RE-POSSESSION PROTOCOL

[David Mond]

I have just picked this up effective 19th November

Sorry that it is a long post.

Possession Claims - Pre-Action Protocol
29th October 2008

Pre-Action Protocol for Possession Claims based on Mortgage or Home
Purchase Plan Arrears in respect of Residential Property
Following the recent downturn in the global economy and in response to the rising number of home repossessions in England & Wales, a pre-action protocol for possession claims based on mortgage or home purchase plan arrears for residential property comes into force on 19th November 2008 (there are no transitional arrangements). It should be noted that where a potential claim includes a money claim and a claim for possession the protocol applies to both.
On or after 19th November 2008, all reasonable steps should be taken to discuss with the borrower, or their representatives, the cause of the arrears, the borrower’s financial circumstances and proposals for repayment of the arrears prior to issuing a possession claim. It should also be remembered that where a claim has been issued, both parties should be able, if requested by the court, to explain the actions that they have taken to comply with the protocol.

Points to note from 19th November 2008

The protocol applies to arrears on:

• first charge residential mortgages and home purchase plans regulated by the Financial Services Authority under the Financial Services and Markets Act 2000
• second charge mortgages over residential property and other secured loans regulated under the Consumer Credit Act 1974 on residential property
• unregulated residential mortgages

The primary aims of the protocol are:

• to ensure that a lender or home purchase plan provider and a borrower or home purchase plan customer act fairly and reasonably with each other in resolving any matter concerning mortgage or home purchase plan arrears
• to 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
• to emphasise that where either party is required to communicate and
provide information to the other, reasonable steps should be taken to do so in a way that is clear, fair and not misleading (if the lender is aware that the borrower may have difficulties in reading or understanding the information provided, the lender should take reasonable steps to ensure that information is communicated in a way that the borrower can understand)

Where the borrower falls into arrears the lender should provide the borrower with the following:

• the required regulatory information sheet or the National Homelessness Advice Service booklet on mortgage arrears (if appropriate)
• information concerning the total amount of the arrears; the total outstanding of the mortgage or the home purchase plan; and whether interest or charges will be added (including details or an estimate of the interest or charges payable)

The lender should also do the following:

• advise the borrower to make early contact with the housing department of the borrower’s Local Authority and, where necessary, refer the borrower to appropriate sources of independent debt advice
• consider a reasonable request from the borrower to change the date of regular payment (within the same payment period) or the method by which payment is made. The lender should either agree to such a request or, where it refuses such a request, it should, within a reasonable period oftime, give the borrower a written explanation of it s reasons for the refusal
• respond promptly to any proposal for payment made by the borrower.

If the lender does not agree to such a proposal it should give reasons in writing to the borrower within 10 business days of the proposal

• allow the borrower a reasonable period of time in which to consider any proposal for payment by the lender.
• warn the borrower, by giving the borrower 15 business days notice in
writing, of its intention to start a possession claim unless the borrower remedies the breach in the agreement

A lender should consider not starting a possession claim for mortgage arrears where the borrower can demonstrate to the lender that the borrower has:

• submitted a claim to an insurer under a mortgage payment protection policy and has provided all the evidence required to process a claim

• a reasonable expectation of eligibility for payment from the insurer
• an ability to pay a mortgage instalment not covered by the insurance

If a borrower can demonstrate that reasonable steps have been or will be taken to market the property at an appropriate price in accordance with reasonable professional advice, the lender should consider postponing starting a possession claim. The borrower must continue to take all reasonable steps actively to market the property where the lender has agreed to postpone starting a possession claim.

Where the lender has agreed to postpone starting a possession claim the borrower should provide the lender with a copy of the particulars of sale, the Home Information Pack and (where relevant) details of purchase offers received within a reasonable period of time specified by the lender. The borrower should give the lender details of the estate agent and the conveyancer instructed to deal with the sale. The borrower should also authorise the estate
agent and the conveyancer to communicate with the lender about the progress of the sale and the borrower’s conduct during the process.
Where the lender decides not to postpone the start of a possession claim it should inform the borrower of the reasons for this decision at least 5 business days before starting proceedings.

ALTERNATIVE DISPUTE RESOLUTION

The court takes the view that starting a possession claim is usually a last resort and that such a claim should not normally be started when a settlement is still actively being explored. Discussion between the parties may include options such as:

• extending the term of the mortgage
• changing the type of a mortgage
• deferring payment of interest due under the mortgage
• capitalising the arrears

COMPLAINTS TO THE FINANCIAL OMBUDSMAN SERVICE

The lender should consider whether to postpone the start of a possession claim where the borrower has made a genuine complaint to the Financial Ombudsman Service (FOS) about the potential possession claim. Where a lender does not intend to await the decision of the FOS it should give notice to the borrower with reasons that it intends to start a possession claim at least 5 business days before doing so.

Well guys here you have it straight- lets try and monitor if anyone on this site has any problems.

[go_4_broke]

It is a pity that the protocol does not appear to offer any protection for those whose home may be at risk because of a Charging Order, although I appreciate the process is somewhat different.

[David Mond]

Interesting - I will try and check that point out

[Reviva UK]

Hi David

I have read the post a few times and still not 100% sure what benefits are actually in place to help people to stay in their homes if there is a viable plan available.

Such plans may include reducing interest rates from 7, 8, 9, 10% or more to a more maneagble level. Even accepting 85% of the mortgage repayment for a period of 1 - 3 years, etc etc etc.

Doesn't seem like the goverment have had their "outside the box" specialists take a look.

After all if we can keep folks in their houses then reposessions and ultimately HUGE losses after sale are going to be avoided.

[greedfighter]

Hi David,

I have to agree with Paul on this, it doesnt actually appear to give any more protection than is given now. Most lenders will argue, as was the case when I had mortgage arrears, that the options of extending the term, capitalising arrears, offering a payment break etc only extends the loan or would continue to accrue interest at a higher rate etc. When I approached my lender all these ranges of proposals they simply said it wasnt their policy and as 'responsible lenders' they could not agree proposals that would put me in a worse position or increase the debt. They also would have wanted a 'fee' for changing the agreement (i.e I would have to have a new agreement)in my case this fee was the same as the original 'fee' when I took out the loan i.e £675.

I also note that this still only says the 'lender' may consider these options it doesnt make it compulsory ?.

All in all I dont see what 'new definitive protection' it offers over the current CML and FSA guidelines. I do see however an opportunity for lenders to potentially profit from it.

[David Mond]

I will put Reviva and greedfighters point to the Government representaives and revert back asap.

[Reviva UK]

Hi David

My neighbour is a "Sitting Lord" and he has trouble putting some of the ideas to the powers that be.

It just seems that these are such extrordinary times that we need very special and DIFFERENT solutions to the problems.

Only today I say that Goldman Sachs were paying out in bonuses almost the same amount as the goverment had supported them with.

It will be good to chat with you David on your return.

[David Mond]

I look forward to it - I plan to be at the FF meeting in Walsall are you going?

[David Mond]

By the way my next door neighbour is also an active 'Sitting Lord' as well!