FSA regulates home mortages in the U.K.
The Financial Service Authority has rules and regulations concerning mortgage loans throughout Great Britain and the United Kingdom. These regulations include making lenders responsible for giving borrowers affordability tests, prohibiting the sale of property with toxic contaminants that put borrowers at risk, and prohibiting excessive arrears charges for borrowers who are behind on mortgage payments.
Affordability Tests
The affordability test was initiated to properly access a borrower's ability to repay a loan. The test takes into consideration the borrower's income, which is then compared to the cost of the mortgage payments to determine affordability. The affordability standard in the U.K. is between 20 and 25 percent of the borrower's income should pay the mortgage payment. If more than 25 percent of a borrower's income will go toward paying the loan, the property is deemed too expensive.
Toxic Contaminents
The FSA prohibits lenders from originating loans for borrowers interested in properties that may have toxic contaminants, including lead paint and asbestos. The property must be safe for the borrower to move into, and may not have any current or future danger to the borrower's health by inhaling the chemicals or coming into physical contact with it.
Excessive Fees
The FSA mortgage rules also prohibit excessive fees for borrowers who are behind in mortgage payments. If a borrower has a financial issue that causes payments to be late or missed, the FSA states that mortgage companies are not allowed to make an excessive profit off of the borrower's late fees. The rules do not prohibit late fees, only regulates excessive fees attached to a borrower who is working to catch up on delinquent mortgage payments. This regulation was created to create mortgage reform in the U.K.
Tags: mortgage payments, borrower income, behind mortgage, behind mortgage payments, borrowers behind