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The government's plea to banks to take a softly-softly approach to borrowers who have lost their jobs and are struggling to meet mortgage repayments and manage their debts seems to be falling on deaf ears just weeks ahead of the expected implementation of its Homeowner Mortgage Support Scheme (HMSS).
Readers report a "shocking" lack of compassion when seeking help from banks and lenders to see them through the financial aftermath of redundancy. This is despite calls by the government for lenders to sign up - albeit voluntarily - to a scheme where they will offer the neediest borrowers payment holidays or renegotiate terms of loans to give essential breathing space while they seek new work and rebuild their finances.
Robert Williams, 47, from Liverpool, lost his job as an architectural technician in October after a solid eight years of working through agencies. He was "appalled" when he sought help from Lloyds TSB, his bank of 30 years. He says: "I have barely had a day off work in those years other than for holidays and sickness. I have an opportunity to take up a sales role but that won't start to earn me money until February.
"I decided to let my bank know and ask them to extend my overdraft by £4,000 just to see me through. I knew I was going to have a problem with paying my C&G mortgage so I took a letter of intent from my employer to my bank, Lloyd's TSB, which owns C&G, two weeks ago but they barely looked at it. They turned me down without discussion. They suggested I stop all my direct debits instead and discuss my position with the utility companies."
In the meantime Williams, who has three school-aged children, has managed to find a lump sum to get through the next month or two without missing any mortgage repayments but he and his wife Annette, who is taking a degree, must make ends meet on her bursary while they make claims for tax credits and Jobseeker's Allowance.
He says: "I was shocked by my bank's attitude. I have never complained before but I stood my ground this time and told them the banks helped cause our problems and have had billions pumped into them by the government so why can't they help us when we need it."
A spokesperson for Lloyds TSB denies that Williams was let down: "We are committed to helping any customer in financial difficulty by finding a solution to suit their circumstances," the spokesperson said. "On his visit to the branch, Mr Williams requested to extend his borrowing by £4,000. However, we felt this would be inappropriate and could potentially worsen his situation.
"Instead, we offered to review his outgoings to help prioritise essential payments and recommended that he made a claim on his credit card protection insurance. We also provided him with the necessary contact details to seek free and impartial debt advice. Subsequently, we offered to arrange for Mr Williams to speak to a senior underwriter to discuss the options for his mortgage payments, but Mr Williams declined our offer."
Lloyds TSB says it is one of the few banks to publicly back the HMSS at launch earlier this month and that it has a strong record in helping homeowners in difficulties, as well as having a below-industry-average repossessions tally. "We have increased the number of people working at pre-arrears level and will consider reducing payments, moving to interest-only and payment holidays," Lloyds TSB's spokesperson says.
Another reader, who is too anxious about her fragile financial position to be named, said that when she lost her job as a recruitment company PA recently, she approached her bank at once.
"The advice you hear is to go to your bank when you think there's trouble ahead," she says: "So since all the agencies say there probably won't be much work until February, I thought my lender might waive the interest on my mortgage for a couple of months. I went to my branch and was told that staff had been sent a memo telling them to be as helpful as possible to customers in difficulty. But they said in the end they couldn't help me. The man was quite upset and I heard him on the phone to another office and could hear a woman's voice replying, 'It's not policy,' to everything he asked. It was a case of 'computer says no'. I finally got a personal loan to tide me over generally and I can meet my mortgage repayments from some other work I am doing for a private individual."
The government is urging lenders to offer a lifeline to borrowers in difficulties, defined as those who, like Robert, have suffered a loss of income from employment or self-employment of a scale which makes full mortgage payments a struggle, but which is not expected to be a permanent situation.
Housing minister, Margaret Beckett, wrote to the UK's main lenders last week seeking feedback on the HMSS by 14 January, ahead of its expected implementation. To be considered, borrowers need to have first discussed action based on the lender's existing policy on reducing payments or payment holidays and they must be able to afford some regular repayment. Borrowers with loans over £400,000 or with savings of £16,000 or over will not be eligible. Neither will owners of second homes, buy-to-let properties or those receiving help through the government's Income Support for Mortgage Interest scheme (which pays the interest on qualifying mortgages when no one in the household is earning). Borrowers must also have sought independent debt advice.
Under the HMSS, borrowers may be able to take up to a two-year interest repayment holiday, although their position will be reviewed after one year.
A third case, involving a family from St Leonards who face repossession of their home even though they have missed no payments, is even more perplexing. Peter and Marion Addyman remortgaged with their lender, NatWest, last spring, but in September RBS, NatWest's parent company, told the couple to repay their £226,000 mortgage within 30 days or have their home repossessed. Marion says the couple have not missed any payments, and adds: "We're both employed - my husband works full-time as a pharmacist - and we can afford our mortgage. We just can't understand why the bank is doing this and they won't tell us why."
A NatWest spokesman refused to tell the Observer the reasons behind its decision, but added: "The Addeyman decision has absolutely nothing to do with our processes for managing customers who are experiencing financial difficulties and we remain fully committed to our recent statement on repossessions. The decision to end any relationship with a customer is made only in response to very limited and exceptional circumstances, and is specific to that individual customer. This is not a move that we ever take lightly."
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