Repossession loophole to be closed by Government

As the law stands, lenders can repossess and sell a property without permission of either the homeowner or a court (see the Mortgage arrears and Redundancy Help guides).

The problem came to light last year after a buy-to-let lender repossessed a property after the borrower got into arrears.

The borrower was living in the property, despite this being against the terms of the mortgage, and the new owner was able to get him evicted on trespassing grounds, even though the lender had never gone to court.

The Ministry of Justice says while there was no evidence other lenders were repossessing properties without court orders, it wanted to close the loophole.

The proposal was contained in a consultation document published today.

Help for homeowners

The Government also says more than 33,000 people had been helped during the year to the end of September by a scheme under which homeowners facing repossession hearings at courts are given free advice.

It said on average 76% of people helped through the scheme were able to return home immediately following the hearing. They were also given help on the best way to avoid future repossession proceedings.

Justice Minister Bridget Prentice says: "Losing your home is one of the most traumatic events anyone can face, and the Government is working hard to ensure that this never happens before borrowers have received all the help available to them, including financial assistance and debt advice.

"These schemes have helped prevent thousands of homeowners being taken to court by their lenders.

"And in those cases which do end up in the court, we're providing last-minute specialist advice, often making a dramatic and very real difference in preventing repossessions and evictions at the 11th hour, for both mortgagees and tenants."

Mortgage rescue

The Government has launched a raft of schemes to help struggling homeowners, including the Mortgage Rescue Scheme, under which people can sell some or all of their home to a social landlord and rent it back, as well as the Homeowner Mortgage Support scheme which enables people to defer paying interest on up to 70% of their mortgage for up to two years.

The schemes, combined with lender forbearance and low interest rates, have caused the Council of Mortgage Lenders to slash its prediction for the number of people who will lose their homes this year by a third to 48,000, although this will still be the highest figure since 1995.

Further reading/Key links

Get help: Mortgage arrears and Redundancy