Post-Completion Servicing, Arrears, Forbearance and Possession
Servicing
After completion the lender administers the account: collecting payments by direct debit, applying rate changes, issuing annual statements and handling transfers of equity, further advances and product switches. Borrowers on a reversion rate should be told about cheaper switches, and payment changes generally require notice - commonly 30 days - before they take effect.
Arrears and forbearance
MCOB 13 governs arrears handling: firms must have a written policy, contact borrowers early, consider reasonable forbearance before possession, and avoid unfair charges. Forbearance includes payment holidays, term extensions, interest-only conversions, reduced payments and arrears capitalisation. The Pre-Action Protocol for possession claims requires lenders to consider proposals and respond within a set period (commonly 10 business days), exchanging financial information.
Possession
A lender cannot repossess without a court order. Courts may grant an outright order, a suspended order (possession postponed on payment terms) or a time order. Since 2010 the old two-month arrears trigger is no longer the test; the court considers reasonableness under the Administration of Justice Act 1970. After sale, any shortfall may be pursued, though lenders often write it off or sell the debt.
Traps
Support for Mortgage Interest is a loan, not a benefit, paid at a standard rate. A payment holiday still accrues interest - it is not free. Arrears fees must be proportionate and the Ombudsman can order refunds.
Rule of thumb: no court order, no possession - and the earlier forbearance is discussed, the more options remain.