'Sale and rent back' regulated

2 July 2009

A new building in the Thames Gateway

After campaigning by Shelter to highlight the problems of the industry, regulation of the ‘sale and rent back’ sector by the Financial Services Authority (FSA) began yesterday on 1 July 2009.

‘Sale and rent back’ or ‘mortgage rescue’ companies offer struggling homeowners the chance to stay in their homes when they can no longer afford their mortgage. The property is bought and rented back to them by the company.

But as the sector hasn’t been scrutinised, some companies have taken advantage of people’s desperate circumstances by buying properties at much less than their market value, putting up rents to unreasonable levels or even evicting tenants from their own home for no reason.

An interim regime, introduced by the FSA yesterday, addresses the most immediate problems for consumers, followed by a more comprehensive regime which will start on 30 June 2010.

Under the interim regime, companies will need to prove that they have adequate resources and are run by ‘fit and proper’ people.  Companies will also have to abide by the FSA’s business rules.

Sam Younger, chief executive of Shelter said:

‘Shelter campaigned actively to highlight the problems of the industry, so we strongly welcome FSA regulation, which is long overdue.

‘With 65,000 homes predicted to be repossessed this year, more and more struggling homeowners will be tempted by sale and rentback schemes in the hope they can offer a lifeline. However many schemes are exploitative, leaving people financially worse off and vulnerable to homelessness.

‘It is vital that the FSA enforces the regulations fully and gets the whole industry signed up for regulation within a month. We will work diligently with the FSA to expose any company that fails to sign up by 31st July and ensure they are held to account and consumers are aware of their practices.’

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