Mortgage Arrears - Repossession Reality Part 2
In the UK repossessions are continuing to make the news as homeowners affected by the recession can no longer meet their mortgage repayments and have fallen into arrears. In the Daily Mail last year they reported that on July 9th, "Seventy-four homes are to be repossessed today and the number of homeowners losing their property is expected to rise to 123 a day by the end of the year," with figures obtained from the charity Money Advice Trust. In May of this year Citizens Advice Bureaux in England and Wales reported a 49% increase in the number of new enquiries about mortgage and secured loan arrears last year.
Repossession can be the result of being issued an ill-suited sub-prime mortgage (non-status or impaired credit lending) - offered by lenders to borrowers who have variable or uncertain incomes (such as the self-employed and contract workers) or who have poor credit histories. Such a group in the current recession have fallen victim to the credit crunch, can no longer afford their mortgage repayments and have fallen into arrears. For others trying to juggle their finances a second charge loan can have been the prime factor in putting homeowners into the position of possible repossession of their homes. Whereas a first charge loan is the mortgage used to purchase your home, a second charge loan is a loan that can be taken out for any purpose - secured against your home. Meaning if you default on the payments you could be at risk of losing your home.
The Pre Action Protocol was introduced by Government in November 2008 and provided new guidance for judges to ensure that lenders take all reasonable steps to avoid repossession. [See article: Mortgage Arrears - Repossession Reality Part1] Sam Younger, chief executive of Shelter said: "The research paints a mixed picture of how lenders are reacting to Government schemes to help homeowners. Unless all lenders urgently sign up to and consistently implement these or equivalent schemes and strictly adhere to the pre-action protocol many people will fall through the gaps and repossessions will continue to rise." If a lender and a borrower cannot agree to postpone a possession claim the Pre Action Protocol offers 'Alternative dispute resolution'. The courts regard a possession claim as a final resort and actively encourage all avenues to be explored including discussion on extending the mortgage duration; changing the mortgage type; postponing payment of the interest due on the mortgage; or capitalising the arrears. 'Complaints to the Financial Ombudsman Service', as outlined in the protocol, is nearly the last resort to avoiding a possession claim from the lender. A lender might yet postpone their claim if the borrower is awaiting a decision from a pending complaint to the ombudsman or they may not await a decision from the FOS and must therefore inform the borrower and give reasons, at least five-business days in advance of commencement of any possession claim. The final point on the protocol is 'Compliance' that the parties involved should be accountable for their actions and able to explain and justify them to comply with the protocol.
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