GMAC-RFC Bad news for defaulting home owners

[righty]

http://www.ft.com/cms/s/0/76031846-aea9-11...?nclick_check=1 By Alex Barker, Political Correspondent
Published: November 9 2008 23:33 | Last updated: November 9 2008 23:33
A landmark High Court ruling has paved the way for mortgage lenders to sell the homes of borrowers in arrears without seeking a court order, bypassing Gordon Brown’s efforts to make repossession a “last resort”.
The ruling, which the judge described as having “wide-ranging implications”, strongly reaffirms the statutory right of lenders under a 1925 law to sell a property independently after two mortgage payments are missed.
While the power is unlikely to be used by mainstream lenders, who customarily seek repossession orders from judges, lawyers and opposition politicians called on ministers to pass reforms urgently to prevent rogue lenders “threatening families with these powers”.
The judgment dismissed the human rights defence of the homeowners in arrears and backed the right of GMAC-RFC, a specialist subprime and buy-to-let lender that is part-owned by General Motors, to appoint receivers and auction the property.

[EXC]

High Court blow for UK homeowners

http://www.ft.com/cms/s/0/76031846-a...077b07658.html


By Alex Barker, Political Correspondent

Published: November 9 2008 23:33 | Last updated: November 9 2008 23:33
A landmark High Court ruling has paved the way for mortgage lenders to sell the homes of borrowers in arrears without seeking a court order, bypassing Gordon Brown’s efforts to make repossession a “last resort”.

The ruling, which the judge described as having “wide-ranging implications”, strongly reaffirms the statutory right of lenders under a 1925 law to sell a property independently after two mortgage payments are missed.

While the power is unlikely to be used by mainstream lenders, who customarily seek repossession orders from judges, lawyers and opposition politicians called on ministers to pass reforms urgently to prevent rogue lenders “threatening families with these powers”.

The judgment dismissed the human rights defence of the homeowners in arrears and backed the right of GMAC-RFC, a specialist subprime and buy-to-let lender that is part-owned by General Motors, to appoint receivers and auction the property.

The former homeowners, who had a buy-to-let mortgage, were then evicted for trespassing by the new owner, Horsham Properties. The sale circumvented the court process through which judges can give struggling borrowers more time to arrange repayments. There are no plans for appeal.

In his ruling, Mr Justice Briggs also suggests the borrowers lost their equity when they fell into arrears, although it is unclear whether they were entitled to the balance of the sale proceeds once the debt was cleared.
GMAC said it “frequently exercised” its power of sale with buy-to-let borrowers who breached contractual terms.

But it said “a receiver would not have been appointed” in the case of a residential home loan, even though the judgment confirmed the power of all mortgage lenders to do so.

Lawyers have responded with ”astonishment” and called for new laws as a “matter of urgency”.

John Gallagher, principal solicitor with Shelter, the housing charity, said the case “gives the green light” for lenders to sidestep courts with legal remedies “rooted in the 19th century and repugnant to most people’s sense of justice”.
“It is quite incredible in the 21st century that the law allows the lender to choose whether or not to take possession proceedings and that the borrower then becomes a trespasser in his or her own home,” he said.

Mr Brown promised repossessions would be a last resort after issuing judicial guidelines to help settle mortgage arrears ahead of court proceedings. But the limited powers of judges to protect borrowers are triggered only when the lender applies for a court order.

Vince Cable, Liberal Democrat Treasury spokesman, said the ruling was “ex-tremely alarming”. “It shows the mounting repossession problems will not be resolved simply by changing court rules since the laws are heavily tilted in favour of mortgage lenders.”

Mr Justice Briggs said the power to circumvent courts was “in the public interest” as it provided the essential security for mortgage lending at affordable rates.

[michael]

Re: GMAC-RFC Bad news for defaulting home owners

Full judgement here:

http://www.bailii.org/cgi-bin/markup...method=boolean

[righty]

Re: GMAC-RFC Bad news for defaulting home owners

Remember repossession & eviction can occur without the need for a CCJ

LOBBY YOUR MP NOW & DEMAND they alter/remove this pernicious law

[Amethyst]

Re: GMAC-RFC Bad news for defaulting home owners

Its very worrying. I will read the judgement later. When we were looking at Jesters case he had an 'all monies' clause in it which meant the bank could take his home after one missed payment....very rarely actually implemented in that way but seriously concerning.

Will read later properly, but yes if this is the case then something needs to change.

The Panorama programme has a woman who was facing repo for missing sofa payments.

[righty]

Re: GMAC-RFC Bad news for defaulting home owners

Yes my concern is that some lenders are desperately seeking charging orders which if granted gives them the same rights as the mortgage lender thereby allowing them to use the same property laws.

I'm not one for conspiracies but this gives credence to the possibility that some unsecured lenders are going down this road with the express intention of repo peoples homes

Also don't forget the limitation on a secured debt is like a mortgage 12 years not 6

[righty]

Re: High Court blow for UK homeowners

The bit I like is "the power to circumvent courts was in the public interest as it provided the essential security for mortgage lending at affordable rates"

The mind boggles. Clearly Justice Briggs lives in a rarefied atmosphere where the sub-prime market is unknown

[scoobydoo]

Re: GMAC-RFC Bad news for defaulting home owners

very worrying. Although this is a buy to let case the principle is there. I will try and have another read as well - as feeling a bit under the weather tonight and can not quite get my head round it at the moment.

[Guest]

Re: GMAC-RFC Bad news for defaulting home owners

Take a look here - an excellent explanation of the case.

Mortgage Possession | Nearly Legal

[Amethyst]

Re: High Court blow for UK homeowners

The mortgage provided that, if the mortgage fell into arrears, GMAC could appoint a receiver, which they duly did. Then, again pursuant to the mortgage contract, the receiver sold the property at auction. (Although GMAC appeared to be relying on their contractual powers, it should be noted that s.101 Law of Property Act 1925 would have provided another way of achieving a similar result. This becomes important later on.)
The property was purchased by Horsham Properties Group Ltd (”Horsham”).
At this stage (a) the sale of the property had raised sufficient monies to discharge the mortgage and (b) Mr Clark and Ms Beech were still in occupation of the property.
Having purchased the property, Horsham then issued trespasser proceedings against Mr Clark and Ms Beech, seeking to recover possession of the property. The effect of this was to bypass all the protections contained in the Administration of Justice Acts, something which had been found to be perfectly lawful by the Court of Appeal in Ropaigealach v Barclays Bank [2000] QB 263.

am going to merge the two threads