Sell up to avoid arrears, says CML
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The Council of Mortgage Lenders wants the government to encourage home owners in difficulty to voluntarily sell their property to avoid court action.
On the eve of the Comprehensive Spending Review, the trade body has made a series of recommendations in conjunction with the housing charity Shelter to minimise the number of cases of possession.
It wants the Communities and Local Government working group to look at instances in which it might be advisable to recommend that owners should consider selling their homes voluntarily.
In its latest issues of News and Views, the CML says: “In our view, borrowers must not be pushed into this position, but we believe that in some cases a voluntary sale may be in their best interests, enabling borrowers to avoid building up long-term arrears and eroding their equity when owner-occupation is no longer a sustainable option for them.”
The trade body says in these cases, advice agencies would have a crucial role to play in helping borrowers focus on their long-term prospects for sustaining home ownership.
But it says for voluntary sales to be a workable option in the right circumstances, it is crucial that both local authorities and borrowers understand that agreeing to sell is not perceived as an act of intentional homelessness.
It also wants the government to explore the future options for a new form of insurance, possibly jointly funded by borrowers, lenders and the government, covering vulnerable borrowers who are not currently protected by the safety net but who still aspire to become home owners.
It says insurance could help those who might otherwise go into arrears and face possession, so it would provide a better safety net than currently exists for those most in need.
The CML says: “In our view, MPPI in its current form cannot realistically be expected to contribute to the safety net, but a new type of insurance covering key risks is worth exploring with the insurance industry.”
It is also urging the government to:
- Retain the existing 13-week qualifying period and the current capital limit of £200,000 for people claiming support for mortgage interest, thereby helping to offset the damaging effects of the 40% cut earlier this month in the rate at which this benefit is paid to claimants;
- Maintain current funding of free debt advice, so that struggling borrowers can get good quality, reliable and impartial help when they need it during the current period of economic uncertainty; and
- Retain the existing mortgage rescue scheme, which provides an option to become tenants in their own home for those for whom owner-occupation is no longer sustainable, and has the spin-off benefit of encouraging borrowers in difficulty to seek out independent debt advice early.
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Readers' comments (17)
Graham Kennedy | 19 Oct 2010 4:22 pm
Sell up voluntary in today's market. What planet are these people living on?
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Bobby | 19 Oct 2010 4:24 pm
and live where exactly ?.
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John Lacy | 19 Oct 2010 4:26 pm
The only people that can't sell are the ones that won't accept the true value of their homes or the unfortunate ones who have slipped into negative equity.
We're selling loads of houses!!
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Lewis Greene | 19 Oct 2010 4:27 pm
Clearly not on our planet
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Anonymous | 19 Oct 2010 4:43 pm
I think what the CML are saying that homeowners should give there houses away and live in a cardboard box, it makes their figures look good.
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Adrian | 19 Oct 2010 4:43 pm
so, you sell up, having accrued just 3 or 4 months arrears if you are lucky enough to sell at a reasonable speed.
The estate agent and solicitor charge you £4k for the service.
You then have to rent, if privately, you are paying more than the mortgage was costing you. Presumably you are paying this rent out of the equity you sought to protect...6 months in advance to avoid status checks.
If you have £16k left after this, your means tested benefits will be taken away.
Then, lets say you find a job and want to buy a similar house back, you have a survey solictors and stamp duty, oh and a booking fee - another £5k - coming out of your equity.
And because you have had arrears, no regular mortgage company will give you a mortgage, so you have to get a sub prime mortgage at 7 or 8%.
The CML are seriously deluded if they think this is a good plan.
Selling up is only a good plan if the next step is repossession.
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Neil Bellamy | 19 Oct 2010 4:46 pm
perhaps the CML think that the proposed reduction of district courts will mean that the repossession system will not be able to cope, and could collapse within the next year or two!
They could well be right - we need a new age of preserving peoples existing homes.
Ask yourself what percentage of repossessions is required before the people make a stand for their family homes?
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Bill Warren | 19 Oct 2010 4:54 pm
The CML,Shelter and others seem to have missed a big opportunity here to try and help those borrowers in serious trouble.Since july 1st this year the Sale and Rent Back market has been fully regulated by the FSA.Under these rules home owners can sell and rent back hopefully paying off most, if not all of their debts,but not having the trauma of moving to a new area,children changing schools,possible job changes.Most sale and rent back providers offer their tenants the chance to buy back the property when they get on their feet again.Surely this is a much better option than just selling and looking for social housing,although not so good for the estate agents of course!
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Baby Jane | 19 Oct 2010 4:57 pm
Estate agents must be rubbing their paws with glee and ordering new motors on the strenght of this news. They will benefit from clients having to sell at lower prices to obtain a quick sale or if time runs out will receive the instruction from the lender. A no lose situation.
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Maurice Edgington | 19 Oct 2010 4:57 pm
Not a realistic proposal from the CML on behalf of their members, the lenders. Home owners unable to pay their mortgages due to the mess the last government and banks got the economy into would not appreciate being told by the local authority or whoever to sell up. My advice to home owners experiencing problems is to do everything possible, negotiate, make proposals, anything to keep your home. Many people have had mortgages for 10 plus years so th eidea of when there is a problem they are told sell up to pay off the lender is offensive. Lenders must acccept more risk and do everything they can to avoid people having to sell or be repossessed. Agree to part payment, extend the term. Whatever it takes. Finally I cannot believe that the CML proposal is serious anyway as it would probably lead to the start up of advice businesses funded by Estate Agents to get more distress sale properties on the market (not all Estate Agents as some are completely trustworthy)
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