With that in mind, firms responded in force to the initial draft regulations, highlighting that to effectively implement the scheme they would need:
• Clear guidance on exactly which debts are included
• Clear notification of when a customer has applied for the scheme (and the start date)
• Clear notification of when a customer exits the scheme
• Guidance on how the scheme will operate and the expectations of the different parties involved
• Clear guidance on regulatory oversight of the scheme and how it interacts with other debt advice and consumer vulnerability policy across government
In recent months, industry bodies have worked with the government and other agencies to seek to introduce this clarity into the final draft regulations and scheme.
Key areas for the mortgage market
• Scope of application: Any “arrears” on all credit agreements secured on land – whether secured by a first, second or subsequent charge, and whether the mortgage is residential or buy-to-let – constitute a “qualifying debt” for the purposes of the regulations and may be subject to a moratorium. This is likely to lead to more consistency of treatment between regulated mortgage contracts and unregulated buy-to-let lending, which is likely to make practical implementation (including systems changes) more straightforward. However, the regulations are less clear on the extent to which certain categories of borrower are eligible for a moratorium.
• Treatment of capitalised mortgage arrears: One of the particular challenges raised by the mortgage industry in relation to the initial consultation proposals was the suggestion that firms may need to separate and freeze arrears interest from the principal balance. Helpfully, “arrears” is now defined in a way that excludes “capitalised mortgage arrears”, which should help alleviate this challenge. However, a key question for a number of mortgage lenders will be what is meant by capitalised mortgage arrears for these purposes, and whether this is intended to have the same meaning as it would for the purposes of FCA regulation.
