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Homes are needlessly being repossessed because judges are failing to give homeowners time to repay what they owe
Rebecca O'Connor
div#related-article-links p a, div#related-article-links p a:visited {color:#06c;} Lenders are needlessly repossessing thousands of borrowers because courts are failing to apply a little-known law that would allow homeowners more time to repay their arrears, a leading think tank said today.
An estimated 100,000 homeowners could be saved from losing their homes if judges presiding over repossession cases used a legal ruling that allows borrowers to spread repayments over their whole remaining mortgage term rather than forcing them to pay up in a couple of years, according to the Centre for Policy Studies (CPS).
Under current guidelines, district judges usually order borrowers in arrears to pay up within two to four years, or face repossession. The CPS states that in many cases, this results in borrowers losing their home because the time frame is too short for them to meet.
Natalie Elphicke, author of Save 100,000 Homes from Repossession, said: “This law means that if someone got into trouble in year five of a 25-year mortgage, the judge could order that he or she has 20 years left to repay the debt, rather than the usual two to four. This would be more manageable, so they would no longer face repossession.”
The Centre attacked the Government for leaving many borrowers unnecessarily vulnerable to losing their home by not publicising this law more widely. It said that Government measures introduced last November were “flawed”, because they did not remind lenders or inform borrowers of these legal rights.
The CPS claimed that the Government played a “far more active” role in preventing repossessions in the last recession of the early nineties and that courts exercised more “judicial discretion” to help borrowers.
An estimated 45,000 households were repossessed last year and a further 75,000 are expected to lose their homes in 2009, according to a forecast from the Council of Mortgage Lenders, as rising unemployment and an inability to meet higher mortgage repayments take their toll. There were 168,000 borrowers in arrears in September last year.
The CPS said that if the trends of the early nineties were repeated, proper implementation of repossession laws could rescue 100,000 borrowers, but added that it should only apply in cases where the courts believe a borrower would be able to maintain their repayments. This would avoid the “moral hazard” of offering a get-out-of-jail free card to those who do not pay back their debts, the CPS said.
The think tank called on the Ministry of Justice to alert courts to the law, which is said could be “so much more effective than the various schemes proposed by the Government.”
The Government has so far pledged £200 million to a Mortgage Rescue scheme to help 6,000 households, runs a Homeowner Mortgage Support scheme and offers free legal representation to those facing repossession.
The CPS said its proposed reforms would be practical; would take account of individual circumstances and would have a negligible cost for the taxpayer.
http://www.timesonline.co.uk/tol/mon...cle5694877.ece
Rebecca O'Connor
div#related-article-links p a, div#related-article-links p a:visited {color:#06c;} Lenders are needlessly repossessing thousands of borrowers because courts are failing to apply a little-known law that would allow homeowners more time to repay their arrears, a leading think tank said today.
An estimated 100,000 homeowners could be saved from losing their homes if judges presiding over repossession cases used a legal ruling that allows borrowers to spread repayments over their whole remaining mortgage term rather than forcing them to pay up in a couple of years, according to the Centre for Policy Studies (CPS).
Under current guidelines, district judges usually order borrowers in arrears to pay up within two to four years, or face repossession. The CPS states that in many cases, this results in borrowers losing their home because the time frame is too short for them to meet.
Natalie Elphicke, author of Save 100,000 Homes from Repossession, said: “This law means that if someone got into trouble in year five of a 25-year mortgage, the judge could order that he or she has 20 years left to repay the debt, rather than the usual two to four. This would be more manageable, so they would no longer face repossession.”
The Centre attacked the Government for leaving many borrowers unnecessarily vulnerable to losing their home by not publicising this law more widely. It said that Government measures introduced last November were “flawed”, because they did not remind lenders or inform borrowers of these legal rights.
The CPS claimed that the Government played a “far more active” role in preventing repossessions in the last recession of the early nineties and that courts exercised more “judicial discretion” to help borrowers.
An estimated 45,000 households were repossessed last year and a further 75,000 are expected to lose their homes in 2009, according to a forecast from the Council of Mortgage Lenders, as rising unemployment and an inability to meet higher mortgage repayments take their toll. There were 168,000 borrowers in arrears in September last year.
The CPS said that if the trends of the early nineties were repeated, proper implementation of repossession laws could rescue 100,000 borrowers, but added that it should only apply in cases where the courts believe a borrower would be able to maintain their repayments. This would avoid the “moral hazard” of offering a get-out-of-jail free card to those who do not pay back their debts, the CPS said.
The think tank called on the Ministry of Justice to alert courts to the law, which is said could be “so much more effective than the various schemes proposed by the Government.”
The Government has so far pledged £200 million to a Mortgage Rescue scheme to help 6,000 households, runs a Homeowner Mortgage Support scheme and offers free legal representation to those facing repossession.
The CPS said its proposed reforms would be practical; would take account of individual circumstances and would have a negligible cost for the taxpayer.
http://www.timesonline.co.uk/tol/mon...cle5694877.ece
