At the moment, the UK is in the grip of a terrible recession and morale is low; people are losing their jobs and thousands are struggling with their mortgage payments. Instead of being compassionate, it has emerged that some lenders are hastily repossessing properties, leaving shattered families homeless.
In October 2008, the Prime Minister Gordon Brown stated that county court judges had been given new guidance, outlining how home repossession should always be a last resort and that both lenders and borrowers should act reasonably in order to resolve any mortgage arrears. These new rules were introduced a month later, in November 2008, and re-emphasised that repossession should always be a last resort.
In December 2008, The Royal Bank of Scotland pledged that it would not seek to repossess a property until borrowers had accrued at least six months of arrears, and that they would advise affected customers to seek independent advice. Unfortunately, many other lenders, including banks, building societies, and in particular sub-prime lenders, are employing aggressive tactics with those who miss mortgage payments.
Northern Rock, the bank that was bailed out over a year ago using taxpayers’ money, is one of the major culprits regarding hasty repossession.
Simon Lambert, assistant editor at thisismoney.co.uk, states:
“Unfortunately, while the Government has asked lenders to do all they can to stop repossessions and pass on base rate cuts to borrowers, the first of the banks to be nationalised has not been doing this. The base rate has fallen from 5% to 0.5% since last October and Northern Rock has consistently failed to pass on the full cut.
Borrowers who took on 100%-plus or small deposit mortgages are unable to leave and have been given a raw deal by the state-owned bank’s refusal to cut rates as low as its rivals. Any borrower with a Northern Rock mortgage who does face repossession should speak to the lender and seek help as soon as possible, as the quicker they do this the quicker they can try and find a solution.
Northern Rock should be doing all it can to help troubled borrowers”.
MPs have called for prosecution for offending lenders; although new guidance was introduced in November, it cannot be enforced and so the Government is powerless to stop quick repossession.
The Commons, Communities and Local Government Committee has welcomed the measures Gordon Brown has brought in to help people struggling with their mortgages, such as the Mortgage Rescue Scheme, but is concerned that the Government is currently powerless regarding the underhand tactics employed by some lenders.
The Council of Mortgage Lenders has predicted that 75,000 homes will be repossessed during 2009, 30,000 more than 2008, and the Citizens Advice believes that some lenders are using repossession as the only solution, rather than a last resort.
To try and find a possible solution to this, a bill was presented to Parliament in February 2009 by Labour MP Andrew Dismore. He spoke of his concerns that some people were being thrown out of their home without a court order and of the importance of legislation to ensure that this is overruled. He told how millions of people are going to be adversely affected by the economic downturn, and how it is thus especially important that people are adequately protected from losing their homes.
It was in October last year that the High Court ruled that lenders could repossess homes without going to court first, and technically this means that a homeowner could lose their home after a single mortgage payment is missed. With both the Council of Mortgage Lenders and the Financial Services Authority predicting that over 1 million households are likely to default on their mortgage payments over the next year, it is imperative that the Government brings in some form of legislation to protect homeowners from house repossession.
Unless this is done, families will, as Andrew Dismore says, be thrown out of their homes without first being granted the opportunity to plead their case before a court. He further states how it is truly shocking that, in Britain in 2009, a basic legal protection for homeowners is simply not there.
The bill presented by Andrew Dismore requires that all lenders must obtain court permission before they can sell a property from underneath the homeowner. This gives the mortgagee crucial extra time to try and repay any mortgage arrears; even if they cannot, it gives them a chance to put their case before a court and thus get a fair hearing.
The bill will amend the Law of Property Act 1925, and the first stage of the presented bill was passed in February and should be printed in June. This will offer invaluable protection from ruthless lenders to thousands of homeowners, and, most importantly, allow them valuable time to find a solution to their predicament.