With the Government now extending the mortgage payment holiday option by a further three months, and the application period for new requests being pushed out until 31 October 2020, we see lenders adopting a longer-term strategy to supporting those customers financially impacted by the Coronavirus pandemic.
When this was introduced as an urgent and inevitably reactive situation in March to help borrowers in immediate financial difficulty, mortgage providers had to act fast to ensure they supported their customers when they needed it most.
As the longer-term impact evolves and timelines get pushed out further, the focus for lenders is now on a more scalable planned operational delivery model to help manage another wave of borrower communication, alongside recalculating borrower accounts.
Updated FCA guidance for lenders
Following the proposals announced by Government and the Financial Conduct Authority (FCA), lenders are being advised to provide ongoing mortgage support for homeowners still struggling with the impact of Coronavirus.
Speaking to the Sunday Times Christopher Woolard, interim CEO of the FCA, commented: “It’s about saying, ‘How do we strike the right balance between helping people in the short term and doing the right thing for them in the next three, six months or even longer?’ ”
Numbers are expected to rise beyond the current 1.8 million UK homeowners who have so far taken a three-month mortgage holiday since the scheme was announced in March and with unemployment levels in the UK, forecast to be 7% by the year-end, the ever-present challenge of servicing those vulnerable customers remains.
Following a short consultation period the FCA’s newly published guidance for lenders details what will be expected of mortgage lenders and the options they make available to their borrowers.
Commenting on the publication, Christopher Woolard, Interim Chief Executive at the FCA said:
“The measures we have confirmed today will mean anyone who needs to can get help from their lender if they are still struggling to pay their mortgage due to coronavirus. It is important that if a consumer can afford to re-start mortgage payments, it is in their best interest to do so. Customers should talk to their firm about the best option available for them.”
— Christopher Woolard, Interim Chief Executive at the FCA
Amongst other measures the final guidance states:
- Customers that have not yet had a payment holiday and who experience financial difficulty have until 31 October 2020 to request one.
- Firms will communicate with customers regarding what happens when their payment holiday ends. They should offer a range of options for how the missed payments will be repaid if they are able to resume payments.
- Lenders will continue to support customers who have already had a payment holiday where they need further help. Firms should contact their customers to find out what they can re-pay and, for those who remain in temporary financial difficulty, offer further support, which will include the option of a further three-month full or part payment holiday.
Depending on the customer’s circumstances, firms may make them aware of self-help steps a customer may take or signpost customers towards sources of debt advice. This will be for anyone concerned about managing their money during coronavirus and wants to find out what steps to take to get back on track.
When implementing this guidance, firms should be particularly aware of the needs of their vulnerable customers and consider how they engage with them. For customers who aren’t able to use online services (such as digital channels), firms should make it easy for customers to access
In addition, the FCA has now published several minor changes to update its previous guidance.
These are as follows:
- The FCA clarifies that firms can agree with customer’s forms of support other than a payment deferral or partial payment deferral, where it is in the customer’s best interests.
- The FCA notes that where there is a disagreement between the customer and the firm about the amount the customer can afford to repay, the lender should reduce payments to a level the customer considers they can afford.
- The FCA expects customers who are in payment shortfall to be included within the scope of all aspects of the guidance.
- The FCA has provided further clarity on the information that firms should provide to enable customers to make informed choices.
With a third of the UK working population saying that their income has been affected by the pandemic, adhering to these measures and the associated administrative assessments, could be the biggest operational challenge that lenders have ever faced. Technology, processes, data, and capacity, already tested by a shift to home working, are going to remain under strain for some time to come.
At EQ Hazell Carr we have been helping many customers build a framework of tools and resource support to bolster their operational resilience to cope with the increased communications with borrowers at this difficult time, as well as get clear plans in place to deal with the essential task of supporting customers as we move out of lockdown.
Despite the challenges, we are continuing to successfully start new projects with our clients on a remote working basis, with training also being completed virtually as well
We're in a great position to help mortgage lenders operationally to support their customers in these unprecedented times. If you would like some additional info, please do contact me on simon.biddlecombe@equiniti.com or 07436 035496.