Mortgage lenders are sometimes failing to show sensitivity towards customers who have endured a personal crisis such as a bereavement and are struggling to keep up with their payments, the City regulator has found.
The Financial Conduct Authority (FCA) wants lenders to make sure they are treating their most vulnerable borrowers fairly and that front line staff are given enough flexibility to offer leniency when trying to help people to hang on to their home.
The regulator found evidence that circumstances which require particular care, such as bereavement, terminal illness or physical or mental health issues, were not always picked up on by staff or properly examined.
It said such cases "were not consistently identified or appropriately probed by front line staff in some firms, even when they were explicitly referred to by borrowers. Referrals to specialist teams were also missed or made late in the process.
"This resulted in firms failing to treat some customers sensitively and failing to provide the benefit of short-term leniency set out in their policies."
The findings were published in a review that the regulator carried out last year into mortgage lenders' arrears management, ranging from bigger names to smaller operators. There are 11.2 million mortgages in the UK, with loans worth more than £1.2 trillion.
Arrears management has improved since a similar probe around five years ago, but some "one size fits all" approaches mean lenders are missing chances to tailor solutions to individual customers' needs, the FCA found.
Staff now appear to have more time to talk through solutions to a customer's circumstances than was found during the last review.
But customer records and diary notes were "insufficiently detailed" in more than one firm, which
restricted the ability of call handlers to deal with borrowers' cases.
There appeared to be pressure on some staff to move on to the next customer call before they could fully note down all the details for people with complex problems.
The FCA expects firms to have a "clear strategy" in place for proactively engaging with customers who are in danger of tipping over the edge.
It also found that some firms are not monitoring the arrears handling process adequately when they are outsourcing it elsewhere.
In the case of one firm it looked at, there was evidence of a "tick box" mentality being promoted, but the firm in question was unable to demonstrate effective oversight or control of the risks involved.
There was also evidence of "unfair" charging practices. In another case, a firm charged a customer for cancelling a visit - even though it was the firm, not the customer, who cancelled.
Clive Adamson, director of supervision at the FCA, said: "Lenders need to treat customers in financial difficulty fairly. We want firms to take further action to strengthen their arrears management practices and invest in their systems and people to make sure that they get this right.
"We are already working with firms and trade bodies to help them embed a culture centred on delivering the best outcome for customers based on their specific circumstances."
Some lenders were found to be unable to switch borrowers' payment arrangements to suit their circumstances, such as when their wages were paid in. One firm only allowed borrowers to pay direct debits on one day of the month.
Arrears and repossessions are currently on a downward path. Some 28,900 people had a property repossessed in 2013 - the lowest annual figure since 2007.
The Bank of England base rate, which has been held at a historic 0.5% low for five years, has been keeping mortgage payments relatively affordable.
But some better news about the economy has prompted speculation over the possibility of interest rates rising, which will mean borrowers' costs rising again. There have been indications that any increase will be gradual.
Some experts have already seen signs of lenders starting to re-price their mortgage deals slightly upwards.
Lenders are anticipating toughened new mortgage lending rules set to come into force in April, to prevent any return to irresponsible lending.
The Mortgage Market Review (MMR) rules will mean lenders have to consider not only whether a borrower can afford their loan now but also what impact interest rate rises could have.
The Council of Mortgage Lenders (CML), which represents banks and building societies, welcomed the review.
CML head of policy Jackie Bennett said: "We have always urged any borrowers with repayment problems to talk to their lender at the earliest opportunity, and continue to do so.
"Most customers can get back on track following a temporary period of payment difficulty, and lenders will help them devise a plan to achieve this that is tailored to their individual circumstances."
Paul Broadhead, head of mortgage policy at the Building Societies Association (BSA), said mutuals take a "human approach".
He said: "Tick-box arrears management is dead and buried, and has been for some time."
Housing Minister Kris Hopkins said the report "will help ensure lenders continue to treat their customers fairly and that repossessions remain the last resort".