"AMI would ask whether it would be fairer for the customer to agree a faster possession process and minimise the debt outstanding by reducing the penalties in arrears."
The latest figures from the CML showed the number of mortgages in arrears continued to fall in the second quarter of this year, and is now at its lowest level since records began more than 20 years ago.
The number of mortgages in arrears was 13.4% lower than a year ago, when the total stood at 106,800, and is now at its lowest level since the run of figures began in 1994.
The AMI says that although this is a "positive trend", the number of properties taken into possession also fell in the second quarter to 1,900, down from 2,100 in the first three months of the year. The CML said that on the basis the present trend continues, the number of mortgaged property repossessions this year is on course to be the lowest since 1982 when there were 6.5 million mortgages compared to 11.1 million today.
In its Quarterly Economic Bulletin, the AMI says: "Nobody wants to lose the roof over their head but if they are in serious arrears and have little to no hope of getting back in control of their payments, AMI would ask whether it would be fairer for the customer to agree a faster possession process and minimise the debt outstanding by reducing the penalties in arrears.
"While MMR has undoubtedly limited people’s ability to over-expose themselves by taking on a mortgage they cannot afford, there remain areas where we are less sure it is working so well. The handling of arrears is one area that we fear that we may have got it wrong."
The AMI also believes that because it is so easy to stray into giving regulated advice, "it is now nearly impossible for lenders to have a reasonable discussion with borrowers who find themselves in financial difficulty but perhaps not yet in arrears".
The AMI added that generic guidance in these situations is "woefully insufficient for the borrower’s needs" and there is the danger that conversations almost immediately stray into the regulated advice arenas of debt.
