New rules to protect homeowners from repossession by mortgage lenders have been announced by the Treasury. Housing minister Margaret Beckett said the move would ensure that repossessions could only take place after all other avenues have been explored.
Legally enforceable
The measures were drawn up in negotiations between the Government and mortgage lenders and were widely expected as a quid pro quo for the bail-out of the leading banking sector. Court protocols will ensure that the agreements are legally enforceable and provide clear guidance on what lenders should do before they apply to court for repossession.
Under the protocols, lenders will be expected to demonstrate that they have tried to discuss and agree alternatives to repossession when borrowers get into trouble with mortgage repayments. If a case reaches court, lenders will be required to tell the court what they have done to comply with the protocol, including using third party resolution systems.
Explore every avenue
Recently appointed housing minister Margaret Beckett said: "We must ensure that every avenue has been explored before lenders seek to repossess homes. These new measures will further protect the most vulnerable households in the current economic climate. We have expanded free legal representation in county courts for households at risk of repossession, we have provided more free debt advice and will continue to work closely with lenders through this difficult time."
But the minister added that households facing difficulty in making mortgage repayments should ensure they seek early independent advice and speak to their lender as soon as they are aware of a problem.
Guidance published
New industry guidance was immediately published by the Council of Mortgage Lenders, which said it had taken into account feedback from advice agencies to ensure that the guidance balances the interests of consumers and lenders. That guidance includes a practical explanation of what lenders must do and examples of good practice for lenders to compare with their own practices.
But the CML has also published evidence that, it argues, illustrates that media concerns over the level of home repossessions have been exaggerated. CML says that it had projected around 45,000 properties being repossessed this year and has not revised its expectation. It argues that the current rate of repossession of 0.38% is "very modest" and reflects most homebuyers' ability to repay their mortgages.
Regulating buy and rent back
In a separate move, made in the same government announcement, the Treasury confirmed that it would publish a consultation paper to bring the sale and rent back of homes under Financial Services Authority regulation. This was recommended just days earlier by the Office of Fair Trading.