Assuring Forbearance in Mortgage Arrears Management: A Regulatory Blind Spot

By Lindberg, Per T. T. | Nottingham Law Journal, Annual 2011 | Go to article overview

Assuring Forbearance in Mortgage Arrears Management: A Regulatory Blind Spot


Lindberg, Per T. T., Nottingham Law Journal


INTRODUCTION

If one would have to extract something positive out of economic crises, it must be the hard lessons learnt. Every flaw of the financial system becomes magnified and scrutinised. One can only hope that for the hundreds of thousands of people detrimentally affected, steps are taken in accordance with the lessons learnt. During the 2008-2009 economic crisis, one flaw that has been magnified is the failure of the mortgage market regulator, the Financial Services Authority (FSA), to ensure forbearance in mortgage arrears practices. While these practices were the subject of criticism long before the crisis (1), it is hoped that it will ensure that the calls do not fall on deaf ears. In response to the radical increase of mortgage arrears and repossessions (2), politicians, the housing advice sector, (3) and the FSA itself have scrutinised the mortgage market and recognised inadequacies in its regulatory framework. Responding to these inadequacies, the Pre-Action Protocol for Possessions Claims Based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property (4) (the Protocol) was implemented in November 2008 to curb the rising number of repossessions and in June 2010, the FSA reformed section 13 (arrears and repossessions) of their Mortgages and Home Finance: Conduct of Business Sourcebook (MCOB). (5) While all parties agreed that reform was needed within the regulatory framework, few have questioned whether the FSA is indeed institutionally and operationally capable of assuring forbearance amongst mortgage lenders to the extent required to protect vulnerable home-owners. This article intends to question exactly why the FSA has failed its regulatory responsibility thus far and whether, in light of the MCOB reforms, the FSA is capable of meeting the demands made of it; or should we put more emphasis on other means, such as the Protocol?

This article argues that the FSA's regulatory approach and operative framework is ill-equipped to ultimately assure forbearance in mortgage arrears management. This is mainly due to what this article labels a regulatory blind spot": an inability of the FSA's operative framework, ARROW, to effectively monitor and assess qualitative measures, such as treating customers fairly. Although the government intends to abolish the FSA and instigate a new regulatory regime, it remains questionable as to the extent the new regime will provide better protection against unscrupulous mortgage arrears practices. In any event, the new regulatory system will not come into effect until the end of 2012. Therefore, this article calls for an approach which will realistically, efficiently and continuously assure forbearance in arrears management. It is argued that an upgraded version of the Protocol has the capabilities necessary to answer these calls.

This article is divided into four parts. The first part aims to briefly introduce the evolution of home-ownership and mortgage regulation in the UK and present the previous and reformed MCOB 13. Part three of this article will analyse why the FSA is ill-equipped in assuring forbearance amongst mortgage lenders, despite the reformed MCOB 13. However, to understand why this is so we must have an understanding of how the FSA is structured and functions, including its regulatory approach and operative framework. This is therefore examined in part two. After illuminating the FSA's limited operative ability to ensure forbearance amongst mortgage lenders, the final part will demonstrate how an upgraded version of the Protocol retains the capabilities of assuring greater protection against unscrupulous mortgage arrears practices.

HOME-OWNERSHIP AND MORTGAGE REGULATION

The home-ownership bubble

The UK housing market has experienced a radical increase in home ownership since the latter half of the 20th century. (6) Governmental encouragement of mortgage finance take-up surged in the 1980s with schemes such as Mortgage Interest Tax Relief (MITR). …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Assuring Forbearance in Mortgage Arrears Management: A Regulatory Blind Spot
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

    Already a member? Log in now.