23 November 2018
Even though interest rates remain at historically low levels and mortgage arrears are steadily declining, UK Finance estimates that one house gets repossessed every 2 hours across the country.
Losing the roof over your head is obviously a scary thought and something that can cause a huge amount of worry.
But, at the same time, it’s worth noting that mortgage lenders have a legal obligation to work with you to get things resolved. They generally do not want to repossess properties as it costs them a lot of time, effort and money to do so.
These days, there is also a range of free and impartial advice from housing charities including Citizens Advice, Shelter, National Debtline and the Debt Advice Foundation. These organisations can lead you in the right direction and prevent the worst from happening.
Dealing with House Repossession
The following sections are extracted from the Property Solvers Guide: How to Stop Repossession and briefly outline how to handle different stages of the process, depending on how many months mortgage arrears you have…
1 Month Mortgage Arrears
If your mortgage hasn’t been paid in the last month, there’s usually not too much to be concerned about. However, this doesn’t mean you should ‘bury your head in the sand’ as things could easily get serious.
You’ll probably already have received a formal letter or default notice. Your first step should be to immediately contact your lender and confirm when you’ll be paying. Most calls are recorded so always tell the truth. They will make a note on their system and you should call them again once the payment has gone through.
If you’re struggling to make ends meet, communication is even more important. Essentially, the lender will want to know when things will be cleared. They may also request information about your employment status, wage receipts or other sources of income you have.
Don’t be afraid to call them any time you need to. Also, check that they are not progressing your case to their legal department.
2 Months Mortgage Arrears
There is still every chance that you can stop repossession from happening, but you now need to be proactive.
It’s worth noting that, following a review of the repossession process after the financial crisis of 2007/08, the government rolled out a series of regulations that protects homeowners.
Lenders own practices are strictly governed by the Financial Conduct Authority (FCA) Mortgages and Home Finance: Conduct of Business and what are known as Pre-Action Protocol rules.
Therefore, your mortgage company cannot simply decide to take possession of your home because you have missed a payment. You should be treated fairly and with respect. The lender is also obliged to discuss your financial situation, give you reasonable timeframe to pay off the arrears and only start repossession action as a ‘last resort’.
The pre-action protocol rules state that the lender cannot start court proceedings if:
- You have made an insurance claim under a valid mortgage payment protection policy;
- You have applied for Support for Mortgage Interest (SMI);
- You have the right to access the Preventing Repossessions Fund through your local authority;
- You can clearly demonstrate how you can pay your mortgage, including any shortfall;
- You can show that you will be getting extra income from your employment or some other windfall / bonus payment;
- You are getting help from your local authority under a homeless prevention scheme;
- You are eligible for income support, Job Seeker’s Allowance (JSA), pension credits (for over 60s), tax credits, Universal Credit (UC) and/or Employment and Support Allowance (ESA);
- You will be taking on a lodger at your property to help with your mortgage costs;
- You have appointed a professional debt advisor who will liaise with the lender and/or the court on your behalf;
- You have made a complaint to the Financial Ombudsman Service (FOS) about how the mortgage lender is handling your case;
- You are actively planning to sell your property (see below).
The mortgage lender must consider one or more of the following options:
- Extend your mortgage term;
- Change your mortgage type (from repayment to an interest only, for example);
- Defer the payment of interest due on your mortgage;
- Treat the payment shortfall as if it was part of the original amount provided;
- Make use of any Government forbearance initiatives in which the firm chooses to participate.
Once you’ve spoken to your lender about these choices, remember to understand what each will mean on your future finances before making a decision.
Be realistic and honest with yourself and remember that, if you do come to an agreement, you must stick to your promises or risk your case getting fast-tracked to court.
3 Months Mortgage Arrears
If you have 3 or more months’ worth of mortgage arrears, you’ll more than likely have a County Court date as the bank looks to make serious steps to repossess your home.
However, remember that you will usually have between three and eight weeks before the hearing to get things resolved.
First, you should complete the N11M personal defence form which enables you to explain your own personal and financial circumstances as well as any attempts you have made to pay back the arrears owed (see our guidance here).
In some scenarios, we also suggest completing the N244 form (see our guidance here) – particularly if you fear that the judge may give the mortgage lender outright possession. Using this form potentially means you could stop or postpone the repossession order.
Remember when filling these forms that you should be up-front and 100% transparent.
The judge is likely to look more favourably at your case if you have:
- Been responsible in your dealings with the lender (responding to their enquiries promptly, for example);
- Informed your lender of your real financial situation;
- Explored all your available options to pay off the mortgage arrears;
- Looked into all your available options to control your mortgage debts;
- Attempted to discuss coming to an arrangement with your lender moving forward;
- Presented realistic proposals of how you can clear your mortgage arrears (wages, family help or another income source);
- Shown that the mortgage lender has not followed Pre-Action Protocol rules.
We would suggest making some kind of mortgage payment, even if it’s a small amount, as it will show that you’re committed to getting things settled.
Also, if you are on a low income, you may be able to access help through the Legal Aid Agency that funds Housing Possession Court Duty Schemes (HPCDS) across England. This means you can get vital legal advice and representation at court.
House Repossession Outcomes at Court
The worst-case scenario at court is an outright possession order which will mean that the lender has the right to repossess your home (usually in 28 days). But often, if you’ve been honest and attempted to get things resolved with the lender, you should be able to get a suspended possession order. This means that you can stay in your home provided you have a plan to clear what you owe.
You may be awarded a Time Order. This is where the court orders the lender to reduce the amount payable on your mortgage, alter the monthly amount, change the payment date or extend the overall term.
The judge can also adjourn the case if there is not enough information to make a decision or you have stated that you will be actively looking to sell your property.
Selling Your House to Stop Repossession
Much will depend on the timescales you have left. If you have been given a few months to actively market your property, working with a proactive estate agency or auction house is probably your best option. We would suggest not mentioning the fact that you have had a court order to the estate agent or auctioneer as that could taint the price you eventually get.
Should you require a more immediate sale, a quick cash buying firm like Property Solvers can certainly help. Fast sale companies like us often have experience of dealing with repossession cases and can show proof of purchase funds and other relevant documentation to the court. This will prove that we are serious buyers and can complete to short deadlines.
Ruban Selvanayagam and James Durr are co-founders of the hybrid estate agency Property Solvers that offers quick cash house sales and express estate agency services across the UK.
This content has been provided to us by the writer. Whilst believed to be factually correct, we cannot accept responsibility for content contained within it.