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Mike Thomas is head of debtwizard.com and comments on the recently announced house repossession figures and the time limits lenders have to recover their losses.
In 1991 76,000 homes were repossessed. Statistics released in May 2008 indicate that last year the number of homes repossessed stood at 27,100. Consequently many analysts including the Housing Minister, Caroline Flint, say that repossessions are only running at around a third of the 1991 figures. Well I have a different view on that.
Research reveals that around 20,000 homes that would normally have been repossessed during 2007 were actually sold off to companies who took ownership of the house with the former owners going back as tenants. Accordingly the ‘repossession’ figure for 2007 would have been nearer 47,000 not 27,000. Furthermore it can take up to a year to have a house repossessed from the initial first missed payment so the data for 2007 is affected to some degree by the state of the economy prevailing in 2006.
It is likely that more families will soon be going through the distressing and stressful process of losing their homes and it does not stop there. Often the borrower is not contacted about the shortfall following the sale of the property until many years after the repossession, in some cases as long as 10 years after the event. This contact is usually made through solicitors or agents acting on behalf of the lender and the initial claim can run into tens of thousands of pounds.
If contact is made the borrower has several options. They can either refuse to pay anything and rely on the outcome of any ensuing legal proceedings or, negotiate a settlement by way of offering a reduced lump sum in full and final settlement or, propose an Individual Voluntary Arrangement (IVA) or go bankrupt.
The mortgage lender has several options too. One in particular is securing the debt by way of a charging order on your current property if mortgaged or owned outright, another option is to agree a full and final settlement by paying a lump sum, often a fraction of the initial claim. This sum is decided according to the amount of assets, if any, that the borrower has together with any monthly disposable income. These factors will be considered by the solicitors or lender to determine what figure they will settle for. Every case will be judged according to its merits.
Care needs to be taken when considering a Mortgage Indemnity Guarantee, (MIG) and advice on this area can be found on my website under ‘repossession debt’
Time Limits to recover shortfalls following house repossession
The Council of Mortgage Lenders (CML) has announced a policy which states that as from 11 February 2000 those that have not been contacted by the lender for more than 6 years from the date of the sale of the property will not have to repay any mortgage shortfall debt. This is a voluntary code however and applies only to new cases and not those with existing shortfall debt repayments or where the lender has already started recovery procedures.
If the lender obtains a money judgment order (MJO) at the time of the re-possession hearing then there is no set time limit for recovery of the debt. However, if the MJO is 6 years old then the lender has to reapply through the Court, otherwise lenders need to abide by specified limitation rules.
Generally they have six years in which to recover interest and twelve years for capital sums. This limitation begins when the lender was first able to issue proceedings and would be much earlier than the date the property was repossessed or, the last time any payment was made irrespective of the amount or the last time the debt was acknowledged by the client or any agent acting on their behalf in writing.
If the debt is of a joint nature and only one of the party concerned is making a payment then the other person can be bound by the time limitation even without their knowledge, e.g. if they were separated or divorced.
How lenders claim such large amounts
Lenders will add interest, arrears, administration charges, disbursements, court fees, advertising and selling costs even the locksmith’s and gardener’s bills. Then there will also be additional legal costs for the lender to defray under any settlement.
Acknowledging the debt
Telephoning a lender just to enquire about the debt is not acknowledgment. Generally, for the time limit to start again, the acknowledgment must be in writing and signed by the debtor or his or her agent.
Debtwizard’s useful tips if you are about to have your home repossessed.
- Try and get 3 valuations in writing just before the home is repossessed as this can then be produced years later when arguing over how much your home was worth when it was sold. Keep the valuations in a safe place.
- Take photos of the house interior with someone holding a current daily newspaper. You can prove the house was not trashed and was left in excellent condition, the newspaper confirming the date of the photograph.
- Remember not to acknowledge or admit the debt.
This is an edited version. To see the full article and details of other useful websites on how to get a valuation of your home from many years ago then click here.
More details on Debt Management Companies, Individual Voluntary Arrangements, Bankruptcy and our Debt Option Comparison table, 6 Option Guide to Getting Out of Debt and the Budget Planning Forms can be found at www.debtwizard.com. For free access to the site you need only insert an email address and password. Because we carry no advertising or sponsorship we cannot be pressurised or influenced on the advice we give.
This article is intended to afford general guidelines on matters of interest. Accordingly, the information in this article is not intended to serve as legal advice. Therefore, no responsibility can be accepted by debtwizard.com, for any loss occasioned by a person acting or refraining from, acting on the basis of this article. Users are encouraged to consult with professional advisors for advice concerning specific matters before making any decision.