10/05/2008

Mortgage possessions – Gordon feels your pain

Mortgage repossessions are rising at the fastest rate since 1991. According to the MoJ quarterly figures [pdf]:

  • Possession claims in the first quarter of 2008 were 38,688, 7% more than in the last quarter of 2007. The rise over the last year was 16%.
  • 27,530 mortgage possession orders were made on a seasonally adjusted basis, 17% higher than in the first quarter of 2007 and 9% higher than in the fourth quarter of 2007. 
  • 47% of mortgage possession orders were suspended compared to 47% in the first quarter of 2007 and 46% in the fourth quarter of 2007.

Caroline Flint and the Chancellor announced a £10 million package of measure to ‘support homeowners facing difficulties with their mortgage’.

This package includes measures to ensure that financial advice and support is available for borrowers who may need it and includes an additional £9 million extra funding for face-to-face debt advice provided by third sector partners including Citizens Advice Bureau.

Let us unpick this a little. That is £9 million over three years, so £3 million a year to ‘third sector partners’. Citizens Advice claims advice is provided at 3000 locations, so, if equally distributed, that is £1000 per location. Of course, it won’t be equally distributed – some will be used centrally or for training and I would be surprised if certain bureaux weren’t targeted, particularly those that run Court advice, but it doesn’t actually look like much.

The other £1 million (over three years!) is presumably to fund the other promises:

  • expanded access to free legal representation at county courts throughout England for households at risk of repossession;
  • strengthened National Housing Advice Service to provide a new comprehensive debt advice service
I take this to mean a bit more support for duty scheme possession solicitors. Does anybody know about the ‘National Housing Advice Service’? It has slipped beneath my radar, or do they mean Community Legal Advice?
The press release adds that this £10 million
builds on the services already in place, backed by £560 million Government investment, such as face to face debt and financial advice, a national debt helpline, homelessness prevention work by every council, legal aid, and financial support for low income households who may face short-term difficulties in repaying their mortgage.
Uh huh. Few mortgage repossession cases are eligible for legal aid. Council ‘homelessness prevention’ is hardly of use and ‘financial support’ amounts to limited payments of interest only, after six months of eligibility.
The government is also talking to the main banks on avoiding repossessions. However, my anecdotal experience, also reported by Shelter, is that it is sub prime mortgagees, second mortgagees and secured loan holders who are pushing for repossessions, often with relatively low amounts at stake. Given the great frenzy of cashing in equity over the last few years, this could present a very large ongoing problem.
Meanwhile, the Civil Justice Council are consulting on proposals for a mortgage possessions pre-action protocol. The consultation paper is here [pdf] and the consultation ends on 23 May 2008.
Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

13 Comments

  1. Usefully Employed

    Last time I was in my local county court waiting room I noticed that one DJ’s list had 26 possession hearings in it. I’d feel for him, if I didn’t know his salary.

    Reply
  2. Ekaterina

    It might be a stupid question, but why is this happening?

    Reply
  3. Nearly Legal

    There are a number of reasons, but one version would be that people mortgaged themselves to the limit of what they could afford to buy a property (or remortgaged to the hilt to get more money out of their property). They are therefore very sensitive to any increase in mortgage interest rates. Rates have gone up, or people are at the end of fixed interest rate deals and are facing higher rates. Re-mortgaging has become very difficult because the banks want higher rates. So people can’t afford the mortgages (and have trouble selling the property).

    The banks, having handed out loans like penny sweets to anyone who asked are now having a panic because they have suddenly realised that they might not get their money back – this was fine as long as house prices kept going up – lots of equity – but once they stagnate or fall, the bank’s money is at risk. As a result, the banks have over-reacted and aren’t lending to anybody much at all unless they have lots of money themselves already.

    Reply
  4. DJ

    The National Homelessness Advice Service, as far I could tell, is a Shelter project to provide second-tier advice to CABx, and possibly a few other agencies .. but mostly CABx. It’s not quite the same as front line workers who will represent in court.

    Reply
  5. Nearly Legal

    That’s what I thought it might be, but the MoJ press release insists on the ‘National Housing Advice Service’. I’m puzzled.

    Reply
  6. Housinganger

    I think there are two NHAS numbers, 1 is for the public and 1 for CABx which I’ve used a number of times.

    I’d be interested to know the number of self declared mortgages that were taken out where people lied about their income. I’m sure tiis is a big unknown as both sides at the time thought they would benefit.

    A lot of people don’t just have 1 mortgage but also 1 or 2 secured loans tied to the property to.

    I see so many people in negative equity using over 50 pct on their income to pay their mortgage and secure loans.

    Reply
  7. Nearly Legal

    Yebbut that NHAS is the homeless advice service, not ‘housing’ advice service.

    Agreed on the multiple loans. Secured loans seem particularly eager to repossess.

    Of course the other big issue is the repossession of lots of buy to let, making for a lot of tenants losing homes in circumstances where they can do nothing about it.

    Reply
  8. Housinganger

    Ah my dumb, to many NHAS’s for me to cope with.

    In any event it’s probably £10 million that no one will actually ever see.

    ITV news did a feature about your last point about the poor tenants. I tried to find the link but failed miserably.

    Reply
  9. Ahmad

    It is possible to prevent very many mortgage repossessioins if only proper legal advice is sought at the right time ( ‘buy to let’ are often the exceptions ). Unfortunately there are no equvilent sites to ‘Nearly Legal’ addressing the numerous complex leagl defences in Mortgage law as there are for Housing law.

    Only a limited number of CABx have adequetely trained advisers the vast majority of bureaux simply aim to negotiate an arrangement of sorts with lenders, simply because they are unaware of what other valid arguments that could be run.

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    Reply
  10. Nearly Legal

    Ahmad, if you would be interested in contributing a piece on mortgage possessions, please email me. I personally don’t do any in practice and, although I’m aware of the basics, a view from someone active in the field would be very useful.

    Reply
  11. Craig Keenan

    …interesting stuff from the government there, particularly as they appear to miss the problem with the wider picture – if repos increase, the demand on social housing increases. And that’s already at breaking point. £10 million is nowhere near enough.

    CLP are the lead agency in the Bham County Court Duty Possession Scheme. I am the only one here who does the mortgage cases (along with colleagues from a number of other firms in the area and the Court Welfare Office). My anecdotal yet very real evidence about the increase in number of mortgage possession cases is this: MAY 2007 – 18 mortgage lists (each of around 25-30 claims per list) in Birmingham County Court; MAY 2008 – 25 mortgage lists in Birmingham County Court. You can prove ‘owt with numbers, but by my maths that’s almost a 39% increase in a year. Further, we seem to be are advising (on the Duty Possession scheme) more people who cannot afford to pay the instalment let alone anything off the arrears (a significant amount of those cases are because of fixed/discount rates ending). Norgan is a very helpful case, but even it can’t magic money from somewhere! Further, house prices in the area have certainly come down and properties are taking longer to sell. So there’s less you can do unless an arguable defence comes up – and it’s sometimes difficult to spot a defence when you have about 5-10 minutes with each client.

    More worryingly, some Defendant’s attend court clutching letters from Companies that “purchase and rent back” to you – you get an indication in the paperwork of a five year rent guarantee BUT with a one year assured shorthold tenancy. Oh, and the agreed sale price with such companies is always something around the mortgage redemption figure plus a couple of grand on top (to keep you quiet). Reprehensible.

    I was doing advocacy in mortgage repos in the early 1990’s and I never believed mortgage repos would be as high again or negative equity would return! Like a rabid dog, it’s back, drooling and biting hard. £10million isn’t going to muzzle it. (Really sorry about the pun; it’s monday, I’ve got 3 County Court appeals to issue in the next few days and it amused me)

    Reply
  12. Niki Goss

    Talking about How many of us knew
    [until reminded 8/10/08 by Horsham V Clark & GE money [2008] EWHC 2327 (admin)]
    that homes can be sold by your lender with u in it and without any possession order or order for sale being obtained by passing the protections of s36 Admin J and with no chance of stopping it once exchange has taken place and the purchaser can get u out and that this is how matters have been since 1860!

    and now the court has just decided this does not breach the HRA

    time for an early change to the law

    Reply
  13. J

    Niki,

    I’m writing a post on the Horsham case at the moment. It should be up on the site over the weekend.

    J

    Reply

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