MRT2 · Mortgage Products and Post Completion
LO4 and LO5 are rule-heavy and full of near-miss numbers: 15 business days, two direct debits a month, £50 or £1, 10, 15 and 5 business days under the Protocol, 6 and 12 years after a sale. Expect scenarios where you must spot the breach, pick the next lawful step, or calculate a capitalisation, a shortfall, a receiver’s commission or a surplus. The thread running through all of it: deal fairly, consider forbearance, and repossess only as a last resort (MCOB 13.3.2AR(6)).
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Checked against: Walbrook (formerly LIBF) CeMAP specification v14, MRT2 LO4 (AC4.1-4.5) and LO5 (AC5.1-5.3); FCA Handbook MCOB 3A.3, 3A.5, 11.6.41R-11.6.49R, 12.4, 13.3-13.6; Pre-Action Protocol for mortgage arrears (justice.gov.uk); LPA 1925 ss101, 103, 105, 109; Limitation Act 1980 s20; AJA 1970 s36; checked 11 Oct 2026. Independent prep, not endorsed by Walbrook (formerly LIBF).
Before borrowing, the warning comes through promotions. MCOB 3A.3.1R requires a mortgage promotion to be balanced, with a fair and prominent indication of risks, to make clear where applicable that the credit is secured on the customer’s home, and not to disguise or obscure warnings. The current MCOB 3A text sets no fixed form of words. An MCD promotion quoting a rate must also state the security and show the APRC at least as prominently as any rate (MCOB 3A.5.1R).
Making sure it is understood is part of the Consumer Duty consumer understanding outcome (PRIN 2A.5): explain what happens if payments are missed in plain words and check the customer can say it back. A signature is not understanding.
Once arrears arise, the warnings become specific:
| When | What the lender must send | Rule |
|---|---|---|
| Within 15 business days of becoming aware of arrears | MoneyHelper ‘Problems paying your mortgage’ sheet, missed payments, shortfall, charges, outstanding debt, likely future charges | MCOB 13.4.1R |
| New arrears within 12 months of earlier ones | Full pack again, or a statement including the consequences, including repossession | MCOB 13.4.4R |
| At least quarterly while in arrears | Statement of payments due, shortfall, debt and charges | MCOB 13.5.1R |
| Before starting repossession action | Written update, advice to contact the local authority about housing, and a clear statement of the action it will take |
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| MCOB 13.4.5R |
Trap: assuming MCOB 3A prescribes exact wording, or forgetting the local authority housing step before repossession action.
Takeaway: Promotions: secured on your home, risks prominent. Arrears: MoneyHelper sheet within 15 business days, quarterly statements, written update before repossession.
MCOB 13.3.1R requires firms to deal fairly with any customer who has or may have payment difficulties, under a written policy agreed by the governing body. Since 4 Nov 2024 that includes customers who say they are at risk of a shortfall, or whom the firm knows to be at risk, before any payment is missed.
MCOB 13.3.4AR lists the forbearance options: extend the term, change the type, defer or waive capital or interest, reduce the rate or apply simple interest, capitalise, or use Government schemes. The lender must explain the effect on the overall balance and the credit file. Capitalisation cannot be automatic where it is material (13.3.4AAR):
| Capitalised amount (20 years at 5%) | Monthly rise | Extra interest | Material? |
|---|---|---|---|
| £600 | £3.96 | £350 | Yes: both limits hit |
| £100 | £0.66 | £58 | Yes: interest limit hit |
| £40, after an earlier one adding £30 interest | £0.26 | £23 (total £53) | Yes: cumulative interest over £50 |
Charges must reflect the extra administration cost (MCOB 12.4.1R), never a percentage of the loan (12.4.8R), should not be applied while the customer keeps to an arrangement (12.4.1AE), and part-payments must be allocated to minimise the shortfall (12.4.1BR).
Trap: waiting for a missed payment before applying MCOB 13, or testing each capitalisation alone instead of with earlier automatic ones.
Takeaway: Fair dealing starts at risk, not at arrears. Consider every forbearance option; capitalise automatically only below £50 interest and £1 a month.
