In 2020 over 4,700 homes in England were repossessed. This is a guide for anyone currently going through these extremely difficult circumstances, whether you are in arrears with your mortgage or are facing a repossession order. Understandably, this is a worrying situation, but now is the time to plan, and look into the best options for you. There are ways that you can prevent your home from being repossessed, and this article will offer practical advice to navigate you away from repossession.
What is a house repossession?
To start, let us outline what a house repossession is…
Usually, a house is repossessed when the owners fall into financial difficulty. If the owners fall behind on the payments for their mortgage or a loan secured against their property, the lender may take court action against them to seize back the property. The lender will then use the property to recover as much of the outstanding debt as possible. The former owners will then be liable for any remaining balance not satisfied by the sale of the property.
The house repossession process explained.
A house repossession is a legal process, so it follows a clear structure. This structure is detailed below with advice on what you should be doing at each stage.
You’ll receive a default notice.
When you miss a payment on your mortgage or loan, your lender will send you a default notice which is a formal letter from them advising you that you are in arrears with the repayments of your loan. Your lender is legally obliged to let you know that you have missed a payment.
What you should do now…
This is the time to contact your lender. The sooner you talk to them, the more likely you are to resolve the situation and keep your home.
- Explain why you are in arrears. Be honest, financial lenders have a legal obligation to help.
- Advise what you are doing or planning to do to clear the debt and discuss an arrangement to pay back the arrears. You need to think about your income and outgoings and prioritise your debts and costs.
- Pay as much as you can, even if you can’t pay in full, any amount will show that you are trying to resolve the situation and build trust with the lender.
- Answer any questions that they have. If you’re not sure of anything, tell them you will find out and agree to come back to them.
- Finally, if you feel that you can no longer afford your home, and your house is for sale, under offer of sold subject to contract, then provide evidence of this to the mortgage lender.
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Mortgage lender starts court action.
If between you and your lender you cannot agree a repayment plan, or you have not agreed on alternative arrangements to pay the loan (such as sale), or even you have failed to communicate with your lender at all up to now, your lender may start court proceedings to repossess your home.
What you should do now…
Mortgage lenders are regulated by the FCA (Financial Conduct Authority). They must adhere to the rules set by the FCA. They state how lenders deal with their customers. These ruses are set out in the MCOB (Mortgage Conduct of Business). These rules state amount other things:
- Your lender must treat you fairly and must consider any suggestions you make to deal with the arrears.
- All reasonable attempts should be made to resolve the matter prior to court action.
- The lender must provide you with a list of missed payment, outstanding debt and total arrears and charges prior to starting court action.
- The lender must also inform you that they are beginning repossession action and advise you to contact your local council for help.
First thing you should do at this stage of the process is to ensure that your lender has followed these rules correctly when dealing with the arrears on your account. We would suggest reading the MCOB in full, it can be found here: MCOB
If you find that your lender hasn’t followed the FCA’s rules then you need to make a formal writted complaint directly to your lender. Your lender is obliged to advise you of their formal complaints process, and this information may be available on their website.
If you are not happy with the resolution to the complaint that your lender provides, or you have not heard from your lender within eight weeks of making the complaint, you can escalate your complaint to the FOS (Financial Ombudsmen Service) here: FOS
The FOS will investigate your complaint and how your lender has dealt with your situation. On some occasions the FOS will advise the lender to stop court action and come to a reasonable repayment agreement outside of the court.
Due to the rules of the court, the lender will likely delay court action if you are waiting for a decision on a complaint made against the lender to the FOS.
If your lender does still decide to proceed with court action, then they must write to you and tell you why this decision has been made.
There are other court rules called pre-action protocol that your lender must adhere to, where you may be able to delay court action even up to the last minute. Your lender must complete a pre-action protocol checklist at the hearing, and if this has not been followed then the hearing will be adjourned. When your mortgage lender advises you that they are going to start court proceedings, these are some idea’s of ways to prevent this from happening.
If you make a proposal to repay the arrears
Your lender must consider any repayment plan that you suggest. If they do not accept the proposal they must write to you within 10 days to advise why. The pre-action protocol check list ensures that this is folled.
If you apply for benefits or financial help
Including: Universal Credits, help from your local council, SMI (Support for Mortgage Interest) or an insurance claim (such as Mortgage Protection). Again, your lender should wait until the outcome of your application for this support prior to court action according the protocol checklist.
If you are selling / have sold your home
Your lender must consider delaying court action in this circumstance. You’ll need to show that the property is on the market at a realistic price, and evidence of correspondence to do with the sale. You may also need to give permission for the lender to talk to your solicitor and estate agent.
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If you are too late to stop your lender applying to the court, then we recommend that you seek legal advice.
Here are a few ways to get free legal advise when facing a mortgage repossession.
Court duty scheme
Most county courts have advisors available when repossession hearings are scheduled.
A legal advisor will be there to provide advise and speak on your behalf if you would prefer.
This service is always free, no matter how much you earn or how much your property is worth.
Legal aid
You will qualify for legal aid automatically if you claim one of the following: universal credits, income support, JSA (Job Seekers Allowance), ESA (Employment and Support Allowance), pension credits.
However, you won’t usually be able to claim legal aid if you have a gross monthly income of over £2657, have savings of over £8000 or your home is worth over £308,000.
To find out if you qualify for legal aid go here: GOV.UK Find Out If You can get legal aid
If you do qualify, you can find a list of legal aid providers here: Gov.UK Directory of legal aid providers
Debt advisor
A debt advisor will be able to help you manage your debts, draw up a financial statement and negotiate with your mortgage advise.
To find out more go here: Citizens Advice National Debtline
You’ll attend a possession hearing
Prior to the hearing you’ll receive a number of letters and forms from the court including a claims form which details your mortgage arrangement and missed payments, and a defence form which is for you to complete. It is important that you check the document to ensure the details are correct, if there is anything you believe to be incorrect, make a note of this.
What your options are at this stage…
Work out a realistic plan to pay back the arrears if possible
This should be included in your defence form. The court will take this into consideration when making a decision. But, you will need to prove that you are in a strong enough financial position to keep up with the plan.
If you can show you can pay your monthly mortgage payments and a set amount each month to clear the debt. Drawing up a financial statement with a debt advisor will also be useful, and can be included in the defence.
Choose to sell your home, to avoid repossession
Alternatively, if you cannot afford to keep up with your mortgage payments and bring the arrears up to date, an alternative will be to sell your property, to prevent repossession.
If you have an offer for your home prior to attending the hearing, the court is likely to allow the sale to go through. You’ll need to show evidence in your defence form or at the hearing of the sale going through.
You need to complete the defence form that is sent to you within 14 days of receipt. You’ll use this form to tell the judge about your financial situation, your plans to pay or your plans to sell and finally anything that you believe to be incorrect in the claims form.
On the day of the possession hearing...
The possession hearing will usually take place in your local county court. It is vital that you attend the hearting otherwise the judge will more than likely make an order that does not benefit you. If you cannot attend in person for any reason, then the courts should be able to arrange for you to attend by telephone or video.
Ensure that you turn up to court with plenty of time, and bring with you three copies of your paperwork which should include your defence form, a financial statement if you have one, a payment plan if you have one, proof of income and if you have decided to sell you will need evidence of the sale.
Ask for a duty advisor if you don’t have legal representation on the day. They will be able to assess your case prior to the hearing and speak on your behalf at the hearing.
The lenders representative may try to negotiate with you prior to the hearing. If this happens, don’t feel pressured to agree to something you cannot afford, ask the duty advisor to negotiate with you.
The hearing should last no more than 15 minutes. The lenders legal representatitive will usually start. They will explain to the judge how the lender has followed the correct rules and protocol around the repossession. They will advise the judge how much is owed, when you last made a payment and what outcome they are looking for.
It will then be your turn to respond and give your argument against the repossession. Advise the judge how you plan to pay back the arrears and show how this is realistic and affordable for you. Alternatively, ask the judge for more time if you are in the process of selling and show evidence of the sale.
One of the following decisions will then be made by the judge based on all the evidence provided by you and the lender:
Outright possession order
This will be the likely outcome if you don’t attend the hearing, or you can’t show you can afford to pay the arrears or have an alternative solution.
In this instance the date for repossession is usually 28 days later. You’ll need to leave you home by the agreed date.
Suspended possession order
This means you can stay in your home providing that you keep up with the payment plan that you have agreed to.
This order stays in place until all the outstanding arrears are paid. If you miss or are late with an agreed payment then you lender can evict you.
Adjournment
This means that the judge has ordered to delay the hearing, usually for 28 days. This is to give you or the lender more time to do something, including:
- Seek legal / professional assistance.
- If you’re waiting for a benefit claim or an insurance claim to come through.
- Or, if you’re waiting for a sale to complete on your property.
If you have not resolved the arrears in the 28 days, then you return to court to continue with the possession hearing.
Dismissal
The judge will only dismiss a possessions hearing if there are no arrears at the time of the hearing.
How to sell your house quickly
We have discussed in detail the stages of the repossession process, and what you can do at each stage of this process to stop your home being repossessed. If you are not in a position to come up with a reasonable payment plan, you may want to consider selling your home. But can you sell it fast enough for your lender and the court? There are a number of things to consider:
Time to sell
Selling your home on the open market can take many months, as buyers are arranging surveys, mortgages are in a property chain. Will your lender and the courts wait months for you to complete a sale?
Costs
Don’t forget to factor in the costs involved in selling your home, this can quickly add up.
Your current payments
Your lender will expect you to keep up payments on your mortgage as well as other bills and financial commitments.
Valuation of your home
Will the sale of your home cover the loan?
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Conclusion
Home repossession is something that nobody wants, even the lender. We hope this article has offered some useful information and re-assurance that there are lots of things that you can do to stop this process. We hope you come up with a solution to your situation and remember good communication and seeking advise will be the key.
