Mortgage rescue schemes and Repos: Facts and models

Despite most of our concerned glances at the various mortgage rescue schemes set up by the New Labour government (see NL’s review of Darling’s Keynesian Splurge), Pickles’ decision to review those schemes announced pretty much as soon as he began to warm his seat in DCLoG, the major amount of cash spent on advertising the schemes, etc, we now know courtesy of the inestimable York Centre for Housing Policy and School for the Built Environment at Heriot Watt how many people benefited from these schemes between January 2009 and March 2010.

For the homeowners mortgage support scheme (which subsidises lenders to forebear taking possession), a grand total of, wait for it, … 32 households had benefited.  The researchers add, and this is not unreasonable, that the scheme has had wider benefits in leading lenders to develop their own forebearance strategies (which currently account for rather more borrowers, erm 33,000).  I wonder also if the FSA might have had something to do with that development as well (see our note here).  The researchers also uncover other various reasons explaining the low take-up, including problems of design and onerous documentation.  It is a rather sorry tale in how not to implement an important social policy.

For the mortgage rescue scheme, under which the borrower’s property is bought by a PRP in the main and other  gatekeeping-type practices, including money advice, housing options, homelessness prevention strategies – all designed to keep the household in their property – there had been 20,254 approaches to local authorities, most of which had received advice of one sort or another, 682 had been “referred for consideration under homelessness legislation” (that’s roughly 3.4% by my calculation), and 629 had their properties bought from them on a sale-rentback type agreement.

This is good quality research (which I probably have not done sufficient justice), which demonstrates the considerable impacts on households helped through these schemes and included 42 interviews with those households as part of the study; and at least the executive summary is worth a read by practitioners (who might get something out of it when it comes to thinking about their s 204(s) and/or LA gatekeeping strategies – see for example the Raw case).

The researchers go on to demonstrate the schemes’ VFM and here, it must be said, they have also been rather clever in providing two measures of VFM, which have been sufficient to satisfy Grant Schapps to retain the HMS for a limited period: “Because of low administrative costs, the Minister has decided that the Support Scheme will remain as a backstop that maybe needed if interest rates rise. It will close as planned at the end of the financial year” (press release, where Schapps is [oddly] supported by Martin Lewis, who has a money saving website for which he gets extra publicity in the press release).

Somewhat worryingly, in the same press release, the CML forecast is for 53,000 repos this year.  I really don’t know why they always have to use the CML repo forecasts, particularly now when they have commissioned the brainy John Muellbauer to model and forecast mortgage arrears and possessions (published by DCLoG the same day as the press release; fortunately, there is a more digestible summary of the report).  One of the stark, key conclusions from this sophisticated study is the perhaps obvious, unsophisticated:

Modelling of a wide range of economic scenarios suggests that it is likely that possession rates will rise in the next three to four years. Indeed very optimistic assumptions need to be made to avoid this. The combination of higher interest rates and weak growth in house prices in the short term would lead to a sharp rise in possessions.

Posted in Homeless, Housing law - All, Mortgage possession.

One Comment

  1. Has anyone tried to JR a LA re their administration of a mortgage rescue scheme? I practice in 1 of the 22 areas identied as hotspot back in 09. LA has suddenly stopped MRS. I’ve tried (politely) making enquires as to why, LA took umbridge at our enquiries and sent a pretty aggresive response along the lines of ‘don’t even think about JRing us as MRS is entirely discretionary’. We’d not previously suggested JR though in view of their lack of a reasoned response maybe more likley now than before.

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