Release date: Nov 2008

This is a saying that we have all heard before or seen in the small print on adverts for loans but did you know that this year it is estimated that up to 45,000 homes in the UK will be repossessed.

Circumstances can arise where homeowners are faced with difficulties in paying their mortgage, for example unemployment, splitting up with a partner or having unexpected expenses.

However, repossession does not happen automatically. As a homeowner, you can only be evicted from your home if the Court orders it. To obtain a Possession order the Lender must prove the correct procedure has been followed by them.

In an attempt to ease repossession rates, the Government recently confirmed that a new Protocol is to be implemented which will state what the Court should expect of Lenders bringing repossession cases.

This Protocol is in addition to existing Financial Services Authority Rules that stipulate how Lenders should go about dealing with homeowners who fall into arrears.

The aims of this new Protocol are to ensure that a Lender and a Borrower act fairly and reasonably with each other in resolving any matters concerning Mortgage arrears; and encourage more pre-action contact between the Lender and the Borrower in an effort to seek agreement between the parties; and where this cannot be reached, to enable efficient use of the Court's time and resources.

Where the Borrower falls into arrears, the Lender should provide the Borrower with information concerning the amount of arrears.

The Lender and Borrower should take all reasonable steps to discuss the cause of the arrears, the Borrower's particular financial circumstances and any proposals for repayment of the arrears.

Most Lenders will try and resolve any difficulties and may be able to offer a solution to the Borrower's problems by:

• Extending the term of the mortgage
• Changing the type of the mortgage
• Deferring payment of interest under the mortgage
• Capitalising the arrears

The Lender should:

• Advise the Borrower to make early contact with the Housing Department of the Local Authority and, where necessary, refer the Borrowers to appropriate sources of independent debt advice.
• Consider any reasonable request from the Borrower to change the date of the Mortgage payment or method of payment.
• Notify the Borrower within 10 business days if the Lender is not satisfied with the Borrowers proposals and provide a written explanation of its reasons for the refusal.
• Give the Borrower a reasonable period of time in which to consider such proposals.

The Lender should also give the Borrower 15 business days notice in writing of its intention to start possession proceedings if agreement cannot be reached between the Lender and Borrower.

Most Lenders will only apply to the Court for a Repossession Order as a last resort.

A Lender should consider postponing the start of repossession proceedings for Mortgage arrears if the Borrower can demonstrate that is has submitted a claim to an insurer under a Mortgage Payment Protection Policy; if the Borrower can demonstrate an ability to pay a Mortgage instalment or if the Borrower can demonstrate that reasonable steps have been or will be taken to market the property.

The parties should be able, if requested by the Court, to explain the actions that they have taken to comply with the Protocol.

The Court has a wide discretion when making Court Orders and is usually reluctant to make a Possession Order unless all other avenues have been exhausted.

It is important that Borrower's simply do nothing about the situation. They should contact the Lender immediately or alternatively seek legal advice and, in the meantime, continue to pay whatever they can towards the Mortgage payments.

If you have any queries regarding home repossession or related issues, please contact Kelly Henderson on 01325 466461 or kelly.henderson@close-thornton.co.uk.

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