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Northern Rock reposessions

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  • Northern Rock reposessions

    Northern Rock makes life even harder for struggling borrowers

    Tactics used by the 'aggressive and unsympathetic' bank can lead to people losing their homes needlessly, reports Jamie Elliott


    • Jamie Elliott
    • The Observer,
    • Sunday July 13 2008
    • Article history

    Lender is taking up whole days at court with a 'charging order frenzy'. Photo: Edmond Terakopian/AFP/Getty images





    Northern Rock is using aggressive debt recovery tactics which are putting at unnecessary risk the homes of people struggling to pay back loans, say debt advice experts. The bank is rushing to take court proceedings against defaulters and is unsympathetic when borrowers try to negotiate repayment deals to avoid their homes being repossessed.




    The number of staff employed at Northern Rock to recover debt is set to almost double and the bank is taking up whole days in court to cope with the increased level of legal action. In Newcastle county court, at least a day a week is devoted to 30 or more Northern Rock charging order cases, as the bank seeks to convert risky unsecured loans into secured lending.




    'Northern Rock has become harsher than the sub-prime lenders used to be,' says Chris Jary, director of Action for Debt, a debt advice service in Durham. 'Now, if you miss two mortgage repayments they take you straight to court. A couple of years ago they wouldn't have taken action for five or six months.'




    Mark Norman, senior debt adviser with the Consumer Credit Counselling Service (CCCS), is especially worried about the growing tendency to place charging orders on the homes of borrowers who took out unsecured loans beyond their means. 'There's a charging order frenzy at the moment,' he says. 'And that's bad because once a charging order is in place, it's relatively easy for a lender to apply for an order for sale and for a borrower to then lose their home.'




    The number of charging orders granted in England and Wales leapt from 9,207 in 2000 to 97,017 in 2007, according to Ministry of Justice figures.




    Ann (not her real name), an administration officer from south Wales, had a charging order slapped on her home after she and her husband fell behind on a Northern Rock 'Together' mortgage. The 'Together' package let thousands of people take out 95 per cent mortgages plus unsecured borrowing of up to 30 per cent of their home's value to a maximum value of £30,000.




    In 2002, the couple took out a 95 per cent mortgage with another lender to buy their £65,000 house. Just over a year later, Northern Rock lent them an extra £75,000 against their house - on top of their existing mortgage - plus another £18,000 in unsecured borrowing. The pair already owed £70,000 to credit card providers and other lenders. 'We thought the Northern Rock loans would sort our money problems out, but they didn't. Our income just covered the repayments, but there was nothing left for basic things like food and petrol,' says Ann.




    Arrears soon built up and Ann got short shrift from Northern Rock. 'The bank refused to tell me how much of the single monthly payment was for the unsecured bit of the loan and how much for the mortgage,' she says. 'I needed to know this so CCCS could work out a debt repayment plan for us.'




    Northern Rock released the information only after CCCS reminded it of its legal obligation to do so under the Consumer Credit Act. Then, earlier this year, Northern Rock threatened to continue charging interest on the £18,000 loan as a result of the charging order, unless she agreed to repay £200 a month - far more than she could afford.




    'They had no right to charge interest because the law says interest automatically stops after a court judgment,' says Norman. 'Ann was trying really hard to hold on to her home, but Northern Rock wasn't interested in even trying to mediate. All we got was threats.'




    Heating engineer David Turnbull from Durham found Northern Rock similarly unsympathetic when, after an acrimonious split with his girlfriend in January, the 25-year-old tried to transfer their joint mortgage into his name. With an income of £30,000-£35,000 a year, he was confident he could manage the repayments on the £88,000 mortgage.




    'When I tried to talk to Northern Rock, they said they would not contact my girlfriend to ask if she would sign papers to transfer the mortgage, and when I asked them to switch the mortgage to interest-only, they refused to do that as well. When I took out the mortgage I thought I'd be able to go and talk to them if I got into difficulty. But you can't talk to them - they just don't want to know.'
    He gave up trying to hang on to his home and has moved back in with his



    parents. Northern Rock has written to tell him the house is to be repossessed.
    Northern Rock would not say how many charging orders it makes. However, a spokesperson said: 'There has been no huge increase in volume. It is standard for charging orders to be heard in court. Possession, if taken, is a last resort and is linked to default on the mortgage. We continue to work with customers who are experiencing payment difficulties to try to resolve the situation in a mutually acceptable fashion. We do have a policy of rapid movement towards recovery where it is clear that it is not in the interests of either the customer or the company to forbear.'


    Chris Tapp, director of money advice charity Credit Action, sees a mismatch between Northern Rock's approach and the government's position on mortgage lending: 'We have the government asking banks to be sympathetic to borrowers in difficulty, while on the other hand we have the bank over which government has the most influence not exhibiting this attitude. I would have hoped that a bank so close to government would be an exemplar of good practice.'





    Liberal Democrat deputy leader Vince Cable wants stronger regulation of all lenders. 'Northern Rock and some other lenders are being tough and ruthless with borrowers and I know of cases where families are sleeping in their cars as a result,' he says. 'But this points to the need for a legally binding code of conduct during the repossession process.'
    Caught in the equity trap

    In some cases, Northern Rock has held off converting unsecured debt into secured debt because bankruptcy proceedings by other debtors will allow the bank to claim its money back more quickly. Action for Debt's Chris Jary has seen a number of bankruptcy cases where the Rock's decision not to convert the unsecured portion of a 'Together' loan into a secured loan has led to people losing their homes.


    Graham, who is going bankrupt due to debts other than his home loans, has a Together loan on his £120,000 house comprising £95,000 of secured borrowing and £25,000 of unsecured borrowing. He needs Northern Rock to secure the £25,000 against his property if he is to avoid losing it in the bankruptcy.




    'When you are made bankrupt, your house is sold only if it has equity in it,' explains Jary. 'If Northern Rock agreed to secure the unsecured portion of Graham's Together loan against the house, Graham could keep it, because there would be no equity in it. In addition, Northern Rock would stand a good chance of getting all their money back when the property was eventually sold.'
    But in Graham's case, and others like it, according to Jary, Northern Rock is refusing to help and going ahead with repossession proceedings. 'In the long run Northern Rock, and the taxpayer, end up getting less money back this way because much of the equity in the property is eaten up by bankruptcy costs and agents' fees,' he says.




    · Citizens Advice: adviceguide.org.uk. Consumer Credit Counselling Service: 0800 138 1111; cccs.co.uk. Bankruptcy Advisory Service: 01423 799141; bankruptcyadvisoryservice.co.uk
    #staysafestayhome

    Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

    Received a Court Claim? Read >>>>> First Steps

  • #2
    Re: Northern Rock reposessions

    Even more worrying for UK mortgage lenders as a whole is that 17,565 possession actions were entered into court in the single month of February after a staggering 22,082 in January*. As a direct comparison, (vis a vis 2007), during the fourth quarter of 2007 a total of 35,662 mortgage possession claims were issued on a seasonally adjusted basis in that three month period. 46% of these mortgage possession orders were suspended.
    If the trend for the first two months of 2008 continues this would suggest that the first quarter of 2008 could see an approximate rise of 30% in possession actions versus 2007 comparisons. Analysing this trend further, on the basis that approximately 50% of possession claims lead to repossessions, the UK could experience a huge jump to close on 90K total repossessions in 2008.
    The top 20 lenders account for 32% of repossessions
    125:kensington mortgage company limited
    143:swift advances plc
    144:db (uk) bank limited
    146:ge money home finance limited
    156:birmingham city council
    159:bank of scotland plc (t/a halifax)
    161:blemain finance limited
    181:southern pacific mortgage limited
    189:ge money secured loans limited
    261:bank of scotland plc t/a birmingham midshires
    279:ge money mortgages limited
    293:gmac rfc limited
    293:kensington mortgages company ltd
    299:gmac - rfc limited
    299:gmac-rfc limited
    382:ge money home lending limited
    475:abbey national plc
    484:lloyds tsb bank plc
    523:bank of scotland plc
    690: northern rock plc
    #staysafestayhome

    Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

    Received a Court Claim? Read >>>>> First Steps

    Comment


    • #3
      Re: Northern Rock reposessions

      On a positive note ,after my initial targeted responses to their threats, NR are continuing to negotiate with me on my mortgage deal although they are still clocking up the arrears which will need to get dealt with soon.

      http://legalbeagles.info/forums/show...2386#post52386

      I think with NR its a question of standing up for your self and they will negotiate as its easier for them to pick off the easy 'kills' rather than take 'us lot on'.
      Light travels faster than sound. This is why some people appear bright until you hear them speak.

      Nemo me impune lacessit - No one provokes me with impunity. (Motto of the Kings of Scotland)

      Comment


      • #4
        Re: Northern Rock reposessions

        And they were well prepared for the repossesions

        Northern Rock set up a company to buy customers' repossessed homes at cut price just weeks before it fell victim to the credit crunch, The Sunday Telegraph has learned.

        Companies House reports show that the Rock established Kielder Property Management on June 27 last year - less than a month before the profits warning that signalled the start of its crisis. Kielder has one share, owned by Northern Rock, and its three directors are all managers at the bank.

        Comment


        • #5
          Re: Northern Rock reposessions

          Absolute *****bags !!!!!!!!!!!

          Comment


          • #6
            Re: Northern Rock reposessions

            Ummmm...isn't that tantamount to insider dealing ?

            We (as tax payers) have paid for their directors to set up a company that will make an absolute killing for those shareholders while we (the taxpayers) pay for their maladministration of the company.

            That stinks !!

            Comment


            • #7
              Re: Northern Rock reposessions

              Northern Rock and the Fake Individual Voluntary Arrangement (IVA). You Wonre Not Going to Tell You


              old article but interesting - read the comments - #3 on

              I have just been reading your n Northern Rock article, and though you would be interested to know that they are now exercising the 'All monies clause' as soon as client does not meet a payment or they are notified of an IVA, and in some cases not advising the Insolvency Practitioner until the day before the meeting that they have secured the unsecured debt against the property.
              #staysafestayhome

              Any support I provide is offered without liability, if you are unsure please seek professional legal guidance.

              Received a Court Claim? Read >>>>> First Steps

              Comment


              • #8
                Re: Northern Rock reposessions

                Originally posted by enaid View Post
                And they were well prepared for the repossesions

                Northern Rock set up a company to buy customers' repossessed homes at cut price just weeks before it fell victim to the credit crunch, The Sunday Telegraph has learned.

                Companies House reports show that the Rock established Kielder Property Management on June 27 last year - less than a month before the profits warning that signalled the start of its crisis. Kielder has one share, owned by Northern Rock, and its three directors are all managers at the bank.

                THIER DEFENCE
                NORTHERN Rock bosses set up a company to allow them to buy customers’ repossessed homes and rent them on at a profit for the bank.
                Homes bought with a Rock mortgage, sometimes criticised as high risk loans which offer too much cash for too little security, are targeted by Kielder Property Management if they are repossessed.
                The news came as a row broke out between Northern Rock bidders over whether Virgin boss Richard Branson has persuaded the Prime Minister to support his buy-out offer during a Government trip to China.
                The Kielder company was formed on June 27 last year – around the same time concerns were being raised that the emerging credit crunch could lead to more house repossessions.
                Kielder was set up on the day Northern Rock announced what was effectively a profit warning which would include possible rate rises for mortgage holders.
                The Journal has discovered Kielder Property Management is run from Northern Rock’s Gosforth headquarters.
                Documents registered with Companies House also revealed the property business is owned by Northern Rock and Kielder’s three directors are all managers at the bank.
                And while only two properties have been bought up since it started, the close proximity of the two businesses has alarmed some MPs.
                Yesterday Northern Rock insisted the process was fully transparent.
                But concerns have been raised over whether a bank should be advising on mortgages of up 117% in one department, while another part of the company is preparing to make a profit from any repossession if the risky loans fall through.
                Newcastle Central MP Jim Cousins defended the bank for “doing what a lot of American banks are already doing and certainly a lot of British banks will at least be considering”. Mr Cousins, who sits on the Treasury Select Committee said Northern Rock should not be singled out for blame, but admitted there were some ethical concerns.
                “These are areas we will have to look at because if the housing market gets worse there will be more cases where people have to be protected, possibly even from their own actions.
                “It is distinctly uncomfortable and I think we need to see measures introduced to ensure people receive better advice.”
                A spokesman for Northern Rock yesterday told a national newspaper that Kielder was formed “to hold possession properties to let in the rental market.
                “Possession properties attract a stigma and can be valued at less as a result...
                “Anything that happened would have been fully and transparently disclosed.”

                Comment


                • #9
                  Re: Northern Rock reposessions

                  It's a very strange development.

                  Lenders are very well aware of the risk of repossessions being sold at an under-value to related parties, whether it's a friend of the estate agents, or a member of the lender's staff. For this very reason they have rules and procedures to prevent related party transactions happening.

                  I can't see how a lender can defend themselves against accusations of conflict of interest, if they effectively keep repossession properties for their own benefit, whilst crystallising a loss which they seek to recover from the original borrower.

                  Precisely for the reasons they state, repossessions sometimes realise less than their non-repossession "fair market value", which means that it's virtually impossible to establish an "arm's length" valuation for such a property other than by making a third party sale at a price someone independent is prepared to pay.

                  A lender I am well acquainted with used to have a team responsible for refurbishing repossessed properties in order to address any defects and to make the property as marketable as possible. Although the refurbishment costs were (of course) charged to the repossessed property's account, these refurbishments were done for the benefit of the borrower even though they'd had the property repossessed, as they were only done if there was a realistic prospect of the value uplift exceeding the cost of the refurbishment.

                  It sounds like NR were proposing virtually the same thing, but with two major differences:

                  - the properties are going to be rented out for a period of time, to generate profit that way rather than through refurbishment; and
                  - NR were going to keep the profit.

                  Clearly it's the second difference here which makes the scheme unfair on the borrowers.

                  Comment

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