If you get into mortgage arrears, then your mortgage lender may decide to take possession action against you which could lead to you losing your home. Unfortunately, mortgage possession claims are a rising trend.
You should stay in touch with your lender and always reply to their letters as you may be able to stop the case from going to court by negotiating an arrangement with your lender. Even if it is not possible to stop the case from going to court, this does not necessarily mean that you will lose your home. Your lender might want the court to grant a suspended possession order. This will allow you to stay in your home as long as you keep to an arrangement to pay off the arrears.
You may be able to argue that your lender has acted unfairly or unreasonably, or has not followed the proper procedures. This could help to get court action delayed or persuade the judge to issue a suspended possession order instead of an outright order which could lead to you being evicted from your home.
Your mortgage lender should not start court action against you without following the Mortgage Conduct of Business (MCOB) rules laid down by the Financial Conduct Authority (FCA). The rules say that your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off the arrears, if you are able. They must consider any reasonable request from you to change when or how you pay. Your mortgage lender should only start court action as a last resort, if all other attempts to collect the arrears have got nowhere.
If you took out your mortgage from 31 October 2004 onwards, your mortgage lender has to follow the FCA rules when dealing with mortgage arrears. If your mortgage lender fails to follow these rules, you can complain to the Financial Ombudsman Service.
As well as following the FCA rules, your mortgage lender should go through certain other procedures before they start court action. These are called a pre-action protocol. If the case does go to court, the judge will take into account whether or not your lender has followed the protocol.
The main things you have to do are: keep in touch with your lender, act fairly and reasonably with your lender, and try to sort out payment of your arrears.
Under the protocol, your lender must give you information about your legal rights if you miss any payments. They must also:
- tell you the total amount of your arrears
- tell you how much is still left to pay on your mortgage or home purchase plan, and whether interest or charges have been, or will be added
- where appropriate, give you the details or an estimate of the interest or charges that may be payable on your mortgage or home purchase plan
- give you information on the current monthly instalments and the amounts paid for the last 2 years
- where appropriate, provide you with the required regulatory information sheet or the National Homelessness Advice Service/Shelter/Cymru booklet on mortgage arrears
- discuss with you or your representative the cause of the arrears, your financial circumstances and proposals for repayment
- advise you to make early contact with the local housing authority, and where appropriate, refer you to independent debt advice
- allow you a reasonable period of time to consider a proposal for payment made by them (also giving you enough detail for you to understand how it works and how it will affect you)
Your lender has to consider any reasonable request from you to change when or how you pay. If you make an offer to repay the arrears, your mortgage lender must get back to you quickly with an answer. If they refuse your offer, they must let you know why in writing within 10 business days of the offer. Your lender should not start court action while you are trying to come to an agreement.
With jointly owned residential property, if you have agreed a mortgage or more typically a second mortgage, in favour of your partner only, for say his business, then there is the possibility of the defence of undue influence. Where the innocent party has been misled or coerced the Court may set-aside the transaction, but it is usually very difficult to prove.
The starting point for calculating a ‘reasonable period’ for repayment of arrears is the entire remaining term of the mortgage, also called the Norgan figure.
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