Good news for struggling homeowners
Northern Rock has given struggling homeowners a six-month period to get back on track with payments before it starts repossession proceedings.
The nationalised lender follows in the footsteps of Royal Bank of Scotland, which recently announced that it would also help-out cash-strapped homeowners by granting them a six-month period of grace.
This is double the industry standard of three months.
Northern Rock, which is just one lender that has come under criticism in the past for having an aggressive repossession policy, has seen the number of homeowners missing payments jump since the downturn in the market. Experts say this is partly down to its history of lending 100%-plus loans to first-time buyers.
The bank says it already “works” with customers facing repayment difficulties to try and agree an alternative debt management solution before taking repossession of their property as a last resort. It says that in those cases where repossession does occur, borrowers have had around 15 months to get back on track since they first fell into arrears.
Gary Hoffman, Chief Executive Northern Rock, adds that less than 1% of repossession cases involve customers that have been in arrears for less than six months.
“We continue to work with customers facing repayment difficulties to try and agree an acceptable debt management solution and avoid repossession,” Hoffman says. “We will now formalise our policy and agree not to repossess a property for a period of at least six months from the point of arrears.”
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.
“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.