender.

(d) If contact cannot be made with the borrower and payments continue to be missed, legal action to recover the arrears or take possession of the property may be necessary.

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