“More than 200,000 homeowners who live in flood-risk areas face the threat of repossession because of a stand-off between the Government and insurers.”  The reason being that an agreement currently protecting homes built in these area will not be renewed in 2013.

Under the current agreement, insurance provide cover for the thousands of homes built in high-risk flood areas as long as DEFRA (The Department of Environment, Food and Rural Affairs) keeps up its investment in flood defences.  However, according to the Association of British Insurers (ABI), DEFRA do not plan to renew this agreement when it runs out next year.  This, of course, will render these properties uninsurable, other than by taking out hugely expensive policies with payments or excess levels set ridiculously, and probably unaffordably, high.

If buildings are uninsured, the mortgagee is technically in breach of the loan agreement, rendering him or her liable to repossession.  ABI are calling for government agreement to pay the insurance for those properties deemed most at risk but, thus far, there has been no commitment from DEFRA.

Not only will this cause enormous hardship for those affected home owners, but the likelihood is that flood plain areas will become like the ghost towns seen in some northern towns and cities, with shops and properties lying vacant because they become uninsurable or unsaleable.

Already some major insurers refuse to provide cover for previously flooded homes – Direct Line, for instance, will not provide insurance cover on a home that has been flooded within the past ten years.

Oh dear, if it’s not one thing, it’s another…

The Council of Mortgage Lenders (CML) believe that, with unemployment predicted to rise even further this year, more home owners will be compelled to ‘hand in their keys.’  Having said this, repossessions aren’t expected to reach the highs of 2009, although they will probably exceed the 37,000 of 2011.

The CML’s chief economist, Bob Pannel, said that falling incomes and rising unemployment are “likely to unwind some of the improvement in mortgage arrears we have seen over the past two years and lead to a somewhat higher level of possessions in 2012.”  There may be some relief to be gained by looking at the Council’s similar predictions for 2011, which proved to be unfounded.  However, they are convinced that this time the predictions are correct – they cite rising unemployment as the main cause.

Mr Pannel explained, “Over recent months, as fiscal cuts have begun to be felt, the UK has seen a sharp increase in headline unemployment figures, and the Office for Budget Responsibility envisages a higher level of joblessness persisting through next year and beyond, (and with) higher unemployment and a prospect of real incomes stabilising at best over the course of the year, we should expect to see increased signs of financial stress.”

If you have received a repossession order your first response will probably be to panic; as difficult as it may seem – don’t, there is still time to act and prevent your home from being repossessed. Even if the repossession proceeding have started there is still quite a bit of time before the order has to be enforced – and it may also be adjourned to give you time to pay off the arrears.

Do not pay for advice, there is plenty of free advice around to help you deal with this situation and one of the best places you can go is the good old CAB

House Repossession and the Defence Form

You will receive a package of paperwork from the court, which will include:

• Copies of the claim for possession forms, completed by your lender
  
• A court hearing date
  
• A blank defence form and guidance on how to fill it out
  
• The court’s contact details
  
• Information about organisations offering free advice on repossessions
  

The Defence Form is expressly so you can tell the court about your circumstances and how they led to your current situation; you will also be given the opportunity to detail what attempts you’ve made to sort things out.

If the mortgage lender has said things that you don’t believe are true, the Defence Form is the place to argue your case. The information you give will help the judge to decide whether or not the mortgage lender needs to provide more information to prove their case. So you can see, it is important not to ignore this form but to use it to your best advantage.

In Questions 5 and 6 of the Defence Form you are given the opportunity to ask the court to scrutinize the fairness of your original mortgage agreement. If it is thought that the agreement was unfair to start off with there are number of actions open to the judge, for instance, he could make an order to extend the terms of the mortgage.

In Questions 7 to 10 of the Defence Form you can agree or disagree with the arrears figure the mortgage lender has given. This is also the place where you can propose a repayment plan, say, paying a regular amount off the arrears on a monthly basis.

Questions 11 to 25 are where you provide details of both your personal and financial circumstances. There’s a place where you list all incomings and outgoings and this will help the judge to decide whether or not to suspend the possession order. When this happens, the order is passed but you have a certain amount of time to pay off the arrears before it is actioned. Also in this section you will be able to give details of additional income – state benefits, say, or your partner’s salary – which may change the financial picture as far as the judge is concerned.

In the final section of the form you are able to explain:

• if you got into difficulties with the mortgage through no fault of your own
  
• what steps you have taken to clears the arrears
  
• any change of circumstances since the arrears built up, which mean you are in a better position to clear or reduce the arrears
  
• if you are selling or re-mortgaging the property and need more time to complete
  
• if your personal circumstances are such – for example due to ill health or disability – that a possession order would cause you particular hardship
  

It is no defence just to say you can’t pay the mortgage however!

If at all possible, you should send the defence form back to the court before the hearing – it should be returned within fourteen days at any rate. However, if time is short, just take the form to court on the day of the hearing.

If you are typical of millions of others then lurking quietly in the back of your mind is the fear that just one bad throw of life’s dice could see the house you’ve worked so diligently to turn into a home could be taken away from you by the banks.  This story is for you; sit back and enjoy.

Turning the Tables on the Banks: The Facts

It’s 2009 and retired policeman Warren Nyerges and his wife Maureen bought a £100,000 house on a Florida development.  They paid in cash, no mortgage required.

One year later, in February 2010, the Bank of America initiated repossession proceedings against the couple; this despite the fact that the couple had paid for the property up front and had no debt relating to it.

It was obvious that if the couple Warren and Maureen fought the action they would win; which is exactly what happened.  How could it be otherwise when there was no outstanding debt on the property?

But taking legal action is just as expensive in America as it is most other places and, despite winning their case, the Nyerges were left owing £1,500 in legal fees.

As you would expect, the couple requested the bank make recompense for this amount; after all, it was the bank’s mistake that precipitated the debt.  However, even in the face of repeated requests, the bank failed to pay out.

Turning the Tables on the Banks: The Fallout

Quite understandably, the couple was more than a little annoyed by the bank’s seemingly cavalier attitude to their plight.  They took the bank to court in an attempt to get their recompense – and they won.  The court ordered the bank to pay up.

Five months and many phone calls and letters later and still the Nyeges were £1,500 down.  So they, quite reasonably in the circumstances, took out a foreclosure order against the bank.

When interviewed by CBS News, the couple’s solicitor, Todd Allen, commented,

“They’ve ignored our calls, ignored our letters, legally this is the next step to get my clients compensated.”

And so it was that, accompanied by two policemen and a moving van, Mr Allen called at the bank to collect desks, chairs, computers – and cash from the tellers’ drawers – to reimburse the Warren and Maureen for their out-of-pocket expenses.

The local media reported that within the hour the bank manager produced a check for around £3,515.11 to cover the couple’s estimated expenses thus far.  In a statement to the local newspaper, the bank apologized, saying,

“We apologise to Mr Nyerges that there was a delay in receiving the funds. The original request went to an outside attorney who is no longer in business.”

Turning the Tables on the Banks: The Relevance to the UK

A story to bring a smile to the face of most people’s faces in these post-bank-originated recession days; but, you may be thinking, how relevant is this story to us here in the UK?

Based on figures for the first three months of 2011, by the end of the year as many as 40,000 people will have experienced, or be in the process experiencing, repossession. In May of this year, Sky News reported that 9,100 UK residents had lost their homes to the banks.

of repossession In the first three months of 2011 some 9,100 Britons lost their homes as banks repossessed them — a position as many as 40,000 people could find themselves in by the end of the year. Some calculations have 90% of homeowners at risk of repossession if interest rates rise; this chilling prediction is based on the tide of variable interest rate mortgages that has overtaken the property market.  It might seem a good idea now, when interest rates are at an historic low, to take out a variable mortgage – after all the initial repayments are going to be very affordable, but what happens when, as must inevitably happen, interest rates begin to rise again?

Turning the Tables on the Banks: The Significance to Every Homeowner

So, the Nyerges’ story was funny and heartwarming – it would make a marvelous premise for a movie – but what is its point?

The point is: repossession and the risk of repossession haven’t gone away; in fact it remains a real concern to UK homeowners.

The message is: if you have any concerns whatsoever, no matter how remote the risk might appear, we are strongly advising you to take action now.  There are people out there who will talk to you free of charge; you can contact them via the links given below.

After all, while the Nyerges’ story is good and heartwarming, if you listen very hard you can hear the nation mutter under its collective breath, “Only in America.”

Turning the Tables on the Banks: Organisations that can Help

Citizens Advice

Phone 084444 111 444

Shelter

Phone: 0808 800 4444

The National Debtline

Phone: 0800 808 4000

What are Repossessed Properties?

Past and current recessions see more people than using falling behind with their mortgage repayments; jobs disappear, everyday essentials cost more and, for some, mortgage payments get left behind.

If you have steered clear from buying a repossessed house because it makes you feel guilty, well, it’s not actually that cut and dried. When the lender repossesses a home, that doesn’t mean the debt is cleared – the borrower still has to pay any shortfall when the property is sold; so by buying a repossessed property you are actually helping the previous owner.

Properties aren’t repossessed solely for failure of mortgage payments though; those half-finished estates you sometimes see also come under the heading of repossessed – the developer may have run out of money due to the recession and be in no position to finish the development. His only way out of the situation is to get the properties sold as is.

Don’t forget distressed property sales either; this term refers to properties that are up for sale at lower than market price because of something traumatic happening in the seller’s life, such as death or divorce.

With up to a third of the market value, the repossessed property market is worth watching closely.

Unlike during previous falling house markets, however, this time round it could prove hard to find repossessions; mortgage buyers have stopped revealing if the properties that they are selling have been repossessed. If you are an investor, we have access to a very exclusive list of below market value properties. This list is updated on a daily basis and includes properties from some of the top estate agents, including: Jones Lang LaSalle, Colliers, Savills, King Sturge and scores of niche agents such as Strettons and Globrix.

The majority of the properties in our property listings will sell for between 15% and 35% lower than RICS valuations.

Whether you are looking for repossessed properties in London or the Isle of Bute, if you want to successfully invest in property, you need to know where to look: we have done most of the searching for you.

We will also be publishing up-to-date listings of house repossession auctions.

Well, there’s not much fun in the world of debt but this interactive debt map from the Centre for Responsible Credit comes close.

In all seriousness, this interactive tool reveals levels of debt throughout the country on a county-by-county and, in some cases, a town-by-town basis. In terms of house repossession, Corby in Northamptonshire, Barking and Dagenham, Newham, Knowsley, Thurrock, Burnley and Luton had the highest proportion of repossession claims per 1,000 of the population in 2009. The tool will also show you figures for personal insolvencies, unemployment rates, bankruptcies, IVA levels, and landlord repossessions (just click on the Data tab followed by CfRC Indicators to see what’s available).

The Centre for Responsible Credit, according to its website, is “an independent, not for profit, research and policy unit.” They publish analysis of policy and regulatory trends and information about the “impacts of debt and financial problems.”

The following article appeared in yesterday’s Irish Times and has been reprinted here in full.

More and more Irish people have been putting their homes on the line in recent months by falling into arrears on their mortgages after being caught out by the bursting property bubble. With interest rates rising and house prices falling, it is a problem that is only going to get worse in the year ahead.

Last September, over 26,000 homeowners found themselves in arrears. The number of people in negative equity stood at 116,000 at the end of last year. That number looks set to rise to 196,000 by the end of 2010 with the average shortfall between the value of the house and the size of the mortgage standing at around €40,000. Despite recent hikes in variable mortgage rates by some lenders, interest rates overall are still very low, but they will rise which will see more homeowners struggling to make their monthly repayments. The problem is further compounded by banks, such as AIB, clamping down on switchers and others, such as Halifax, leaving the Irish market entirely

The State has taken several steps to protect cash-strapped homeowners from losing their homes. Last year, as part of the Government’s bank recapitalisation, AIB and Bank of Ireland agreed to a 12-month moratorium on repossessions, while last month the Financial Regulator imposed a new rule which means that all banks and building societies, including sub-prime lenders, must now wait at least 12 months from the date arrears first appear before they can look to repossess a borrower’s primary residence.

Borrowers are also protected, to some extent, by the reluctance of banks to exacerbate their losses. Moving for repossession would likely result in a loss for the bank, given the likelihood that it would be unable to sell the property at a price that would clear the mortgage. A desire to clean up their balance sheets also means that banks have a vested interest in reducing the number of mortgages on their books which are in arrears.

In the US, “jingle mail” has become a reality with people reneging on their mortgage by sending the keys to their home back to their bank in the post, but Irish bankruptcy laws make this very unattractive. If you were to hand back the keys, then your lender could still pursue you for the money outstanding on the mortgage, so voluntary surrenders should be avoided.

If you fear you are going to run into difficulties repaying your mortgage, or you have already fallen into arrears, the very first and the most important step should be to meet your bank manager. While it may be the last thing you want to do, coming to an arrangement with your lender is the only viable option. But don’t go in expecting the bank to offer you a cup of sweet tea and listen to your tales of woe. That won’t happen. Prepare for the meeting and have a clear perspective on your current financial situation. An AIB spokesman told Pricewatch that the purpose of such a meeting is “to put together a solution through which borrowers manage their financial difficulties as best they can rather than allowing them to grow in the future.”

It is likely that the bank will offer you one of three possible resolutions: An extension of the term; a switch to interest-only repayments; or a moratorium, or break, on repayments altogether. While any of these options will help in the short-term, you will end up paying for the relief over the course of the mortgage.

If you have come to an agreement to make your repayments more affordable, along the lines mentioned above, you may still be stuck with the burden of arrears. If, say, you are €10,000 in arrears and you only pay €100 off every month (on top of your standard repayment) it will take you over eight years to clear the arrears, which may be an uncomfortable position to be in. As such, you could try and get your lender to “capitalise” your arrears, provided that you meet repayments for a certain period of time. Given that the lender is likely to want to clear its mortgage books of arrears, it may be willing to add the arrears to your outstanding balance, thereby giving you a new monthly mortgage repayment – so there will be no worry from the arrears hanging over you. However, you should note that doing this will add to the overall interest costs on the mortgage.

Given the limited possibilities, other options are needed to deal with the twin problems of mortgage affordability and negative equity. Such alternative options may be on the way following the establishment last month by the Government of an “expert group” which will look at ways to assist homeowners struggling to pay their mortgages. But what measures might they introduce?

Other countries have already started dealing with the problem. In the US, the “Making Home Affordable Program” offers two different potential solutions for borrowers – refinancing mortgage loans and modifying mortgage loans.

In the UK, where an estimated 900,000 people are in negative equity, last year’s budget introduced a “Mortgage Rescue Scheme” and “Mortgage Support Scheme”. These schemes include options such as an equity loan enabling mortgage repayments to be reduced or, alternatively, the debt is cleared completely and the applicant pays rent at a level they can afford; or the deferral of borrowers’ interest payments for up to two years, with the UK government guaranteeing a proportion of the deferred interest. (This mortgage rescue scheme has now been extended.)

Solutions are also coming from the private sector in the UK. The Nationwide Building Society, for example, last year launched a 125 per cent mortgage for existing customers who are stuck in negative equity but want to move. Other options for Ireland might include extending 100 per cent mortgage interest relief for a fixed period of time, or shared ownership schemes. Under such a scheme, the lender would take a percentage share in the property, which would result in a reduced mortgage burden for the borrower.

These include:

• Extending free face-to-face debt advice services;

• Tightening the rules so lenders must show greater tolerance and understanding to those in arrears, and must prove they have exhausted every possible option before seeking repossession

• Help with mortgage interest payments through schemes including Homeowner Mortgage Support and the Support for Mortgage Interest scheme; and

• For the most vulnerable families, the backstop Mortgage Rescue Scheme.

Repossession Hot Spots

According to the government, the following 86 repossession hotspots have been identified as being at greater risk due to higher levels of unemployment and repossession court orders:

• Basildon
• Bolsover
• Broxbourne
• Bury
• Coventry
• Darlington
• Dartford
• Dudley
• Enfield
• Erewash
• Gateshead
• Gloucester
• Gravesham
• Harlow
• Ipswich
• Kirklees
• Lambeth
• Leeds
• Leicester
• Mansfield
• Medway
• Milton Keynes
• NE Lincolnshire
• Redbridge
• Slough
• Southend-on-sea
• Stevenage
• Thanet
• Wakefield
• West Lancashire
• Barking and Dagenham
• Corby
• Knowsley
• Salford
• Newham
• Walsall
• Redditch
• Halton
• Sandwell
• Wolverhampton
• Nottingham
• Birmingham
• Manchester
• Bolton
• Liverpool
• Sunderland
• Reading
• Wigan
• Swindon
• Northampton
• Kingston-upon-Hull
• Cannock Chase
• Barnsley
• Derwentside
• Doncaster
• Easington
• Luton
• Middlesbrough
• North Lincolnshire
• Nuneaton and Bedworth
• Oldham
• Peterborough
• Rochdale
• Rotherham
• Sedgefield
• South Tyneside
• Stockton-on-Tees
• Stoke-on-Trent
• Tameside
• Tamworth
• Wear Valley
• Wellingborough
• Ashfield
• Blackburn with Darwen
• Blackpool
• Blyth Valley
• Bradford
• Burnley
• Chester-le-Street
• Croydon
• Greenwich
• Lewisham
• Rossendale
• South Holland
• Thurrock
• Waltham Forest

In summary, the largest percentage fall was in the West Midlands, where repossessions fell by 40% compared to the same period in 2008.  Meanwhile, the greatest number of repossessions per households occurred in Wales, where 1.4 properties out of every 1,000 were repossessed in the quarter, although this figure does represent a 34% fall when compared last year.

The figures below represent:

1. Total number of repossessions for the period
2. Percentage rise or fall on Q3 2008
3. Number of repossessions per 1,000 households

• Total England & Wales: 24,938; down 34%; 1.1
• England only: 23,205; down 34%; 1.1

Regional Break Down

• North East: 1,465; down 34% ; 1.3
• North West: 3,875; down 37%; 1.3
• Yorkshire and the Humber: 2,830; down 29%; 1.3
• East Midlands: 2,155; down 33%; 1.2
• West Midlands: 2,480; down 40%; 1.1
• East: 2,360; down 31%; 1.0
• London: 3,425; down 36%; 1.1
• South East: 2,925; down 34%; 0.8
• South West: 1,700; down 32%; 0.8
• Wales: 1,710; down 34%; 1.4

For even greater regional breakdown of repossession figures for the quarter, click on the relevant region above.