Ten ways to deal with repossession
The number of homeowners facing repossession has jumped by more than 90% over the past 12 months, according to official statistics from the Financial Services Authority.
If this is the situation facing you, your family or anyone you know, then it is important to understand that mortgage lenders see repossession as a last resort, and will want to avoid it at all costs.
Repossession is not only an expensive process for lenders - falling house prices and auctioning a home means that they will receive less than if you were still making at least some of your repayments.
In addition, the situation may not be as hopeless as you first imagine. It may be possible to find a way out, keep your home and get back on track with your debt.
1) The first phase
If you have missed one or two mortgage payments, your lender will contact you either by phone or letter asking the reasons why. It will want to know how you intend to pay your arrears, and will urge you to contact it immediately.
2) Face up to the situation
If your lender has contacted you, the worst thing you can do is bury your head in the sand and hope the letters and calls go away. If you don’t respond to requests for you to contact your lender, it is much more likely to initiate court proceedings and this is when it can get difficult.
3) The pre-action protocol
The government says it is committed to keeping people in their homes. New guidelines introduced on 19 November mean mortgage lenders must demonstrate to the courts that they have been sympathetic when dealing with homeowners struggling to meet their monthly repayments before they get the green light to possess a property.
Lenders have been told that they must try to agree a manageable payment plan, either by reducing the monthly repayments or extending the length of time over which the mortgage can be repaid.
4) Speak to your lender
The message is clear - you should contact your mortgage lender as soon as you become concerned that you won’t be able to make your mortgage repayments. Both lenders and the courts tend to look favourably on borrowers who demonstrate they are committed to paying their mortgage.
5) Seek advice
If you feel you are not able to speak to your lender yourself, a housing aid centre, or charities such as Shelter and the Citizens Advice Bureau, can help. Their staff can help you negotiate with your lender and help you work out a manageable repayment plan.
6) The solicitors
If you continue to ignore your lender’s demands for payment, are unable to negotiate with the bank or building society in question, or it is not satisfied with your proposal, you will be contacted by your lender again. But this time it will state that solicitors will become involved if you do not clear what you owe within seven days.
7) Court action
If you can’t clear your arrears, you will be written to by the lender’s solicitor warning that court proceedings are being initiated. The court will then contact you to inform you when a hearing is to take place. It is very important that you phone or write back to the court acknowledging the date as it could harm your case if you ignore it.
Before the court date it is essential that you seek advice, because a summons to court does not necessarily mean that you will lose your home. You can still try and negotiate with your lender before the case goes before a judge.
9) Build your case
Should this not be possible, always get advice before the case gets to court. As every case is different, the judge’s decision as to whether or not you will lose your home can depend on many reasons, such as unemployment or divorce. An adviser can help you prepare your case by gathering evidence.
10) The day of the hearing
The judge will listen to both sides of the case before deciding if you are to lose your home. The judge is likely to look favourably on you providing you have demonstrated that you have not ignored the problem, have tried to negotiate a new repayment plan and have paid as much of your mortgage as you can afford. Your circumstances will also be taken into consideration.
The judge may decide to adjourn the case, allow you to stay in the property under a new repayment plan, or allow you to sell the property yourself to avoid it being repossessed. If you have consistently ignored your lender’s demands for payment and made no effort to negotiate with your lender, the chances of being evicted are high.
So, if you are struggling to meet your mortgage and don’t want to face repossession you need to act quickly. Don’t put your home at risk by burying your head in the sand.
A homeowner’s worst nightmare; repossession is an action of last resort by mortgage lenders to recover money from borrowers that have failed to keep up with repayments on their mortgage or other loan secured on their home (see secured loan). Repossession is a legal procedure that has to go through several processes before the homeowner is evicted and the property reposed. These are: if a borrower keeps defaulting; the lender applies for a solicitor’s notice; the lender instigates possession proceedings through the court; at the court hearing a possession order is granted and sometimes a possession warrant; a bailiff is appointed and an eviction notice issued at which point the homeowner has two to three weeks to vacate the property.
This is a mutual organisation owned by its members and not by shareholders. These societies offer a range of financial services but have historically concentrated on taking deposits from savers and lending the money to borrowers as mortgages, hence the name. In the mid-1990s many societies “demutualised” and became banks. One academic study (Heffernan, 2003) found demutualised societies’ pricing on deposits and mortgages was more favourable to shareholders than to customers, with the remaining mutual building societies offering consistently better rates. In 1900, there were 2,286 building societies in the UK; in 2011, there are just 51.
“Arrears” tend to be associated with debt. If you fall behind and miss payments on any outstanding debt, the amount you failed to pay is an arrear – the amount accrued from the date on which the first missed payment was due.