Repossessed Homes UK

Mortgage payments often represent the largest item of monthly expenditure for a household. With the credit crunch biting and interest rates on many mortgages going up an increasing number of people are finding that they can no longer afford to maintain their mortgage repayments. Once a mortgage account goes into arrears the lender may start possession proceedings. To avoid a downward spiral into debt and eviction, action should be taken as soon as difficulties with mortgage payments arise.

Talking to Lenders About Mortgage Payments
Mortgage lenders have a responsibility to their customers – and taking possession of someone’s home should always be a last resort. If a borrower finds they are struggling with their finances they should immediately talk to their lender. There are various ways that a lender could help a borrower get back on track with their mortgage payments. These include:
* Capitalising the arrears – any arrears will be added to the total balance outstanding;
* Converting a capital repayment mortgage to an interest only mortgage resulting in lower monthly payments;
* Accepting lower mortgage payments for a limited period;
* Allowing a payment holiday, meaning that the borrower does not have to pay anything to the mortgage for a number of months.
Lenders are not obliged to offer any of these solutions. However, a lender is more likely to agree if the borrower contacts them as soon as mortgage payments become a problem.

State Benefits
Some people on low incomes or in receipt of state benefits are entitled to help with their mortgage payments. Assistance may be available to those on Income Support or Job Seekers Allowance. However, a contribution towards mortgage payments will usually not be made until the applicant has been in receipt of the benefit for about 36 weeks. Payments will only be made towards the interest element of the first £100,000 of the mortgage. People in receipt of pension credit are also likely to be entitled to help with their mortgage payments.
In addition to benefits which specifically contribute towards mortgage payments, people may be eligible for other benefits which could increase the overall household budget. These include:
* Working Family Tax Credits and Child Tax Credits;
* Child Benefit;
* Council Tax Credit.
Organisations such as the Citizens Advice Bureau can give free advice on eligibility for benefits.

Payment Protection Insurance
Payment Protection Insurance (PPI) can cover mortgage repayments if the borrower is unable to pay them due to unemployment or ill health. PPI is often sold at the same time as the mortgage, although it should be possible to find a similar product elsewhere. Whilst a good idea in theory, there have been some problems with PPI – and in particular the products sold with some mortgages. Questions to ask before taking out PPI:

* Will the policy cover a period of unemployment if the borrower is self-employed?
* Will the policy cover a period of unemployment if the borrower has only been in his current job for a few months?
* Will the policy cover ill health if the borrower has a pre-existing condition?
* Could a similar insurance policy be purchased more cheaply elsewhere?
* Will the policy still be valid if the borrower has already fallen into arrears with their mortgage by the time they make a claim?
As with any form of insurance, the small print should be read carefully before signing up for PPI.

Taking a Secured Loan to Help With Mortgage Payments
If there is equity in the property taking out a further loan to help with mortgage arrears could seem like a good idea. This is a step which should not be taken lightly and which may, at best, only provide a short term solution.
Anyone who is already struggling to keep up with the repayments on their mortgage is likely to find additional loan repayments problematic. The loan is likely to be at a higher rate of interest than the mortgage and, if the borrower defaults on the loan, the lender is entitled to ask the courts for a possession order.

Budgeting in Other Areas
With everyone so busy these days it can sometimes be difficult to organise finances and create a budget. Many debt and credit counselling organisations offer excellent, free money advice which often includes preparing a breakdown of all income and expenditure. This could disclose areas where savings could easily be made releasing more funds to put towards mortgage payments

“Your home may be repossessed if you do not pay your mortgage or other loans secured on it.”

The repossession of homes is becoming a more and more frequent occurrence particularly in the UK as a result of the credit crunch. A property is usually repossessed when an owner is unable to make mortgage repayments and falls into arrears with the mortgage lender, and as a result their home is repossessed via a court order. Having your home repossessed can be an awful ordeal particularly when it has occurred as a result of circumstances which you are unable to control.
Home repossession occurs when a mortgage lender, usually a bank or building soceity, decides that the loan which has been lent to a borrower or owner of a property can no longer be recouped by reasonable means. This results in the mortgage lender applying to the courts for the issuing of a repossession order and following this is an eviction order.

What happens during the whole repossession process is explained below:

1. Failure to Make Repayments
Due to a variety of circumstances homeowners often find themselves being unable to make repayments on a mortgage. In the majority of cases a mortgage lender will allow 2 payments to be missed before taking further action. The lender will contact you via telephone or mail in order to try and recover missed payments. If you are in this situation speaking to the mortgage lender and arriving at some arrangement for further repayments would be the best step to avoid repossession of your home. Lenders will always consider repossession when there is no alternative so trying to negotiate a solution to the problem is always the best option.

2. Possession Order
Possession hearings are relatively informal. The judge will look at the documents in support of the claim and ask the claimant’s representative to confirm the latest figures on the account. The judge will then consider what order to make. The basic possession order gives the mortgage company the right to repossess the property 28 days after the hearing but the judge can make different orders.
A possession order is when a lender approaches the court for a possession order as:
a) a homeowner has made no attempt to contact the mortgage company with regards to arrears on their account.
b) the lender cannot reasonably expect the homeowner to make repayments because of finance problems or bankruptcy.

When a mortgage company or lender makes a possession order, the borrower or property owner will be required to appear before a magistrate of the courts along with a representative of the mortgage lender. Upon appearing before a judge, the homeowner is provided with the opportunity to appeal for lower repayments as long as they can prove that the income which they are receiving is low enough to justify the amount they are offering to pay.
At this point the representative of the lender can decide whether or not to agree to the terms which are put forward by the borrower. If the repayment is thought to be sufficient, the lender will often agree to a new repayment structure rather than carry out a repossession. The judge can overrule the decision of the mortgage company if he or she feels that the homeowner will be able to make the repayments of the arrears on the mortgage account. If the judge decides to go down this route they will issue a Suspended Possession Order.

3. Suspended Possession Order
When a homeowner appears before a judge in court, the judge may decide to issue a Suspended Possession order. If the homeowner can prove that they will be able to make further repayments on this property, the judge may agree to giving them more time to make repayments or even a temporary new repayment structure to clear the arrears.
If the terms of the Suspended Possession Order are not adhered to ie. if repayments are not made as agreed, the mortgage lender can restart the proceeding of repossessing the home. This will result in the lender applying to the courts for an eviction notice. When a homeowner misses their repayments, a judge is likely to go ahead and issue an eviction order so it’s very important to stick to the payments agreed within the suspended repossession order.

4. Eviction Order
The final part of a property repossession is an eviction order.  When an eviction order is issued by the magistrate, it will specify the date on which the homeowner will be required to leave the property. Bailiffs will arrive if the premises are not vacated by the specified date. They will remove you from the property. It is important to note that obstructing a court appointed officer is regarded as a criminal offense and it is not recommended. If the property has not been evicted by the specified date, then the bailiffs will remove the homewoner from the property and with only what few belongings they can carry. There will be an opportunity to collect the remainder of the belongings on a further specified date in the company of a court appointed officer. Following the eviction and removal of all belongings from the home, property repossession is complete. Repossession properties are then sent to auction. But could this repossession property have been avoided in the first place. Click for info on how to avoid home repossession in the first instance.

There are many options available to homeowners to stop repossession or reduce the chances of being in a situation where your home can be repossessed. We advise the options available are wider if steps are taken early when it becomes apparent that there will be problems carrying out repayments towards a mortgage. The moment payments are not made, this information will begin to appear on credit reports and thus limit options available, e.g. remortgage.

Choose a Good Mortgage When You Buy
In order to avoid repossession the its important to firstly ensure that the mortgage you are opting for is affordable. Many people suffer by buying above their budget and end up struggling due to changes of circumstances. Before signing a mortgage agreement borrowers should:

* Prepare a proper budget so that they know exactly what they can afford.
* Not assume that income will increase over the coming years.
* Assume that interest rates will go up.
* Make sure that they have read and understood the terms and conditions of the mortgage or loan they are considering.

Many borrowers rely on the advice of mortgage brokers. Brokers make their money through commissions paid when people enter into mortgages that they have recommended. Before signing any document people should make sure they have read and understood it.

Talking to Lenders
Mortgage lenders have a stated responsibility to assist borrowers if they face difficulties with their mortgage. Lenders will often be very accommodating if a borrower is going through real financial problems. Some lenders may even allow a payment holiday – a number of months when a borrower does not have to pay anything. Borrowers should approach their lender as soon as difficulties arise, preferably before payments are missed.

Making Payments
If arrears can be kept beneath a certain level (usually two months’ worth of instalments) lenders will generally not pursue a possession order – even once court proceedings have started. If the arrears are lower than the level required when a case comes to court, most lenders will ask for the case to be “adjourned generally with liberty to restore”. This means that the case is effectively put to sleep. The lender is entitled to ask for another hearing if the arrears build up again. This can happen repeatedly but costs will be added to the mortgage debt every time the case is re-listed.

Selling the Property
If a borrower cannot afford to maintain payments towards their mortgage there is nothing to stop them selling the property themselves. People are often reluctant to sell their home but this is a better option than having it repossessed and sold by the lender. Many lenders will not start repossession proceedings if they know that the borrower is in the process of selling the property.
Once a case comes to court most judges will give borrowers time to sell by granting a possession order for longer than the usual 28 days – a 56-day order is common. Judges may also postpone evictions if satisfied that the borrower is about to sell the property.

Re-mortgaging
The approach of lenders and the courts to borrowers who are re-mortgaging is similar to their approach to borrowers who are selling. Many judges will happily give a borrower more time if they are shown evidence – such as a mortgage offer – that the borrower is in the process of re-mortgaging.
Opening a newspaper or doing a search on the internet will reveal that there are now many companies offering to provide re-mortgages to people who are already in arrears. Naturally these companies will charge a higher interest rate than other lenders. In the current economic climate it is likely that first-time buyers and people with bad credit ratings will find it increasingly difficult to get mortgages.

Getting a Loan to Clear the Arrears
Taking out a loan to clear the arrears on the mortgage may seem like an easier option than re-mortgaging. However, the borrower will then have to pay the monthly instalments on both the mortgage and the loan. If a borrower obtains a secured loan, and fails to maintain payments, the loan company will be entitled to start repossession proceedings. This is often only a short-term solution.

Other Options
There are companies who offer to buy properties quickly so that repossession can be avoided. In some instances the borrower may stay in the property as a tenant. Some companies will pay a borrower a lump sum to clear the arrears, help the borrower to sell the property through agents and then take a percentage of the equity when it is sold. Both of these options will result in a borrower selling their home for substantially below the market value.

Summary
Borrowers should take action as soon as problems become apparent. This will maximise the options available: the more options available, the greater the likelihood that repossession can be avoided.

A property is usually repossessed when a buyer fails to keep up with repayments on a mortgage which is being paid to a bank or building soceity. The owner/lender will then take action using the method of repossession in order to repossess the home.

What happens when a home is repossessed?
Failure to keep up repayments can result in the buyer’s home being repossessed by the lending company. The company will send out bailiffs to evict you from the property and then take steps to sue the buyer in order to recover losses. The lender will often make substantial profits when recovering this money. The company will also charge the borrower for costs involved.

If you have missed two payments on your mortgage then a lending company has the legal power to apply for a repossession order via the courts. When buying a  property, it is extremely important to read any agreement thoroughly before committing  as terms may vary. Do not forget to always read the small print. Remember theses contracts are drawn up by clever and cunning solicitors who want to make it as difficult as possible for you to cancel the mortgage contract.

Below are the steps involved when a home is repossessed:

1. Mortgage Account Falls into Arrears
For most mortgages the lender will not take any action until an account is two months in arrears. At that stage they may write to the borrower alerting them to the arrears, send a Default Notice or make a formal written demand that the borrower pay back the full amount owing.

2. Lender Passes the Account to their Solicitors
The borrower may receive a letter from the solicitors telling them they are in arrears and inviting them to make proposals to clear them. Negotiations may take place and a borrower may be asked to provide evidence of their financial circumstances. Alternatively, the lender’s solicitors may send a letter warning that court proceedings will be started if the arrears are not cleared within a set period, usually 7 days.

3. Lender’s Solicitors ask the Court to Issue a Possession Claim
The solicitors will send documents to the court, including a claim form, which set out the lender’s entitlement to repossess the property.

4. The Court Issues the Claim
The court will send the borrower, who now becomes the defendant, a copy of the claim form and any documents sent to the court by the solicitors. The court will inform the borrower of where and when the case will be heard. The borrower will also receive a Defence Form which can be filled in and sent back to the court – this gives the borrower the chance to set out their position.

5. Before the Hearing
At least two weeks before the hearing date the solicitors will send a letter to the property addressed to “The Occupier” giving details of when the case is to be heard. This is intended to protect anyone living in the property, such as a tenant, who would otherwise be unaware that the property could be repossessed. A few days before the hearing the borrower should receive the lender’s witness statement, which sets out the details of the case and gives the updated figures on the account.

6. The Hearing
Agreements can sometimes be reached with the lender’s representative before the hearing: it is usual to discuss the case with them before seeing the judge. In court, the lender’s representative will provide the latest figures and outline the lender’s case. The borrower can explain his circumstances to the judge and put forward any proposals or defence. There may be some arguing back and forth, and the judge then makes an order. The borrower should write down what the judge orders.

7. After the Hearing
Within a couple of weeks the borrower should receive a copy of the judge’s order from the court. It is vital that any payments which fall due before the order is received are made. If regular payments are to be made the borrower should talk to the lender about setting up a Direct Debit.

8. Breach or Expiry of a Possession Order
The lender is now entitled to enforce the order. They do not need to go back to the judge or give any warning to the borrower. If the property is still occupied the lender’s solicitors will apply to the court for a “Warrant of Eviction”. The court bailiff will fix a time and date for the eviction. The bailiff will usually send, or hand-deliver, a notice telling the borrower when the eviction is to take place.

9. Applying to Suspend the Warrant
The borrower can apply to the court to stop the eviction and a hearing will be listed at short notice. The borrower can ask the judge for more time to clear the arrears or for a promised sale or re-mortgage to go through. Ideally the borrower will have documentary evidence to support what they are saying. The judge may decide to “suspend the warrant” meaning that the scheduled eviction will not go ahead. Such applications can be made repeatedly but, naturally, a judge will be more sceptical if a borrower keeps coming back to court saying the same thing.

10. Eviction
If all else fails the bailiff will come to the property on the day set for eviction, make sure there is no one inside and change the locks. If the borrower has not yet removed all his belongings the lender will usually allow him back into the property at a later date to retrieve them.