18 February, 2009

It has been revealed that anybody who opts for a mortgage or homeowner loan has feel a sigh of relief by getting known with the fact that the product they are seeking for and the company who are supplying it are both regulated under the Financial Services Authority (FSA), thereby making sure that the company and the loan adhere to a strict procedure and guidelines, which provide the consumer a high level of protection and understanding of exactly what they are entailing and what their commitments are.

On the other hand, this procedure do not be relevant to second charge homeowner loans, or secured loans, which offer extra borrowing secured on a person's home alongside the main mortgage, yet these can place a borrower's home in danger of repossession just as much as the main mortgage.

It has been indicated that any company that provides second charge secured loans, must entail a license issued by the Office of Fair Trading (OFT) so as to do so and thus work within the OFT's guidelines on secured loans.

However, following a rising level of arrears and defaults on secured loans, which can finally turned to a borrower losing their home through repossession, the OFT has carried out a study into this sector, looking into practices taken by loan companies regarding areas like sales practices, customer care and arrears managing methods.

The regulation is planned to promote the most appropriate practice within the secured loan sector, enhancing and building on the rules which already exist within the OFT's guidelines and will operate alongside their present study into careless lending by banks, building societies and other loan companies.

On the other side, the OFT has now issued its draft suggestions for the new guidelines and any company who wanted to respond to these must do so by early May this year. Therefore, the ultimate report is then projected to be issued some time in the autumn this year.