This is a new government scheme designed to help most vulnerable families who are experiencing difficulties making mortgage repayments.

The scheme is run by your local housing authority.

There are two schemes:-

1. Government Mortgage to Rent

This is where a Housing Association buys your property at market value/a fair price and lets the property back to you whereupon you will pay rent at an affordable rate. You will therefore become the Housing Association’s tenant, pay them rent lower than market rate and no longer be a home owner. The scheme is safer than those offered by the unregulated sell and rent operators.

 

2. Share Equity

This is when an independent Housing organisation (Registered Social Landlord) provides assistance to home owners who are not able to afford their mortgage.

The Registered Social Landlords supply a shared equity loan which pay a proportion of your mortgage and receive a share in the property’s equity. You will still own your property and will repay your mortgage. This will reduce your mortgage.

3. Sell and Rent Back

The problems with Sell and Rent Back is that they are unregulated. The landlord may threaten or ask you to leave the property after 6 or 12 months. You may not be able to claim Housing Benefit. The landlord may offer you less than the value of the home if the company gets into financial difficulties, you may be evicted.

4. Qualify

To qualify for the Mortgage Rescue Scheme, your household must have someone in priority need. This could be:

i) dependent children.

ii) if anyone in your household is pregnant, elderly, disabled or has mental impairment.

You must also meet the following criteria:

a) Household must not earn more than £60,000 per annum.

b) Must not own a second home.

c ) Home must be suitable for your needs.

d) Value of your home should not be higher than a certain level (depending on the level set by your region).

e) Must have a clear need to stay in your home (i.e you can’t downsize).

f) Should have discussed all options to meeting repayments with lender.

g) Made arrangements to repay all debts.

h) Received debt counselling and advice from independent debt advisor.

i) everyone named on mortgage must agree to be considered for the scheme.

Homeowners Mortgage Support Scheme

The Government has launched a Homeowners Mortgage Support scheme which help you if you are a homeowner and your household has a temporary, unexpected drop in income making it harder to meet your mortgage repayments. This may be for example a reduction in your working hours, a pay cut or one mortgage holder is made redundant. This scheme allows you to reduce your mortgage repayments for up to two years by delaying some of the monthly interest due on your mortgage. You will have to pay at least 30% of the interest due on your mortgage each month. The money you will have to pay back will be delayed. The money you delay in paying will be added back onto the debt at a later date. Not all mortgage lenders provide HMS.

Qualifying

1. You must have had a temporary drop in income and be unable to meet your monthly mortgage payments.

2. You need to switch to an interest only mortgage.

3. The lender will ask you to commit to paying as much as you can afford each month.

4. You will not be able to apply if you own more than one home

5. You have payment protection insurance.

6. Your lender is not convinced you cannot meet the reduced repayment.

7. You are unlikely to ever again earn at your previous level.

8. You claim JSA (in which case you can claim for support from mortgage interest).

9. Your lender is not offer the service.

Your lender may have other conditions that you will need to meet, i.e. not have a large amount of savings.

If you are not eligible for HMS, please talk to your lender about other options that they may be able to offer you.

Prevent repossession prior to your lender issuing a claim for repossession

If you are in arrears with your mortgage or unable to meet the monthly remortgage repayment, options are available to you to seek to resolve the matter to prevent your lender issuing a claim for repossession of your property. Please do not ignore the situation as mortgage debt is a priority debt. It is worth considering the following options:

1. Are you able to cut back on your spending to enable you to have more money each month to pay your mortgage?

2. Are you able to get a better deal on your mortgage?

3. If you have other debts, it may be worthwhile to see if you can reduce these debts and contact these companies to see if you can enter into a repayment plan to enable you to make your monthly mortgage repayments.

4. Are you able to change your mortgage to an interest only mortgage?

5. Do you have any payment protection insurance that you are able to invoke?

6. Are you able to remortgage?

7. If your loan is a Consumer Credit Act 1974 loan, can your repayments be reduced or the term of the mortgage extended?

It is important not to ignore the situation and if you are uncertain, talk to your lender and seek to negotiate a solution. Inform them regarding your circumstances and an amenable solution may be achieved. You will also be able to consider the Government Home Owners Support Scheme and Government Mortgage Scheme.

If you are unhappy with how your lender has been dealing with your matter, you are able to complain to the Financial Ombudsman Service. Your lender may be able to:

• Reduce monthly repayments for a certain period.

• Cut the charges they make for you being in debt with your mortgage.

• Extend the time of the loan.

• Offer a better loan rate.

• Allow you time to sell your home.

• Allow you to pay interest payments for a short period of time (only if you have a repayment mortgage).

• Spread repayments of the total amount due you owe (over the remaining period of your mortgage).

You must check the problems that may arise when entering into any arrangements with your lender in the future.

Pre-action protocol

There is a pre-action protocol which came into force on 19 November 2008. This protocol applies to most residential mortgages. The protocol is a procedure that most lenders must follow before taking any Court action against you if you are in mortgage arrears. For example, if you miss a payment your lender should inform you how much you owe, how much mortgage you still have to pay, what interest or charges you have to pay, they should consider any reasonable request from you to change the date you pay your mortgage or how you pay your mortgage and response promptly to any offer of payment made by you. If they do not accept your offer, they must given reasons as to why not. If you do enter into an agreement with your lender but you do not stick to it, your lender must warn you in writing and inform you that they are going to take Court action.

Stages and events leading up to your home being repossessed

Once your lender has followed the pre-action protocol, they may apply to the court to repossess your property, if you are in two or more months’ mortgage arrears.

You will receive a claim form and a defence form from the Court. The claim form will detail your lender’s claim against you. The defence form provided to you by the Court is a form for you to complete detailing your income, expenses and reasons why you are defending the proceedings. The claim form will state a hearing date which will usually take place within four to eight weeks. You will be required to file your defence at Court before the hearing. The hearing will be relatively informal. The Judge will consider the documents provided to him by the lender and will request from the lender or their representative at the hearing to confirm the latest figures on the account. The Judge will then consider what order to make.

Possible Defences

1. If you were forced to sign the mortgage you may have a defence under Duress. This may invalidate your mortgage.

2. If you signed the mortgage as a family member/professional adviser talked you in to signing it, you may have a defence of Undue Influence. This may invalidate your mortgage.

If the agreement is a Consumer Credit Act agreement:

1. If your lender has not complied with the Consumer Credit Act 1974 you may be able to raise a defence which may make the agreement unenforceable. For example if the agreement is improperly executed (s61) ie. The document has not been signed in the prescribed form containing all the prescribed terms

2. You may be able to claim that the agreement is an extortionate Credit Bargain for example the agreement requires you to make grossly exorbitant payments. The loan amount may then be reduced.

Types of Orders that can be made

1. You may request an adjournment of the proceedings. For example, you may be wishing to sell or remortgage your property.

2. The Judge may adjourn the hearing or make a possession order that is enforceable after a longer period, for example 56 days. It can range from six weeks to three months depending on circumstances.

Proceedings may also be adjourned as the Court made need more information from you or your lender before entering judgment or you have requested more time to raise a lump sum to pay off the arrears and the Judge considers this to be realistically possible.

3. If the Judge is satisfied you are able to pay the full current monthly instalments and an additional monthly sum on top to clear the arrears over a specified period, the Judge may make a Suspended Possession Order (“SPO”). The Judge will require details of your income, expenditure and reasons for the arrears. This means that the Judge has granted the lender possession of your home but the Judge will have decided that it is not reasonable for the possession order to take place immediately so you will be allowed to remain in your home provided you keep to the conditions imposed by the Court. This will be the ongoing mortgage payments and an amount towards the mortgage arrears each month. If you break the terms of the Order, the Possession Order is no longer suspended and your lender can request the Court’s bailiffs to evict you.

4. An outright possession order may be made by the Judge. An outright possession order is an order made by the Judge which requires you to leave the property within a specified period of time. If you do not leave the property within the time specified by the Court, it will be up to the lender to apply to the Court to have bailiffs evict you. This normally takes place within 28 days.

5. Time Order. Consumer Credit Act. When there are secured loans and/or a second mortgage against the property, the Court has the option to lower payments by:

1. Lowering the level of interest on the loan.

2. Increasing the duration of the loan (varying).

This is called a Time Order however, you must inform the Court prior to the hearing or at the Court hearing that you wish the Court to make such Order. Time Orders can only be granted for certain types of agreement. This depends on the amount borrowed and when the loan was taken out.

6. Money Judgment. A money judgment is a County Court Judgment against you in respect of all the monies owed under the mortgage. The lender will normally also request such money judgment be made together with their claim for repossession of the property. This usually occurs to cover a shortfall between the value of the property sold and the outstanding mortgage.

7. Dismissal. The Claim will be dismissed for certain reasons such as the fact that your lender may have not followed the correct procedure for bringing the case to Court.

After the Hearing

If an outright possession order has been, after the date of the expiry of the possession order, if you have not left the property, the lender will be required to request a warrant of eviction from the Court. This warrant of eviction will state that on a specified date the Court bailiff will be able to attend your property and evict you, i.e. ensure that the property is empty and will change the lock. You will normally receive at least two weeks’ notice of this.

If a suspended possession order was made and you have failed to maintain the ordered payment, the lender can apply to the Court to request a Warrant of Eviction and you will be evicted once the bailiff has attended your property. However, you may be able to make an application to the Court to suspend the warrant as you may require more time to pay the arrears or wish to sell or remortgage the property. A hearing will thereafter be listed whereupon the Judge will decide whether it is reasonable for the eviction date to be suspended due to the grounds of your application.