Lenders ignoring repossession protocol
Share
Some lenders are failing to comply with pre-action protocol rules for repossession, shows a new report from AdviceUK, Citizens Advice and Shelter.
The report, Turning the tide?, is based on research into hundreds of cases seen by advisers who give last minute advice to people at court on the day of their repossession hearings.
It found in a third of recorded cases the lender had failed to comply with pre-action protocol rules, requiring them to take court action only as a last resort after offering borrowers other options for dealing with their arrears. Despite this, judges took action to address this in only a handful of cases.
In general, sub-prime lenders were found to be taking court action earlier than high street lenders, and a few sub-prime lenders in particular had many more court cases listed than their share of the mortgage market would suggest.
From its sample of 2,444 cases in the court lists, 55% of cases were taken by sub-prime lenders, 34% by high street lenders and 7% by specialist second charge lenders.
Some 15.8% of these cases related to GE Money, with 12.8% Lloyds Banking Group, 7.4% Santander, 6.5% Southern Pacific and 6.3% Kensington.
The market share of GE Money, Kensington , SPML, and Preferred is only 2.3% combined, whereas their share of listed court cases was over 21%. Their court action appears nine times more than proportionate to their combined market share.
Job loss and other loss of income were the most common reasons given for mortgage arrears, and low income households were the most likely to lose their homes. While Support for Mortgage Interest is a benefit specifically designed to help in these circumstances, many borrowers who ended up in court were paying higher monthly interest rates than would be covered by SMI payments and there was some evidence of shortfall in take-up.
The research shows that the advice provided by court duty desk advisers is crucial in helping people with a chance of recovery to avoid repossession. Almost eight out of ten of people whose cases were analysed in the survey avoided the immediate loss of their home But their circumstances suggested that up to half could find it difficult to sustain the repayments set by the court unless their incomes recover quickly, so they remain at high risk of repossession at a later date.
David Harker, chief executive of Citizens Advice, says: “Government, lenders and regulators have taken swift and welcome action to protect people affected by the recession from losing their homes unnecessarily. Our advisers see evidence of these initiatives working in many cases, but our research makes it clear that the safeguards already in place to protect people from avoidable homelessness need to be strengthened if they are to succeed in stemming the rising tide of repossessions.”
If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat
Readers' comments (6)
Trish Jones | 15 Dec 2009 10:56 am
My partner lost his job through redundancy and asked Natwest if he could go onto interest only whilst he looked for another job, their response was No as his loan to value was 85.04% and the limit is 85% He has tried to make payments for the full amount on repayment each month,having secured a job after 3 months but on a lower salary but has fallen short a couple of times only to be hounded by Natwest. At no point was any assistance or adcise offered to help him in this very difficult situation.
More tolerance and understanding should be applied up front to stop the situation getting to the point of repossession, which is not to the benefit of any lender.
Unsuitable or offensive? Report this comment
Stephen Wilson | 15 Dec 2009 11:47 am
What I find most interesting having read the report online is that the so-called nationalised or bailed out banks account for a quarter of court actions. It stands to reason that sub prime lenders will be in court more because of the nature of their customer bases (and we are in a serious recession). Why are publicly owned entities taking their "shareholders" to court?
Unsuitable or offensive? Report this comment
Steve Manning | 15 Dec 2009 12:04 pm
This is criminal.No wonder our large financial institutions no longer have the respect they once enjoyed. Where is the customer care in all this? Surely everyone loses out when a repo takes place. The family lose a home, the ender rarely gets market value in an action so has to write off the debt. The property market gets further damaged by cheap properties entering the market.
A little bit of flexibility, individual customer attention with sensible help will go a long way.
Instead it is impersonal, rigid and a sad reflection of the strangle hold our lenders have on us all.
It seems legislation can be the only answer in getting our lenders to 'treat clients fairly.
Unsuitable or offensive? Report this comment
Keith Hickman | 15 Dec 2009 12:07 pm
Stephen, from memory at the height of the market when lending was in full swing HBOS brands accounted for 25% of the market, Northern Rock 19%, was the second largest lender, add the Lloyds,RBS & Bradford and Bingley brands then the lenders where the UK taxpayer are stakeholders accounted for well over 50% of all mortgage lending.
Unsuitable or offensive? Report this comment
John Schuster | 15 Dec 2009 12:40 pm
It is good to see that the advice sector is recognising the many initiatives most lenders are adopting to contain the level of repossessions. However comparing market share to the share of such repossessions does not contribute or inform the debate.
Having visited many of the UK's lenders this year it is evident most of them are positively applying TCF principles to customers with payment difficulties and offering a wide range of concessionary payment arrangements.
There still remains however the entrenched problem of borrowers not contacting their lender or the advice sector early enough to seek advice and assistance.
There are some excellent examples of active cooperation between lenders and the advice sector to address this issue. However if one looks at the main UK lenders web sites very few indeed give any sort of profile or easy navigation to the help available.
Unsuitable or offensive? Report this comment
Anonymous | 15 Dec 2009 4:08 pm
I would recommend all advisers be careful when getting lenders to move from a repayment to interest only mortgage due to their clients financial hardship. It is very important to ensure that the lender does not see this as an 'Arrangement to Pay' that can result in mortgage arrears and a damaged credit history.
Unsuitable or offensive? Report this comment