In March this year the Financial Conduct Authority (FCA) introduced a range of targeted temporary measures and guidance to help consumers who have been negatively impacted and are struggling with mortgage payments as a result of Covid-19. In line with existing guidance, consumers can take a first or second three-month payment deferral (PD) until 31 October. The FCA published additional guidance with effect from 16 September, which included the support that should be offered to borrowers who have already an initial and/or subsequent PD but are still in financial difficulty. 

From 31 October, firms should move back to providing their customers with tailored support to reflect the specific circumstances of the customer. Here are some of the key action points firms should be considering now.

Continued short-term support: The guidance recognises that some customers may continue to face payment difficulties, and that for some customer cohorts continued short-term support may be appropriate, with firms being able to act on more limited information from customers than they would otherwise gather when assessing the appropriateness of forbearance options under Mortgage Conduct of Business (MCOB) 13. If firms offer short -term support in this way they must have a written policy and must review the forbearance offered to the customers in accordance with MCOB 13 within 60 days of agreeing it.

Forbearance: Given the changing and fluid nature of the current Covid-19 situation and uncertainty as to the continued impact of Covid-19 at a national and local level, firms' treatment of borrowers and provision of support needs to adapt to reflect the ongoing uncertainties and challenges that customers will continue to face. The combination of a changing and specific impact of Covid-19 on individual customers, coupled with the volume of customers impacted, creates a real challenge for firms. They must guarantee that they have the resources and oversight to ensure that forbearance offered to customers takes account of individual customer needs and circumstances. Firms will need to have these varied forbearance options available in their toolkit.

Second charge lenders: The restriction on capitalisation of certain PD amounts seen in the original draft of the September guidance has not made it into the final guidance. This will be a relief for second charge firms. However, the final guidance does set out particular considerations for second charge lenders in relation to the forbearance options available to firms (including applying simple interest or zero per cent interest on PD amounts) and highlights the particular concerns the FCA sees with this segment of the market.

Customer engagement and communications: Customer engagement and communication is key. Firms need to consider both online and offline channels, ensure clear communication strategies are implemented and that staff are appropriately trained. Firms should ensure that customers are not required to repeat information to multiple people or required to complete detailed questionnaires, to avoid them becoming disengaged.

QA, T&C and governance: The QA of cases, training of staff and appropriate governance around processes are significant considerations for firms. End to end QA should be adopted to allow firms to evaluate the fairness of customer outcomes. Many firms will require additional staff to provide support to customers - the training and oversight of these staff is important. The senior manager accountable for providing support to customers should critically review policies, procedures and controls. Executive committees and boards should ensure teams are appropriately resourced and demonstrate a customer-focused culture. Firms should keep appropriate records of generic and personalised information provided.

As firms move forward now to the end of the PD period and the end of the Job Retention Scheme in October, a large number of borrowers will continue to be impacted by Covid-19 in a variety of different ways. Some may be suffering continued or new short-term financial difficulties as a result, while others may be suffering much longer-term financial distress. The response of firms to differing circumstances of borrowers which allows the consideration of individual circumstances is key. The challenge with this is the volume of borrowers that firms will need to work with and their differing circumstances. Firms will need to build teams and processes to manage these volumes whilst ensuing appropriate QA and governance arrangements.