A good website on debt reduction:
http://sevenactions.com/2008/01/7-recommended-websites-for-debt-reduction/
Sunday, 22 June 2008
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.
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
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
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
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.
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.
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
Sunday, 9 March 2008
Repossession - Shelter advice
Link to Shelter website - http://england.shelter.org.uk/advice/advice-2901.cfm
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