The Financial Regulator's new mortgage arrears code will not protect borrowers, the legal rights group Free Legal Rights Centres (Flac) has said.
According to the group, the Code of Conduct on Mortgage Arrears, which will come into affect on February 27th, fails to deal with a number of important aspects of mortgage arrears, including the sanctions that may be imposed for breaches of the code, or the legal costs that a lender may recover.
The original draft of this code was to provide for an accumulation of six months’ arrears before court proceedings could be issued, Noeline Blackwell, Flac's director general said.
"The new and final version reduces that protection, such that a lender may start proceedings six months after any arrears at all, without requiring that the full six months’ must be owing," she added.
The language in the code is vague and ambiguous, making it difficult to enforce, according to Ms Blackwell.
"The code gives guidance to lenders, urging them to deal sympathetically with borrowers in difficulty, but allows a number of escape routes for lenders who wish to short circuit the code."
The code sets out a framework within which mortgage lenders must operate in relation to arrears and details the waiting period for commencement of legal action on repossession, agreed as part of the Government's recapitalisation plans.
Under the code, mortgage lenders must not seek the repossession of properties until every reasonable effort has been made to agree an alternative repayment schedule.