Shearman & Sterling LLP | FinReg | FCA Publishes Final Guidance on COVID-19 Measures for Mortgage Providers
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  • FCA Publishes Final Guidance on COVID-19 Measures for Mortgage Providers

    The U.K. Financial Conduct Authority has published final guidance on how mortgage lenders should treat customers coming to the end of a payment holiday, or those yet to request one, in light of the COVID-19 pandemic. The guidance will come into force on June 4, 2020 and remain in force until October 31, 2020, unless renewed or updated. The guidance covers: (i) fair treatment of customers seeking, or coming to the end of, a payment deferral; (ii) options for customers able, or unable, to resume full payments; (iii) the interaction of the guidance with the FCA’s Mortgage Conduct of Business Sourcebook; (iv) training, monitoring, record keeping and Credit Reference Agency reporting; (v) repossessions; and (vi) debt help and money guidance.
    The FCA consulted on the draft guidance in May 2020 and has largely implemented it in the form proposed but with certain amendments, including:
    • the guidance now clearly applies to full or partial payment deferrals, addressing industry concerns that insufficient weight was given to the partial payment deferral option;
    • borrowers in payment shortfall will be given the option of a second payment deferral, instead of being obliged to rely only on the protections under the FCA Mortgage Conduct of Business Sourcebook (as the FCA originally proposed);
    • firms should provide personalized (as opposed to general) information on both the impact of taking a payment deferral and the impact on monthly payments if the borrower chooses to capitalize the costs of the deferral, but this information may be a reasonable estimate; and
    • the guidance now sets out the FCA’s expectations on credit reporting at the end of payment deferral periods more clearly.
    View the FCA's guidance for mortgage providers.
    View the feedback on the FCA's draft guidance for mortgages.
    Details of other regulatory responses to COVID-19 are available on our COVID-19 Research Center.

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