As repossessions are expected to continue to rise, lenders need to do more to make sure it is a last resort, a new report has suggested.
HM Treasury is calling on the Financial Services Authority to take a stance on unfair arrears charges and clamp down on those who fail to comply.
John McFall, chairman of the Treasury Committee, said: "Losing the family home is one of the most distressing experiences a family can go through.
"We have heard harrowing tales of households struggling to keep their heads above water in an attempt to avoid repossession."
Mr McFall highlighted some examples of malpractice, emphasising that some companies charge as much as £35 simply to make a phone call, while others charge £150 for a visit from a debt counsellor.
The Council of Mortgage Lenders revealed in June that it was to downwardly revise its prediction for the number of repossessions this year from 75,000 to 65,000.
Around 360,000 mortgages are expected to be in arrears by the end of the year, equating to around 2.5 per cent of all mortgages.