MCOB 13 applies to mortgage lenders and mortgage administrators (and firms that were mortgage lenders or mortgage administrators before the sale of a repossessed property took place).
What does it do? It imposes some key duties in relation to administering a regulated mortgage contract and a mortgage shortfall debt. It also amplifies MCOB 6 (duty to treat customers fairly) in respect of the information and service provided to customers who have payment difficulties or face a mortgage shortfall debt
MCOB 13.3 requires that a firm must deal fairly with any customer who has a payment shortfall on a regulated mortgage contract, or a sale shortfall. It addresses vulnerable customer and customers in payment difficulties. It also requires forms to make and retain an adequate record of its dealings with customers whose account has a payment shortfall or a sale shortfall.
MCOB 13.4 stipulates that if a customer falls into arrears, a firm must within 15 business days provide the customer with certain arrears information, and to provide further disclosure on subsequent arrears. Before commencing an action for possession, a firm must (1) provide a written update of the information required by MCOB 13.4; (2) ensure that the customer is informed of the need to contact the local authority to establish whether the customer is eligible for local authority housing after his property is repossessed; and (3) clearly state the action that will be taken with regard to repossession. MCOB 13.4A deals with data sharing with other charge holders including an obligation to give notice if it commences legal proceedings to each person who has a legal or equitable mortgage (which will include charging orders).
MCOB 13.5 requires further disclosures about the payments due and charges being incurred, and MCOB 13.5.3 prohibits firms from putting pressure on a customer through excessive telephone calls or correspondence, or by contact at an unreasonable hour.
MCOB 13.6 deals with repossessions and is set out in full as follows:
A firm must ensure that, whenever a property is repossessed (whether voluntarily or through legal action) and it administers the regulated mortgage contract or home purchase plan in respect of that property, steps are taken to:
(1) market the property for sale as soon as possible; and
(2) obtain the best price that might reasonably be paid, taking account of factors such as market conditions as well as the continuing increase in the amount owed by the customer under the regulated mortgage contract.
13.6.3 If the proceeds of sale are less than the amount due:
A firm must ensure that, as soon as possible after the sale of a repossessed property, if the proceeds of sale are less than the amount due under the regulated mortgage contract or home purchase plan, the customer is informed in a durable medium of:
(1) the sale shortfall; and
(2) where relevant, the fact that the sale shortfall may be pursued by another company (for example, a mortgage indemnity insurer).
13.6.4 (1) If the decision is made to recover the sale shortfall, the firm must ensure that the customer is notified of this intention.
(2) The notification referred to in (1) must take place within five years of the date of the sale (if the regulated mortgage contract or home purchase plan is subject to Scottish law) or within six years (in all other cases).
13.6.6 If the proceeds of sale are more than the debt:
A firm must ensure that, on the sale of a repossessed property, if the proceeds of sale are more than the amount due under the regulated mortgage contract or home purchase plan, reasonable steps are taken, as soon as possible after the sale, to inform the customer in a durable medium of the surplus and, subject to the rights of any subsequent mortgage or charge holders, to pay it to him.
13.7 Business loans and loans to high net worth mortgage customers:
Where the regulated mortgage contract is for a business purpose or is with a high net worth mortgage customer, a firm may as an alternative to MCOB 13.4.1 R(1) provide the following information in a durable medium instead of the Money Advice Service information sheet "Problems paying your mortgage":
(1) details of the consequences if the payment shortfall is not cleared;
(2) a description of the options available to the customer for clearing the payment shortfall; and
(3) (in the case of loans for a business purpose) details of sources of fee-free advice for business customers.