New Protection For Home Owners In Mortgage Arrears

The public is constantly being warned that they will be indirectly bailing out the banks through their taxes for many years to come.

But perhaps a more immediate consequence for the man in the street is a desire by most lenders - and not just the two big banks rescued by government - to reduce their levels of toxic debt. In short, lenders are getting tougher with homeowners in mortgage arrears. Inevitably, respectable folk with relatively small levels of arrears who are behind in their payments through no fault of their own are being caught up in the net along with the feckless non-payers.

Fortunately for the former some relief has come in the form of the Home Owner and Debtor Protection (Scotland) Act 2010. This is real legislation for the times as it gives homeowners more protection against banks and other lenders foreclosing on mortgages and repossessing houses due to non payment of instalments. However it should not be seen as a 'chancer's charter' and, hopefully, the courts will see through any defender who tries to justify mortgage arrears on spurious grounds.

Until now lenders seeking repossession could serve a court action on the borrower if the necessary calling-up notices had been served. These must still be served, and must contain more information than ever before about the debtor's rights of challenge. However, there is also a list of pre-action requirements which lenders must go through before being allowed to proceed further. They must explain the terms of the security to the homeowner and the charges which will be incurred if the default is not remedied. Precise broken-down figures showing the amount of arrears and the amount of charges incurred are also required. A duty is placed on lenders to take reasonable steps to seek an outcome other than repossession, which means making genuine efforts to 'talk through' the position with the borrower. Proposals must be made in a manner the borrower can understand and should the borrower make a counter-proposal, the lender is expected to respond within a reasonable time.

If an agreement cannot be reached, or one is reached but then broken, the lender can start repossession proceedings, but only after giving 15 days written notice. In serving writs, lenders must also put into court a checklist ticking off all these steps and confirming that they have been taken.

The act also states that where agreed payment of the arrears is going to take place within a reasonable time, a lender cannot make an application for repossession to the court. Such circumstances might be, for instance, if the borrower is applying to repay arrears under an insurance policy; or has made an application to a government-run mortgage support scheme; or if the property is being marketed for sale at an appropriate price with professional advice. Given the current depressed state of the market, this last item might delay repossessions for some considerable time.

Previously if an action was unopposed, repossession was granted automatically without a hearing. Now there must always be a hearing and if the borrower appears, the court can impose a solution based on payments by instalment, with the proceedings continued indefinitely to allow the arrangement to proceed.

Recognising that the borrower is not the only person affected by repossession, a class of people called "entitled residents" - generally spouses and civil partners, or co-habitants, but not tenants - have the right to oppose the action in court.

On the basis that some affected individuals may not be able to afford lawyers, provision has been made for more representatives from the CAB, charities, etc. to be accredited as approved lay representatives.

The extent of the problem is reflected in the fact that about 10,000 applications a year are expected under the Act. Therefore, to ensure it works as intended, the government is inevitably going to have to commit more resources to the courts. I

Comments? Questions? Email Here

© HowtoAdvice.com

How to Advice .com