Thursday 17 July 2008

Cartel Client Review

http://www.cartelclientreview.co.uk/ - Cartel Client Review Limited helps you receive financial compensation as a result of invalid, unenforceable or fundamentally flawed consumer credit agreements.

Monday 16 June 2008

To save your home, be in possession of the facts

Home reposession cases nearly doubled in the first three months of this year, according to debt advice charities, which warn that many homeowners facing court action are not receiving the legal help they need.

Law centres and Citizens Advice report that the number of people seeking help to fend off repossessions is soaring, but some are being turned away because they do not qualify for legal aid, while many more are turning up at court without attempting to get legal advice.
Suman Antcliffe of Burton upon Trent's Citizens Advice bureau says that 17 repossession cases were heard in one county court session a few weeks ago. 'The number has shot up in the past few months,' she says.

She adds that the judge is becoming 'exhausted' with the workload because homeowners are not seeking legal advice beforehand. 'People are coming in totally unprepared and the judge is having to do the sums on their behalf.'

Capitalise, a London-based debt advice organisation, says it has helped 90 per cent more clients in repossession hearings from January to March than in the same period in 2007, while the Sheffield Law Centre reports a 100 per cent increase over the past six months. Nazma Latif, the centre's duty scheme co-ordinator, says: 'The court used to hold a session devoted to repossession hearings once every three weeks; now they hold one every week. Where we would help two or three clients every session, we now help five or six.'

The Isle of Wight Law Centre says it is helping more than twice the number of homeowners it did last summer and is 'struggling to cope with demand'.

Ninety-four of the 230 county courts in England and Wales have legal advice desks, funded by the Legal Services Commission, which are intended to provide last-minute help.

But James Williams, housing solicitor at the Harehills and Chapeltown Law Centre in Leeds, says that not getting legal help well before a hearing can have devastating consequences. 'Someone who gets advice at the door of the court, or no advice at all, is far more likely to see a possession order granted, which takes them a step closer to losing their home. If we have time to go through the paperwork and gather evidence in advance, we can argue for a realistic payment schedule, an adjournment of the possession order or even get the case dismissed.'

Debt advisers report that some lenders adopt aggressive tactics outside the court to persuade unrepresented homeowners to agree to unrealistic repayment deals. Anthea Puran, of the law centre Law for All in Action, says: 'Lenders' agents can be quite bullying, and sometimes their legal representatives approach defendants on the day of the hearing and try to persuade them to agree to a repayment schedule with high monthly repayments they won't be able to afford. The court then grants the lender a suspended possession order, which means a possession warrant is granted if the defendant is unable to keep up the repayments.'

Steve Lewis, who earns £20,000 a year working for a disability charity on the Isle of Wight, was taken to court by Halifax after falling into arrears on his £92,000 mortgage. He stopped work while suffering from depression and, although he had a payment protection policy, did not qualify for a full, ongoing payout because he was not being treated by a psychiatrist. He was then hit by a sharp hike in his mortgage payments - from £480 a month to £730 - after his fixed rate ended in March. He is unable to remortgage because of the arrears. He says the Halifax proceeded with the case even though it knew he was starting a new job the following week.

Lewis was helped by the Isle of Wight Law Centre: 'I couldn't have afforded a solicitor. If I'd gone into court to defend myself, I wouldn't have known what to say, what agreements could be made. Without the Law Centre, I would probably have lost my home.'

Heather Scott, a spokeswoman for Halifax, said: 'We have shown considerable forbearance and have been trying to help Mr Lewis since 2006. The court order is a standard process and is the first step to formalising a payment schedule. As instructed by the court, this is now in place. Unfortunately, we did not know Mr Lewis had secured a new post until the court hearing had taken place.'

Lewis is now paying an extra £30 a month to try to clear the arrears.
Deborah Smith (not her real name), a VAT inspector who lives in London, agreed just before her repossession case to pay an extra £100 a month towards her arrears, but couldn't cope with the payments and has fallen even deeper into debt.

'I sought advice from Law for All about the repossession case, but then panicked,' she said. 'The mortgage company phoned and said: "There's no need to go to court, just pay us £100 a month extra to clear the arrears." I didn't want to go to court, so I said yes, but it was the worst thing I could have done.'

Smith was lent £214,000 - an extraordinary 7.6 times her salary - for a first mortgage, then she and her husband were lent a further £45,000. They managed the repayments of £1,700 a month on their combined take-home pay of £3,000 a month, but when her husband became ill and could no longer work, she fell into arrears of £2,700.

Her lender, GE Money, says it lent her the money because her credit record was excellent and the repayments should have been lower than the amount she was already paying out for her previous mortgage, plus other unsecured debts. However, it acknowledges that she has shown willingness to deal with the arrears and adds: 'The next step for us is to re-establish contact. We are not a real estate company - we will try to find a way that does not involve repossession.'

The Council of Mortgage Lenders, which represents 98 per cent of the mortgage industry, has published a set of principles on dealing with arrears and repossessions, but Vincent Cable, the Liberal Democrats' Treasury spokesman, is sceptical that all lenders will adhere to the guidelines. 'Unless these guidelines are enshrined in law, it is difficult to see what impact they will have on the spiralling number of repossessions,' he said.
Emergency action plan

1) If your debts are overwhelming, make sure you pay the right bills - council tax, mortgage or rent, utilities. Don't make unsecured debt (credit cards and personal loans) a priority.

2) Seek help from Citizens Advice, the Consumer Credit Counselling Service, the National Debtline or other free debt counselling services. Do not turn to an Individual Voluntary Arrangement company that charges a fee.

3) Make sure you are claiming all the benefits to which you are entitled. If you have lost your job, check whether you have any insurance policies which might pay out.

4) Set a budget and cut down on non-essential spending: posh coffees; satellite TV; alcohol; ready-made meals; gym membership; holidays (unless you invest in a tent).

5) Take in a lodger or ask non-dependent children who live at home to make a contribution towards bills and rent.

6) If this still isn't enough, try to sell before you are repossessed.

7) If you end up in court, seek advice before you go in. Some courts have 'last-minute' advice desks, but it is better to arrive prepared and with someone who can argue your case on your behalf.

8) If a possession order is issued, you have 28 days in which to pay or leave. You can pay what you owe up to the 28th day, but after that the court will issue a warrant of eviction, stating when the bailiffs will be round to change the locks.

Thursday 13 March 2008

N244 Form - Stop Repossession

Repossession orders or Bailiffs Warrants for eviction can always be stopped or postponed by using a standard County Court Form N244.

http://www.lud-ltd.co.uk/N244%20Example%20Prop.pdf

Using Form N244 lets you apply to the County Court for an emergency hearing. However, you MUST provide some evidence as to why the Court should postpone or cancel your Order for Possession.

Form N244 Facts
You must fill in your form N244 and take it directly to the County Court...
- Give the Court as many details as possible about your case;
- Make sure you attach any documents or proof separately;
- Make sure you keep a copy of everything for your own reference;
- The Court will charge you between £30 and £60 for filing a Form N244 Repossession order
Handing in an N244 may not be sufficient on its own. You MUST provide some evidence as to why the Court should postpone or cancel your Order for Possession.

http://www.lud-ltd.co.uk/N244%20Example%20Prop.pdf

Tuesday 11 March 2008

REPOSSESSION INFORMATION

Call us FREE...
0800-822-3757

25,000 repossessions could be avoided in 2008...

Repossession Information estimates that up to 25,000 repossessions could be avoided in 2008 if the homeowners are given the ability to have basic advice, support and legal protection. Repossession Information is concerned about the fact that many homeowners are unaware of their rights in the eyes of the law and are falling victim to bullying tactics used by lenders.

As an organisation, we are campaigning for the following:

1) Lenders to fully explore all the options available to the mortgagor and provide ample advice in order to avoid repossession;
2) The provision of an approved Law Society duty solicitor in court for all homeowners;
3) Better support for people who are facing financial difficulty

'Set Up to Fail' - extracted from the CAB website

Set up to fail

CAB clients' experience of mortgage and secured loan arrears problems

Citizens Advice Bureaux have seen increasing numbers of mortgage and secured loan arrears problems in the last two years. Homeowners in arrears receive little help from benefits, insurance or their lenders. Poor lending and arrears collection practices made problems much worse for many borrowers. Government policy and mortgage markets have paid too little attention to what happens when things go wrong. Consequently, too many borrowers are being set up to fail.

This report calls on government and regulators to take co-ordinated action to ensure that homeownership for lower incomes households is sustainable in the long term.

Background
Most people in the UK want to own their own homes and the Government want to help more people become homeowners. Public policy on homeownership is currently geared towards encouraging more people to get on the housing ladder by tackling affordability, rather than the risks of not being able to pay the mortgage over lifetime of the loan, particularly if circumstances change.

In the last year, Citizens Advice Bureaux dealt with over 57,000 problems about mortgage and secured loan arrears, an 11 per cent increase on the previous year. At the same time, the number of county court possession claims has increased sharply and is now at a similar level to that seen during the mortgage arrears crisis of the 1990's, even though the number of loans in serious arrears is much lower. This suggests that lenders are taking court action more readily and are less willing to help borrowers in arrears.

This report is based on 1,200 case studies from 360 Citizens Advice Bureaux in England, Wales and Northern Ireland, a survey of CAB clients with mortgage or secured loan arrears and interviews with CAB clients and advisers. We also analysed mortgage possession cases listed in 23 county courts in January 2007.

Main findings
Most CAB clients seeking advice on mortgage and secured loan arrears are disproportionately from lower income households. They tend to borrow from sub-prime lenders at a higher rate of interest.

In many cases, CAB clients do not shop around for a good deal. Instead they rely on the recommendatiions made by a broker. Often, they end up with inappropriate and unaffordable mortgage and secured loans. Some of the people buying their council houses receive particularly poor advice from brokers on the suitability of the loans they take out.

CAB evidence shows that many lenders and brokers do not ensure that borrowers understand the risks of entering into a mortgage. In some cases, it seems that lenders do not check whether the borrower can afford the mortgage repayments from the onset.

Some borrowers also take additional secured loans for items such as home improvements or debt consolidation. In some cases, these are as large as their main mortgage. Many do not realise the risks and consequences associated with taking out further secured loans.

Lenders' arrears management practices often increased the arrears problems borrowers face. They take court action for possession rather than negotiate with the borrower. Our research shows that sub-prime lenders are responsible for a level of possession actions substantially above their market share. Lenders have little incentive to consider alternatives to court action, and so can take possession action quickly, adding substantial additional costs to the borrowers' debt.

The growth of mortgage arrears problems has been accompanied by the development of sale and rent back schemes. In these schemes, the borrower sell their property to a private landlord at a discount and in return can rent the property back as a tenant. CAB evidence suggests that homeowners in a financially and emotionally vulnerable situation end up selling their houses for much less than they are worth, in return for a tenancy that offers little security of tenure.
Safety nets are also failing. Take-up of mortgage payment protection insurance (MPPI) has declined. The Government's income support for mortgage interest payment scheme (ISMI) is also failing to keep CAB clients out of serious arrears problems, because of the limited help that it offers. Borrowers have to wait up to 39 weeks, because there is an assumption that MPPI will pay their mortgage during this period. After the waiting period, help is limited to a maximum mortgage size well below current average house prices and to a standard interest rate much lower than the sub-prime rates that many CAB clients have to pay. Furthermore, their is no equivalent of housing benefit to help homeowers in low paid work meet their housing costs, leading to hardship for some CAB clients.

The current system to protect consumers from unfair business practices in the mortgage and secured loan markets is not adequately dealing with the poor lending and arrears management practices outlined in this report. Whilst the Financial Services Authority (FSA) rules governing first charge mortgages are extensive, lenders are not always complying with them. Regulation of second charge lending by the Office of Fair Trading (OFT) has not been updated to take account of changes in the marketplace. The OFT also does not have a clear and proactive compliance strategy.

Over evidence suggests that sustainable homeownership is a challenge for many low income households. Better co-ordination of government policy and proactive regulation of bad business is needed to prevent these borrowers from being set up to fail.

Key recommendations

  • All secured lending should be included in a unified regulatory regime that takes the best from the existing regimes.
  • In the meantime, the FSA and the OFT need to ensure that lenders treat borrowers fairly, both when making lending decisions and collecting and enforcing arrrears.
  • The Ministry of Justice should develop a pre-action protocol to ensure that mortgage and secured lenders take court action for possession only as a last resort.
  • The Government's strategies for financial inclusion and financial capability should take into account the needs of low income homeowners.
  • The Government should ensure that the help available from the benefit system fits the needs of people borrowing from sub-prime lenders at higher rates of interest.
  • The Government should develop rules for the cost and quality of MPPI for all mortgages and secured loans.
  • The Government should develop a benefit, comparable to housing benefit, for low income homeowners in work.
  • The Government should act to protect people who enter into sale and rent back schemes.
  • The Government should develp a cross-departmental action plan to address the issues raised in this report.

Saturday 8 March 2008

How to hold on to your home

How to hold on to your home
Falling behind on your mortgage repayments? Regain control with our 20-point action plan
Keith Tondeur

Tough times lie ahead. For 15 years we have basked in low inflation, low interest rates and low unemployment, while the value of our homes has risen steadily. Yet Britons have drifted deep into debt: every five minutes UK personal borrowing grows by £1 million. In particular, many of us have borrowed heavily to climb up the property ladder.

Conditions are now far less sunny: Mervyn King, the Governor of the Bank of England, has said that rising food and fuel costs are likely to drive inflation higher. What he called “unwise” lending will mean that banks may fail to pass on to borrowers interest-rate cuts and in a slowing economy there will be fewer jobs. Here is our 20-point guide to staying in control of your loans in the new climate of higher-cost, harder-to-secure credit:

WATCH FOR WARNING SIGNS
Things are most worrying for the 1.4 million households that are due to come off low-price fixed-rate loans this year. But you should also be concerned if you are on a downward spiral of paying back less and less of your borrowings each month. Failing to repay your overdraft (and going up to, or exceeding, the limit regularly) is a sign of credit distress - as is taking on new borrowings, such as another credit card, without clearing the old.

CAST AROUND FOR MORE CASH...
If you have suffered redundancy or are employed on short-term contracts, you may have paid too much tax under PAYE and may be due a refund. Check with Revenue & Customs.
Go online to www.direct.gov.uk and check if you are getting all the benefits due to you.
Check on your tax credits at www.taxcredits.inlandrevenue.gov.uk.

... AND CUT BACK YOUR SPENDING
Budget sheets and a calculator can be found at www.moneybasics.co.uk.
Could you pay less for expensive items such as utilities? Check at a price-comparison site such as www.uswitch.com .

Ditch insurance policies you don't need, such as payment protection insurance (PPI) or mobile phone cover. Cancelling PPI on a £5,000 loan over three years will save £366.60 a year.
The websites www.creditaction.org.uk and www.moneysavingexpert.co.uk have hundreds of money-saving ideas.

APPROACH YOUR LENDER...
Ask your lender for advice. If your problem is short-term - perhaps you were off work because of an illness - it may offer a payment holiday during which it will accept lower or even no payments. It may even suggest an alternative mortgage.

If you are repaying both capital and interest, switch to an interest-only loan. On a £200,000 loan, a borrower paying 6 per cent can save £289 a month this way. But be sure to begin repaying the capital again as soon as you can.

Increase the term of your loan to reduce the monthly repayments due. An increase from 25 to 30 years on a £100,000 mortgage cuts £44 a month off the bill - but be warned: you will pay much more over the term of a longer loan.

You may be able to take out a cheaper mortgage with another lender, although companies have tightened their lending criteria since the credit crunch.

Pay mortgage, council tax and utility bills before credit and store card bills. Non-payment of the former can bring much harsher penalties.

Ask your lender for more time. Show it how many of the above steps you have taken. Remind it that repossession is a financial hit for both of you.

If repossession looks inevitable, aim to sell the property yourself. Point out to the lender that this serves both your interests: a far better price will be achieved if househunters see a cheerful, furnished home rather than an empty property on sale through an auction house.
Stay on the property ladder. You should be aiming to downsize to a cheaper home.

... AND CONFESS TO THE PROBLEMS
This is perhaps the most important thing of all, and involves being frank with:
Yourself. People in debt are often in denial. Do not underestimate how much you owe, or fool yourself that “a cheque is in the post”.

Your partner and older children. You may be ashamed, angry, frightened and depressed, but you need to talk to them, not least because they can try to boost their income and cut their spending. I was once phoned by a lady who had people at the door to repossess the family home, yet her husband had told her nothing.

Your mortgage company. Your lender cannot be sympathetic if you have not told it. Always communicate in writing and keep copies of letters sent and received; only make offers you can afford and back this up by showing the company your budget. Tell it about every change in your circumstances. Ask the company's advice.

Other debtors. Once you have informed your major creditor - the mortgage company - write to everyone else to whom you owe money.

Debt advice agencies. If you have several debts, it is vital to seek free and confidential help from a debt advice charity. Visit the Consumer Credit Counselling Service at www.cccs.co.uk (its free helpline is 0800 1381111) or National Debtline at www.nationaldebtline.co.uk .

The writer is president of the money education charity Credit Action

Responsible Lending

Below are some basic guidelines as to how lenders are governed to treat their customers.

All mortgage lending companies are governed by the Mortgage Conduct of Business (MCOB) and the following statement applies from the date at which the regulated mortgage contract is entered into or the further advance/re-mortgage is started.

According to the Mortgage Conduct of Business Rules (MCOB):
“…the lender should be able to show that before deciding to enter into a regulated mortgage contract with a customer or, on making a further advance on a regulated mortgage contract, account was taken of a customer’s ability to pay...”

A lender is obliged to deal fairly with any customer who:
(a) is in arrears on a regulated mortgage contract; or
(b) has a mortgage shortfall debt

The rules also state that the lender must:
“…put in place, and operate in accordance with, a written policy (agreed by its governing body) procedures for complying with its duty to deal fairly…”

The MCOB guidance further provides that:

“A lender should ensure that its written policy and procedures include:
(a) using reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall or mortgage shortfall debt, in the case of the former having regard to the desirability of agreeing with the customer an alternative to taking possession of the property;
(b) liaising, if the customer makes arrangements for this, with a third party source of advice regarding the payment shortfall or mortgage shortfall debt;
(c) adopting a reasonable approach to the time over which to the time over which the payment shortfall or mortgage shortfall debt should be repaid, having regard to the need to establish, where feasible, a payment plan which is practical in terms of the circumstances of the customer;
(d) granting, unless it has good reason not to do so, a customer’s request for a change to:
the date on which the payment is due (providing it is within the same payment period); or
the method by which payment is made;
and giving the customer a written explanation of its reasons if it refuses the request;
(e) giving consideration, where no reasonable payment arrangement can be made, to the customer being allowed to remain in possession to effect a sale; and
(f) repossessing the property only where all other reasonable attempts to resolve the position have failed.”

The MCOB states that any breach of these procedures can be looked at as a contravention of the obligation to operate in accordance with the duty to deal fairly. This would therefore permit the borrowing customer to complain directly to the Financial Ombudsman Service (FOS).
O Please note that, according to the MCOB,
the duty to have an adopted policy to deal
with arrears and mortgage shortfall debts
‘does not oblige a [lender] to provide
customers with a copy of the written
policy and procedures.’
However, it is important to note that the lender does have an obligation to try and reach an agreement with a borrower over repayment of arrears.

According to MCOB rules, lenders are advised that customers:
(1) should be given a reasonable period of time to consider any proposals for payment that are put to them; in addition, and depending on the individual’s circumstances, a [lender] may wish to do one or more of the following with the agreement of the customer:
§ extend the term of the regulated mortgage contract; or
§ change the type of the regulated mortgage contract; or
§ defer payment of interest due on regulated mortgage contract or mortgage shortfall debt; or
§ treat the payment shortfall as if it was part of the original amount borrowed;
(2) should be given adequate information to understand the implications of any proposed agreement;

In terms of the requirement to adopt a reasonable approach as to the length of time a borrower should be given to clear arrears, MCOB guidance provides:

“The FSA takes the view that the determination of a reasonable repayment period will depend upon the individual circumstances. In appropriate cases this will mean that repayments are arranged over the remaining terms of the regulated mortgage contract…”

Record Keeping: lenders’ obligations
Lenders are obliged to make and retain an adequate record of their dealings with borrowers in arrears (or who have a mortgage shortfall debt) to enable it to show that it has complied with the obligations imposed by the MCOB.

Arrears: provision of information to the customer
A lender is required to provide a comprehensive package of information to a borrower in arrears. If a customer falls into arrears on a regulated mortgage contract, a lender must as soon as possible, and in any event within 15 business days of becoming aware of that fact, provide the customer with the following in a durable medium:
(1) the current FSA information sheet on mortgage arrears;
(2) a list of the due payments either missed or only paid in part;
(3) the total sum of the payment shortfall;
(4) the charges incurred as a result of the payment shortfall;
(5) the outstanding debt, excluding charges that may be added on redemption; and
(6) an indication of the nature (and where possible the level) of charges the customer is likely to incur unless the payment shortfall is cleared.

The lender must also make sure that the borrower is informed of the need to contact the local housing authority to establish whether he/she is eligible for local authority housing if the property is repossessed and ‘clearly state the action that will be taken with regard to repossession’.

Additional Charges
Many lenders add charges to borrowers in arrears. This includes charges such as monthly administrative charges, legal fees and interest.

The MCOB rules state that at least the borrower is made aware of the extent of the charging:

“Where an account is in arrears, and the payment shortfall or mortgage shortfall debt is attracting charges, a [lender] must provide the customer with a regular written statement (at least once a quarter) of the payments due, the actual payment shortfall, the charges incurred and the debt…”

The above statement would apply to all charges and fees levied directly as a result of the account falling into arrears. If interest is applied to the amount of the arrears, as it is applied to the rest of the mortgage, a lender does not need to send a written statement, unless other charges are also being made. If interest is applied to the amount of the arrears in a different manner to the rest of the mortgage then a written statement will be required.

Pressure on Customers
MCOB also seeks to protect borrowers from the more unpleasant forms of debt collection.

‘The rules state that a lender must not put pressure on a customer through excessive telephone calls or correspondence, or by contact at an unreasonable hour’.

A ‘reasonable hour’ will usually fall between 8am and 9pm. Putting pressure on a borrower includes the use of documents such as a court summons or other official document which intends to lead the borrower to believe that they have come from or have the authority of a court. It also includes the use of documents containing unfair, unclear or misleading information intended to put unnecessary force on the borrower into paying.

Complaints about the lender / Dispute Resolution
The Financial Services and Markets Act 2000 s.225 provides for the setting up of the FOS (Financial Services Ombudsman) to investigate complaints about lenders (although it also covers those involved in the administration of regulated mortgage contracts).

Complaints are to be determined according to what the Ombudsman considers to be ‘fair and reasonable in all the circumstances of the case’. The FSA Handbook sets out an elaborate Complaints Dispute Resolution procedure entitled ‘Dispute Resolution Complaints’.

The procedure provides that a complainant must first seek redress through the lender’s internal complaints procedure. The FOS cannot look into a complaint until either the lender has issued its final response to the complaint or eight weeks have elapsed from the date the complaint was received by the lender. If the FOS upholds a complaint it may either make a money award against the lender (to a maximum of £100,000) or a direction that the lender takes such steps in relation to the complaint as the FOS considers just and appropriate (whether or not a court could order those steps to be taken) or both. It remains to be seen to what extent the court will itself grant a stay in possession proceedings, under CPR 26.4 (2) (b), to allow negotiations to take place between the parties or to allow the FOS time to investigate a complaint.

<<<>>>

The FOS can also award a sum which reflects some or all of the cost reasonably incurred by the complainant (borrower) although ‘it is not anticipated that award of costs will be common since in most cases complainants should not need to have professional advisers to bring complaints to the Financial Ombudsman Service’. The FOS website can be found at www.financial-ombudsman.org.uk and the FOS Technical Advice Desk on 020-7964-1400.

In practice, mortgage possession actions can normally only be successfully defended by raising enough money to satisfy the lender or, failing that, persuading the court that it is right to exercise one of the statutory powers. In common with most debt cases, this involves minimising the borrower’s expenditures and maximising the borrower’s income.

Where the borrower is working, the question of income maximisation is largely one of ensuring that he or she is in receipt of any possible relevant additions to wages, income support, working tax credit, child tax credit, maintenance and child support payments, child benefit etc. If the borrower is unemployed, it is important to ensure that benefit payments are correct and complete. Any potential tax rebates should be claimed and any unfair dismissal, redundancy or discrimination claims considered.

It is also worth checking whether the borrowed is protected by any mortgage protection plan (where an insurance company has agreed to make part or all of the mortgage repayments for a limited period of time following the borrower becoming sick or unemployed).

Sunday 2 March 2008

OPTIONS WHEN FACING REPOSSESSION

OPTIONS WHEN FACING REPOSSESSION

Although in law most lenders have quite wide-ranging powers to lend money as they wish, lenders often say that options for rescheduling the loan are not available, possible or practical. It will be necessary to persevere and show that by the lender reducing the current mortgage costs, for example by rescheduling over a longer term or by altering the level and/or frequency of repayment, it will be possible for the borrower to meet future commitments.

Reduction of repayments
Lenders should be prepared to accept interest-only payments and defer capital repayments within repayment mortgages. This should prevent further arrears accruing providing payments are made, although the lender may require that the unpaid capital elements be paid off when normal repayments are resumed. In relation to regulated mortgage contracts the Financial Services Authority (FSA) requires lenders to deal fairly with any borrower in arrears. Lenders must also operate within their written policy for complying with this obligation. FSA guidance suggests that lenders may wish to defer payment of interest due on a regulated mortgage contract or treat any arrears as if they were part of the original amount borrowed. An unreasonable response to such a request might be found the basis for a complaint to the Financial Ombudsman Service. Many financial institutions are also sensitive to bad press publicity where the lender is obviously acting insensitively.

Where the borrower took out a mortgage protection policy (to pay the mortgage instalments in the event of unemployment or sickness), it is important to lodge the necessary claim form with insurers as soon as possible. Many of these policies set down a very short time-scale within which a claim should be made. Do not, however, be put off lodging the claim after the time specified, as the insurers can extend the time at their discretion. Complaints about insurance policies can be lodged with the Financial Ombudsman Services. Mortgage protection policies are commonly taken out with second mortgages or ‘secured loans’. Payments received under a mortgage protection policy which are used by claimants receiving income support or income-based jobseeker’s allowance claimants to pay housing costs not covered by the Department for Work and Pensions are not treated as the claimant’s income. Similarly payments which these claimants actually receive from other sources (rather than being paid directly by a third party to the lender) and which are actually used to make payments towards a secured loan which does not qualify for assistance under benefit regulations, are ignored unless the claimant has used insurance policy payments for the same purpose.

Extension of Term
In any repayment mortgage case, it may be possible to extend the term of the loan so as to reduce the capital element and thus the amount of the monthly repayment. This option need not be pursued if the lender is prepared to accept interest only for a period. Extending the term of the loan involves entering into a new mortgage arrangement and it may be possible, as part of the process, to have the existing arrears ‘capitalised’, by the lender wiping out the arrears and increasing the outstanding capital by an equivalent amount. In this way the borrower can be given a fresh start. Care, however, should be taken in pre-October 1995 loan cases to try to ensure that the new agreement will not be treated as a post-October 1995 loan in the case of future claims for income support and jobseekers’ allowance.

Again the Financial Services Authority encourages lenders in relation to regulated mortgage contracts to consider extending the term of the regulated mortgage contract.

Changing type of mortgage
In the case of an endowment mortgage, it is worth considering whether there would be a reduction in monthly payments by switching to a repayment mortgage. The amount of interest paid each month would remain the same but the monthly repayments of the capital (over the remainder of the term or over an extended term) may be less than the payments of the life insurance premium. The amount of capital originally borrowed from the lender could be reduced by the surrender or sale value of the life insurance policy. If the life insurance policy has been going for some years, more will be raised by selling the policy to an endowment policy investor. The borrower should contact a reputable insurance broker for details of how the policy could be sold on. It can be difficult to sell policies which have been in existence for only a few years. If the lender agrees to a new loan, mortgage protection policy may have been taken out to cover the possibility of the borrower’s death before the end of the loan term. Where an endowment mortgage borrowed is told by the endowment policy insurance company that the sums likely to be realised at the end of the term of the policy are less than the amount needed to pay off the mortgage loan, the borrower would probably be better advised to negotiate with the lender to make additional payments towards the shortfall, as if those payments were capital repayments, rather than taking out an additional endowment or similar policy cover to pay off the shortfall. Again the Financial Services Authority advice in relation to regulated mortgage contracts is that lenders may wish to consider changing the type of the regulated mortgage contract. Borrowers who have been advised that their endowment policy is unlikely to be enough to pay off the capital borrowed and who feel that they may have been mis-sold the policy should contact the Financial Services Authority.

Re-mortgaging
Where there are two or more mortgages (one of which is likely to be with a ‘fringe’ mortgage company which charges high rates of interest), or even where there is one high interest rate loan, it is worth trying to persuade one of the mainstream lenders (such as bank or building society) to ‘remortgage’ the loan. This involves redemption of the existing loan(s) and replacement with a new mortgage agreement. It is easier to persuade a building society or bank to remortgage the defaulting borrower if, at the time of the new mortgage, the local housing authority agrees to enter into a form of mortgage guarantee which would indemnify the lender in the event of the bank or building society suffering a loss because of the default. It is worth arguing that the lender has in the future nothing to lose, as the money will be recovered either following repossession and sale, or, if there is any shortfall, by the local authority meeting the shortfall under the terms of the guarantee. Extreme caution should be exercised when considering whether to re-mortgage with institutions other than building societies (or other similar lenders) as the terms offered may well be disadvantageous over a period of time. The costs of remortgaging may also be considerable, as they include not only surveyors’ and solicitors’ costs but also the commission charged by the mortgage broker who arranges the re-mortgage. However, it is worth seeking specialist advice from a reputable mortgage broker as lenders are keen to attract new customers, often on initially advantageous terms.

Where a borrower is ‘threatened with homelessness’, ie, it is ‘likely that he will be homeless within 28 days’, it is useful to remind the housing authority of its duty to ‘take reasonable steps to secure that accommodation does not cease to be available for [the borrower’s] occupation’. It is arguable that this duty may extend to requiring the authority to use one or more of its powers in Housing Act 1996 Pt VII to try to prevent dispossession. This duty, however, arises only where the authority is satisfied that the borrower is in priority need and not intentionally threatened with homelessness.

Sell and rent back
Sell and rent back is a relatively new service mainly being offered by individual and collectives of Property Investors. The companies target overstretched homeowners (who have explored all the options mentioned above), particularly those who may be facing the prospect of repossession, and essentially purchase the property and subsequently issue a rental agreement on the property. These services are mainly aimed at those who wish to remain in their home whilst clearing any debts secured against the property.

Pros
  • Any maintenance issue with the property will be dealt with quickly by te person who has offered to buy the property;
  • The majority of investors and companies offering the Sell and Rent back service can complete the whole transaction in one month;
  • Tax free money (via the proceeds of sale, if there is a sufficient amount of equity which can be released) - avoidance of future inheritance tax issues;
  • Some companies offer a ‘buy back’ option and will confirm a re-purchase price with you;
  • Research has shown that the majority of the companies will cover your legal fees and, as they are buying the house from you – will also pay for the survey;
  • You can stay in your house;
  • Secured debts will be cleared;

    Cons
    The property, in the majority, will be bought below the market value – usually anything between 15-25%. So if your house is valued at £100,000 – you will be offered something in the region of £80,000 - £75,000;

    You lose ownership of the property and therefore any future gains in its value;

    You may have been hoping to pass the property on to you spouse/siblings which will no longer be possible – unless you have come to an arrangement with the new owner whereby you can buy the property back at a later date;

    Rent back tenancies are only guaranteed for 6 to 12 months with a months notice (usually under an Assured Shorthold Tenancy – AST –Agreements);

    The openness or longevity of the companies operating in it are questionable. In addition to short tenancy, the future of rent charged is unknown.

    The majority of companies do not offer long-term rent back agreements (despite saying they do) as the mortgage companies they use do not permit them to do it.

    You should bear in mind the following things:

    This is a big decision and there are 100s of companies that have emerged recently offering this service – take your time over who you choose. Should you wish to proceed, they will be your landlord, so you must feel comfortable with them;

    You may have more time than you think;

    Spend some time looking at all the options available and selling-and-renting back should be looked at as the final choice;

    Should you still decide to proceed you should be aware that for a Property Investor, entry into the business is relatively easy, compared to, say, becoming a mortgage broker (there is no formal qualification required);

    From a consumer point of view, the business is not regulated by the Financial Services Authority (FSA) or the Office of Fair Trading so there may be unscrupulous operators who will be offering this service;

    You should check their credentials (you can ask for a Criminal Records Bureau report; bankruptcy check; copy of passport for example)

    Some questions you may want to ask the Company that approaches you:

    o How reputable is their Sell and Rent back service?
    o How long has the company been established?
    o Does the Property Investor / Investment Company have a proven track record?
    o How long has the company been established?
    o Has the investor done this before or can he provide references of people that have used his/her service?
    o How experienced is the Investor in doing this kind of transaction?
    o How do I know that the rent will be kept reasonably stable?
    o How do I know that I’m not going to be chucked out of my home?
    o How long with the rental agreement be for?
    o Will I be able to buy the property back? (perhaps when you are in a better financial position)
    o Can you provide me with a Company Registration Number?
    o Should I proceed, how long will the transaction take?
    o Are there any hidden charges?

Friday 29 February 2008

Website coming soon...

Website coming soon...

Should you be facing the prospect of House Repossession contact us free on 0800-0937-829
Website coming soon...

Should you be facing the prospect of Repossession please contact 0800-0937-829