Suspension of capital repayments

[Halifax71]

I'm looking into the case for someone who is currently in prison. He'll be there for the next 2-3 years.

He has a mortgage, a wife (not named on the mortgage) and a young child.

DWP are paying the interest element under the mortgage interest guarantee.

TSB have advised me that as sole name on mortgage they cannot put any plan in place to reduce capital, extend period etc as there is no income at all. Apparently the fact that the DWP are paying the interest is irrelevant. He's coming up 50, with 10 years remaining on the mortgage so in theory, as I said to them, they could suspend the capital for 3 years and add 3 years onto the term. Just a suggestion.

I should add that, at the moment, the capital is still being paid by his family. But that cannot last much longer.

I've asked them to confirm in writing to me the refusal to discuss any arrangement, and effectively repossess. But whilst I'm waiting for that and my inevitable referral to the ombudsman does anyone have any advice?
MCOB 13.3.4A jumps out for starters: -
3In complying with MCOB 13.3.2AR(6): (1) a firm must consider whether, given the individual circumstances of the customer, it is appropriate to do one or more of the following in relation to the regulated mortgage contract or home purchase plan with the agreement of the customer: (a) extend its term; or
(b) change its type; or
(c) defer payment of interest due on the regulated mortgage contract or of sums due under the home purchase plan (including, in either case, on any sale shortfall); or
(d) treat the1 payment shortfall1 as if it was part of the original amount provided (but a firm must not automatically capitalise a1 payment shortfall where the impact would be material1 ); or
(e) make use of any Government forbearance initiatives in which the firm chooses to participate;


But what about putting his wife's name on the mortgage - would that make a difference?

What about housing benefit - can that be claimed for his wife as she is not named on the mortgage?

The main thing here is to keep the house so his child has not only a roof over their head but they have an asset to inherit. Any thoughts anyone?

Thanks in advance.

[Halifax71]

Re: Suspension of capital repayments

Just a sneaky bump for this. Just some general advice on the interpretation of the MCOB's please and any other tools that I might be able to use. Surely the bank can't be right in saying the account should just go into default and ultimately repossessed? There must be other options that they should consider?

One option, bank aside, is for the wife / child to move out and the house is rented to cover the mortgage. Bizarrely, they will get housing benefit then to cover the rent - strange system we have. But before that route is considered I want to see what is expected of the bank, if anything. Ta.

[PAWS]

Re: Suspension of capital repayments

Hello Halifax
I am just giving this another Bump for you:bump2:. I am sure someone will come along soon with the necessary knowledge; I am afraid I am clueless on this issue!:sorry:

[stevemLS]

Re: Suspension of capital repayments

Given no-one has answered I'll try and set out the issues as I see it.

First, the mortgage interest guarantee - have not come across this previously - if it is SMI on what basis was he claiming it? It is usually time limited unless there are issues of disability and receipt of certain benefits.

I suspect what the lender will say is that they have given consideration to your friends circumstances and that they see no prospect of contracted payments being resumed in an acceptable timescale firstly because he is in prison for 2-3 years (which indicates a determinate sentence of 6 years) and secondly because of the known difficulty ex-offenders have in securing employment when they are released from prison.

Adding a name to a mortgage is not necessarily a straightforward process. Does the wife have the means to service it?

Once again, her moving out and getting rented accommodation may not be as easy as you think, firstly housing benefit is not as generous as you seem to think and secondly, if she is deemed to have an interest in the property (which she may or may not have, it isn't as straightforward as lookin at the names on the mortgage) then it may rank as a capital asset which will affect the amount of housing benefit she may get.

Finally, nobody other than your friend has any interest in preserving an asset for the child to inherit, sorry but that is the harsh reality - it is simply not a relevant consideration.

I'm afraid I don't have any answers, I fear your friend may end up having to sell the house in which case they would invariably be better off doing it themselves rather than it being a repossession. If it is repossessed, they may well end up with no house and a debt to cover the shortfall.

I sorry to say but I don't think your friend is in a very good situation.