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<p>A mortgage prisoner is an existing borrower that cannot switch to a cheaper deal
with a new lender because they don’t meet stricter borrowing criteria set by strengthened
regulations post financial crisis. The Government is aware that these borrowers have
been in a difficult and stressful situation. That is why we have worked closely with
the FCA to implement their rule change to remove the regulatory barrier that has prevented
some customers from switching.</p><p> </p><p>I have written to Stephen Jones, Chief
Executive Officer of UK Finance to outline my expectation that as many of its members
as possible should move quickly to offer new deals to borrowers that are eligible
to switch under the new FCA rules.</p><p> </p><p>However, FCA data shows that some
of these borrowers may be in problem debt and are therefore likely to exceed the risk
appetite of many lenders, including those in arrears. As with any borrower in the
UK that experiences problem debt, the Government and the FCA are committed to working
alongside lenders to provide appropriate support for these individuals. That is why
we have established a range of initiatives to support those in problem debt, including
the Money and Pensions Service which has been set up by the Government to support
consumers with free and impartial information for every stage of their financial lives.
Treasury officials are also working on implementing Breathing Space which will give
borrowers in problem debt the opportunity to get their finances back on track. We
have also ensured that regulations concentrate on helping people avoid repossession,
including protection in the courts through the Pre-Action Protocol which makes it
clear that repossession must always be the last resort for lenders.</p><p> </p><p>The
sale of mortgage books is a commercial decision for lenders and the Government does
not seek to intervene in these decisions.</p><p> </p><p>I cannot comment on future
UK Asset Resolution (UKAR) sales other than to say that a range of buyers, including
active lenders, will be invited to participate and we will continue to require bidders
to agree to our robust customer protections. In asset sales to date, we have not received
a bid from an active lender that covered all of the portfolio on offer.</p><p> </p><p>In
all sales of UKAR loans, customer treatment is a key consideration for UKAR and the
government in selecting a bidder and all bidders have to agree to UKAR’s customer
treatment conditions in order for their bid to be considered. This is a strict requirement,
not open to negotiation, and is considered before bids are assessed on price.</p><p>
</p><p>The purchaser is obliged to ensure the servicer of the mortgages is regulated
by the Financial Conduct Authority (FCA). For the latest asset sale and future sales
the legal title holder must also be FCA-regulated. This is a contractual requirement.</p>
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