Mortgage Charter vs MCOB 13 vs Section 36 AJA 1970

Falling behind on a mortgage feels like a single problem, but three separate layers of protection sit between you and repossession, and they apply at different stages. The Mortgage Charter is a voluntary commitment most lenders have signed, aimed at helping before you miss a payment. The FCA's MCOB rules are binding regulation that governs how lenders must treat you once you are in difficulty. Section 36 gives the court power to hold off possession at the hearing itself. This comparison shows what each provides.

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Feature	Mortgage Charter	FCA MCOB 13	s.36 AJA 1970
Type	Voluntary industry commitment	Regulatory rules (binding)	Statutory court discretion
When it applies	Before missed payments (forbearance)	Throughout the arrears process	After court possession proceedings issued
Forbearance options	6-month payment holiday, interest-only switch, term extension	Various — capitalisation, term extension, switch, payment holiday	Court can suspend possession or grant time to pay arrears
Affects credit file	No (if charter forbearance taken before missed payment)	May appear as arrears once missed payment recorded	Existing arrears and any CCJ already on file
Enforcement	FCA can investigate non-compliance	FCA can fine and require compliance	Court order; appeal to Crown Court
Coverage	50+ lenders representing 90% of UK mortgages	All FCA-regulated mortgage lenders	All mortgages and second charges
Time you have to engage	Best engaged before first missed payment	From first contact about difficulties	At the possession hearing itself

These protections overlap. Engaging early (Charter), exercising rights during arrears (MCOB), and challenging at court (s.36) provide layered protection. Most repossessions are avoidable if you engage with the lender from the first sign of difficulty.

Use them in order, not instead of each other

These are layers, not alternatives, and the earlier you engage the more options you have. The Mortgage Charter is aimed at people who can see trouble coming and act before a payment is missed — that is when a switch to interest-only or a term extension can be arranged without an arrears marker on your credit file. Once payments have actually been missed, the FCA rules take over and require the lender to treat you fairly, consider forbearance, and treat repossession as a last resort. By the time you reach a court hearing, the judge's power under section 36 is the final safety net.

Struggling but up to date? Contact your lender now and ask specifically about Charter options. This is the only stage where your credit file can be left untouched.
Already in arrears? Put a realistic repayment proposal in writing. Lenders must consider it, and a documented proposal helps enormously later.
Court papers received? Attend the hearing with an income and expenditure statement. Courts routinely suspend possession where arrears can be cleared over a reasonable period.

The mistake that causes most repossessions is silence. Lenders cannot exercise forbearance for someone who does not answer the phone, and the court will ask what you proposed and when. Even a small payment maintained consistently is far better than nothing while you sort things out.

Get free advice from Citizens Advice, StepChange or National Debtline before agreeing to anything that adds arrears to the loan.

Frequently asked questions

Will asking for help damage my credit file?

It depends on the stage and the option. Arrangements agreed under the Mortgage Charter before any payment is missed are designed not to affect your credit file, which is a strong reason to act early. Once payments have been missed, arrears are recorded whatever help follows. Capitalising arrears or extending the term is reported differently again. Ask the lender directly what will be reported before agreeing, and get the answer in writing rather than relying on what you were told on a call.

What should I take to a possession hearing?

A completed income and expenditure statement, evidence of any income you expect such as a benefit award or new job, proof of payments you have made, and a clear proposal for clearing the arrears over a period you can genuinely sustain. Turn up even if you have nothing to offer — a hearing where the borrower attends and engages goes very differently from one where nobody appears. Free duty advice is usually available at court on the day.

Can I sell the property myself instead of being repossessed?

Usually yes, and it is normally the better outcome, because a sale on the open market tends to achieve more than a repossession sale and leaves you in control of the timing. Courts can adjourn or suspend proceedings where a sale is genuinely in progress and likely to complete within a reasonable period. Tell your lender in writing as soon as you decide to sell, and provide evidence — the agent's instruction, viewings and any offer received.

What happens if the sale does not cover what I owe?

The shortfall remains your debt, and lenders can pursue it for a long period afterwards, so a repossession does not necessarily draw a line under things. Get free debt advice about the shortfall as a debt in its own right — it may be negotiable, and it may be appropriate to include it in a formal debt solution. Do not ignore correspondence about a shortfall years later; the limitation position depends on the type of debt and any acknowledgement or payments made.

Related guides

Mortgage Arrears and the Pre-Action Protocol

Falling behind on mortgage payments is frightening, but lenders are required to follow strict procedures before they can repossess your home. The Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears means that courts will expect both you and your lender to take reasonable steps to resolve arrears before a possession order is made. Acting early and engaging with your lender greatly improves your chances of keeping your home.

8 min

Mortgage Charter Protections

The Mortgage Charter is a voluntary agreement between HM Treasury, the FCA, and most major UK mortgage lenders (covering around 90% of the residential market). It gives borrowers struggling with payments specific forbearance options that protect their credit file and home. This guide explains what the Charter offers, how to invoke it, and what to do if your lender is not signed up.

6 min

Defending Mortgage Repossession: Your Rights at Court

A mortgage repossession claim is frightening but not the end of the road. Lenders must follow the FCA's MCOB rules and the Pre-Action Protocol for Mortgage Possession Claims before they can issue. The court has wide discretion under section 36 of the Administration of Justice Act 1970 to suspend or postpone possession. This guide walks through every defence and the practical steps to keep your home.

11 min

Disclaimer

The information on this page was correct at the time of writing. Amounts, thresholds, and rules may change. Always check the latest official guidance.