The CML said the month-on-month annual comparison is likely to continue to decrease a little in the coming months, because underlying lending volumes rose sharply in the latter part of 2009 as borrowers rushed to take advantage of the stamp duty concession before the end of the year.

Its clear that Borrowers are nervous, even more so since the Spending Review and confirmation of some half a million public sector job losses. This fear for their personal circumstances has certainly contributed towards the drop-off in mortgage applications.

This news comes just weeks after the FSA stated that they would be looking to ban self cert mortgage products.

This news is no doubt going to come as a massive blow to the self employed business community who have ordinarily not been able to fit into the prescribed boxes that mortgage lenders have imposed. It is however, hoped that once the Financial Services Authority issue guidance that mortgage lenders will be able to tailor specific products to the self employed business community.

We all wait to see how the mortgage market will cater for the self employed business person.

Between 31 October 2004 and 30 November 2008, a number of serious failings by GMAC-RFC were identified in relation to its dealings with customers experiencing arrears and repossessions. 

These included excessive and unfair charges for customers that did not reflect administration costs, proposing repayment plans that did not always consider a customer’s individual circumstances and inadequate training of mortgage servicing staff in handling of arrears and repossessions.

The lender was also issuing repossession proceedings before fully considering all the alternatives.

The case sets a precedent, with the FSA concluding this investigation in a matter of weeks, and the firm working with the FSA to agree a process to enable customers to receive redress as quickly as possible.

As a result of early settlement, the firm qualified for a 30% discount under the FSA’s settlement discount scheme.  Without the discount the fine would have been £4m.

The FSA announced in June that four firms had been referred to enforcement for investigation and several more firms were being assessed for referral.

In many cases the FSA found a high incidence of mortgages moving straight into arrears and potential breaches of responsible lending rules.

Margaret Cole, director of enforcement and financial crime, says: “This case shows credible deterrence in action.  It is an excellent example of what the FSA’s more intrusive approach can achieve for consumers, and it reflects what we said in our Mortgage Market Review last week about unfair mortgage arrears charges.  Mortgage lenders and third party administrators should read this final notice and the Mortgage Market Review and take action in the interests of their customers.”

Alan Cleary, managing director of Exact, says that the scale of the fine shows that the spotlight is firmly on third party administrators and lenders, and the FSA has shown that it means business.

He says: “All mortgage servicers will need to have the very best, most up-to-date arrears handling processes to demonstrate they are treating their customers fairly and not rushing them to court.”

A spokesperson for GMAC-RFC says: “We want to apologise to customers affected.  We have worked openly with the FSA to review and revise our procedures for managing accounts in arrears.

“We’ve been able to work quickly as a result of cooperation with the FSA and changes already made to our procedures and training programmes over the last eighteen months.  Furthermore, we have established a customer contact and redress programme in relation to certain arrears charges.    

“Whilst our arrears charges were in line with the market, in hindsight, we fully accept that for certain fees our estimates of the costs were not proportionate to the additional administration actually required. We will be writing to customers who incurred these specific charges when in arrears and will re-credit the charges plus interest.”

Details of fees to be redressed include:

• Charges for non payment of the monthly mortgage payment by Direct Debit when in arrears (average refund £117)
• Early Repayment Charges applied to arrears fees and charges (average refund £14)
• Part of the solicitors instruction fee which was more than the actual cost  (average refund £45)

The company will be sending a letter with details of the redress programme to any customer with a mortgage in arrears who was charged one of the above fees since 1 November 2004. Following this communication, existing customers of GMAC-RFC will receive an automatic re-crediting of the charges plus interest to their mortgage account.

For past customers who were in arrears and have already redeemed their mortgage with GMAC-RFC, the company will send a letter to the last known address to arrange a refund.

source: mortgagestrategy.co.uk

The CML created the comments as part of its submission to the Money Services Authority ahead of the publication of its Mortgage Market Review – expected next week.

But the CML says it considers self-cert a legitimate niche product for those that have irregular income or cannot verify their income from employment.

It says a ban on the merchandise would mean lenders would not be ready to fast-track cases for borrowers where income verification is simply not always undertaken, even when the applicant may give proof of income.

It will believe however there are sensible concerns for lenders to consider when verifying income, like how a lender may really verify income without access to a powerful knowledge set.

The modern issues stem not from a failure of the mortgage rulebook, or from widespread credit problems during a recession, but essentially from past approaches to supervision of the principles and an over-supply of cash to lend out. Currently the pendulum has swung and the difficulty is the lack of available mortgage finance. Regulatory intervention on mortgages is unlikely to reverse this trend plus can accentuate the problem

The initiative will be part of the FSA’s keenly awaited mortgage review, set to be published which early next week, according to an exclusive in The Times.

The sweeping report is also targeting buy to let mortgages, which could be regulated for the first time, said the paper.

Self-cert mortgages, also dubbed liar loans, Self-certification mortgages accounted for one third of new loans in 2007, or about GBP 100 billion of the GBP300 billion loans granted that year. Buy-to-let accounted for 12 per cent of all properties, or more than three million homes in the same year.

But new loans in both sectors plunged to almost zero in the past year as lenders have deserted the riskier parts of the housing market.

Self-cert loans have been one of the fastest-growing parts of the mortgage market in recent years. They were mainly targeted at the self-employed or those with mulitple income streams who find it tough to prove their irregular income streams.

Unlike standard mortgages, for which customers must provide pay slips and other documents proving salary and expenditure, self-cert loans require far fewer documents and rely more on customers’ declarations that they can meet their repayments.

However, in the donwturn defaults on self cert mortgages have been at much higher rates than the industry average.

HBOS and Bradford & Bingley were among the biggest self-cert lenders. HBOS was sold to Lloyds TSB in a rescue deal in September last year and B&B collapsed and had to be partially nationalised.

The FSA is also considering regulating buy-to-let loans for the first time. That could require professional landlords, who may have portfolios of 500 properties, to fill in the same forms that individual homeowners have to complete. Such a move would be inappropriate, experts assert, and could further stifle buy-to-let lending, which has also nose-dived in the past 12 months.

Total Equity Release lending has fallen from £240 million to £183 million. As a direct result the average loan amount has fallen by 15.33% to £44,948 (2008 Q1 – £53,084).

Equity Release Market Monitor for Quarter 1 of 2009 shows that the mixture of a 7% drop in plan numbers and a 16% drop in house prices has resulted in a fall in lending for the sector of almost 24%. This is the largest fall KRS has recorded since it began monitoring the sector in 1998.

The average property price in all regions of the UK has fallen dramatically with falls a high as 26% in East Anglia, 24% in Scotland and 20% in the East Midlands. London fared best with a 6% fall. With such dramatic property value changes KRS says there is no way that the equity release market could not be unaffected.

London continues to show the largest average amount released at £91,845, followed by Northern Ireland at £53,850. However, Northern Ireland has seen a considerable stall in plan numbers with a 66% fall in the number of plans being arranged.

Despite a reduction in the number of plans taken out during the quarter and in the values, some regions showed positive growth. East Anglia and the West Midlands showed an increase in both plan numbers and levels of borrowing.

The Market Monitor continued to show that the most popular use of the equity released from consumers’ homes was for home or garden improvements (58%). One in three (33%) used the money to go on holiday and 19% used it to help out family or friends, as parents are helping their children to get onto the property ladder or helping them meet their commitments in the current economic climate.

Debt repayment is consistently one of the prime motivators for releasing equity, with 23% repaying an outstanding mortgage and a further 33% repaying other forms of debt.

The figure represents a fall of 15% from £11.7bn in January and 60% from February 2008. The trade body was keen to emphasise that February is typically the weakest month for mortgage completions, and although this is a larger decline than the 3-4% usually experienced between January and February, it is in line with the CML’s forecast of £145bn gross mortgage lending in 2009.

Michael Coogan, director general of the CML, said: “Retail savings are now the predominant source of funding for mortgages. But banks and building societies have seen savings ebb away to National Savings and Investments, which has a negative impact on their ability to lend.