Mortgage Prisoners – What Steps Can the Industry Take to Help?

Borrowers trapped in their current, more expensive mortgage who can’t re-finance for a cheaper loan have been dubbed “mortgage prisoners” in recent years in the United Kingdom.

The pandemic has shone a spotlight on their situation. A recent report by the London School of Economics (LSE) found that those in this situation were up to 40% more likely to default on their mortgage payments.

The UK’s Financial Conduct Authority (FCA) has made efforts to address the issue of mortgage prisoners over the last few years, but any progress appears to have been offset by the impact of the coronavirus pandemic and resulting economic downturn.

A joint effort

The LSE report suggests that the UK’s Treasury offer interest-free government equity loans and ‘mortgage rescue’ to help homeowners, but what about the financial services organisations to whom these mortgage prisoners are in debt? What role can they play in addressing this pressing issue?

One thing lenders can do is improve communications with customers who find themselves locked into unaffordable mortgages. They can provide better information about who owns their mortgages, the regulatory status of those owners and advising which protections are available to the customers. All this is dependent on identifying mortgage prisoners from the outset. Some customers may be unaware that they’re actually in the situation of being locked-in to an unaffordable mortgage product.

Identifying a need

Lenders need to first identify who these mortgage prisoners are before they can respond accordingly. It’s similar to other vulnerable customers who don’t or won’t identify as vulnerable.

There’s the issue of new vulnerability, too, with increasing numbers of customers finding their personal circumstances changed considerably due to the pandemic. This puts the onus on responsible lenders to get a comprehensive picture of each and every customer before deciding how best to communicate with them and how best to address their particular needs. This is vital if financial services organizations are to ensure they’re not contributing to further detriment via their interactions or even negligence.

Data-driven

At the crux of the matter is customer data and how financial services institutions ensure they gather the right information while optimizing how it’s used. It’s crucial to have the right systems in place to log all customer interactions. This helps the business to pinpoint patterns in behavior or communications that would suggest a change in circumstances. The ability of the system’s predefined workflows to steer the customer service agent in the right direction for follow-up actions is also paramount with intelligent systems reinforcing any employee training.

This includes suggesting which communications should be sent out to customers next or which products could be made available. Crucially, when it comes to mortgage prisoners, the system would trigger a send of the factual information needed while steering the customer in the direction of support relevant to his or her specific circumstance.

What’s right for one struggling borrower may not be right for another but, with the right systems and processes in place, lenders can facilitate nuanced communications, treating every customer as an individual in line with their specific needs.

The right support

It’s vital for lenders to understand and support the needs of mortgage prisoners if they are to play their role in ending the dire situation in which increasing numbers of customers find themselves. Lenders can kick-start a chain of measures to proactively help by training staff how to best handle this type of customer, putting in place the systems which help identify and respond to their specific need.

It’s only with this infrastructure in place that lenders can offer appropriate, more flexible products, services and advice while improving the situation for an increasing percentage of the population.

Are you looking to enhance vulnerability detection within your case handling process? Check out our page on vulnerability.