§ Baroness Hamwee
asked Her Majesty's Government:
What is the status of the recent note agreed by the Council of Mortgage Lenders and the Association of British Insurers on negative equity, whether it will be included in the future Code of Practice on Mortgage Lending, and what steps the Council of Mortgage Lenders will be taking to ensure that it is adhered to by lenders; and
Whether they will monitor the refusal by mortgagees to permit borrowers in arrears and with negative equity to sell their homes on a voluntary basis, and whether they will introduce legislation, if necessary.
The note, a copy of which has been placed in the Library, sets out current general practice adopted by mortgage lenders and insurers in relation to voluntary sales of property by home owners with negative equity and mortgage arrears. It is not a set of rules or procedures which lenders and insurers are obliged to follow. Cases are considered on their individual merits, and the note outlines the criteria which lenders and insurers commonly apply. It is for the Council of Mortgage Lenders to consider whether the contents of the note should be included in their proposed Code of Mortgage Lending Practice.
The contents of the note suggest that most lenders and their insurers already recognise that in some cases it is in the interests of all parties to limit the accumulation of debt by allowing borrowers to sell voluntarily. The Government have no plans for legislation in this area but we will continue to encourage lenders to act reasonably and flexibly in dealing with borrowers' problems.