Stop Repossessions Org UK Sees Rise in Negative Equity Repossessions

As 2008 marches on and the global and economic situation looks ever more bleak, so are the tales we are hearing from UK homeowners facing repossession.

Back in 2007 a rough estimate would be that 70% of those people who contacted us by phone or email had some difficulties with their mortgage repayments, were in arrears but were also in a position to:

a) Repay the arrears over a given period either by direct agreement with their mortgage lenders or by a court judgement.

b) Remortgage with a new lender in order to get a fresh start with a new payment record appearing on their credit score

Fast forward and now it is rare that we are hearing from people who have enough extra monthly income to repay their arrears over time and many lenders (especially the sub prime) are refusing to accept repayment plans to pay off morgage arrears.

The majority of people contacting us are now also at the start of the negative equity trap.

The true and actual cost of their borrowings, (which consists not just of the amount borrowed but also the huge penalties, legal and court fees and Early Redemption Penalties), have risen dramatically, whilst the value of their homes is in many cases starting to stagnate, if not fall.

A homeowner who previously remortgaged their £200,000 home with a 90% mortgage (£180,000) and who has either added a secured loan (say £10,000 – new total £190,000) or had a County Court Judgement for unpaid credit card bills of a similar amount, and who has an early redemption penalty of say £7,000, may be mortgaged to £197,000.

One missed mortgage payment and not only can the interest rate rise dramatically so that monthly costs are hugely increased, but legal fees and punishing penalty fees will be also be added.

Suddenly we could be looking at redemption costs of over £200,000.

Sell the house?

Not always possible.

Estate agents will charge a minimum of 1%, more if you go with multiple agents. That’s at lease £2000. Legal fees and the Government’s ridiculous HIPs pack will add another £1500.

It’s now going to cost £3,500 to sell the home and get nothing in return.

But it doesn’t stop there.

If you remortgaged before the Northern Rock crisis hit in September 2007, then the chances are that your lender was giving signals to surveyors to over value properties.

The market is always rising so why not let them over value your home and then lend you more money in return for more profit?

By the time you may be in trouble house prices should have risen by enough to bring down your mortgage level to less than 100% – just in case they need to repossess.

But the reality is that homes are now only selling if the price is right.

Now it’s a buyer’s market again.

Houses which comfortably sold for £200,000 back in 2007 are now sticking in agent’s windows at £189,000.

Suddenly it could cost you as much as £10-20,000 to buy your way out of repossession.

But who is going to lend you the money to pay the costs?

It is not going to happen.

If you do have equity in your home then you do have options to avoid repossession find out here

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4 Responses

  1. Well done on such a great blog that deals with sensitivity on such a difficult subject.

    It is ridiculous that lenders are refusing to help by accepting payment plans to pay off arrears. So they would rather make a family homeless and then sell the house for less than its worth?

    Totally agree, redemption costs are too high, as are remortgage fees (though at least these can be added to the loan). Estate agents fees, hips etc add to the burden, but worse than this…..going to an estate agent does not guarantee a sale, especially not in the current climate. This could leave the potential repossee further in debt while his/her house languishes on the market for months, with little or no interest. In this instance a quick house sale company is the only alternative.

  2. The problem is despite what they might pretend they have no choice. The ‘mortgage’ company your now dealing with is not actually the mortgage company who supplied your mortgage.

    They are the ‘servicer’ using the original lenders name who’s only duty is to collect the monies & most (Kensington, Blenhiem etc) operate with the same staff out of a bunker in Ripon

    As the mortgage has been securitized (packaged) into a SPE (Special Purpose Entity) or SPV (Special Purpose Vehicle) (Think Northern Rock & Granite) they have no powers to alter the agreement nor do they have any qualified FI’s to offer advice & assistance

  3. yes, all very well.

    securitised mortgages (subprime) can never be modified, servicers/lenders are unable to provide even the basic of help as being restricted by the securitsation agreement between seller (orginator)and buyer and as such pay a lip service to CML guideance of repossession is the last resort.

    Due to this agreement ….repossession HAS to be the first resort.

    HML have admitted thay cannot do anything for a borrower with problems and hence the very high rise in repossession rates, even before the credit crunch and over 87% were from the subprime so called lenders (mostly SPV’s).

    The borrower is totally unware of of this until times of problems.

    Do they not need more protection and not less than their counterparts in the prime sector?

    The whole subprime process is a one way balance in favour of the industry.

    If they are totally incapeable of hellping and do not even employ FSA mortgage advisors (there is no reason to do so as the contract cannot be changed) then what is the benefit to advise your lender thsat you may have a problem other than to alert them to litigation from Day 1 of a missed payment and repossession action being taken.

    It is not ridiculous that lenders are refusing….due to the type of the mortgage you have (unknown to you) they just cant. They do not have any accounting systems either today to even account for arrears.

    It is that basic and you have been lied too by the Treasury, FSA and CML…all covering up on this.

    Regards,

    TaffR

  4. check your mortgage contract…

    “we can sell/transfer your mortgage at anytime to anyone” etc

    this obscure clause means that when they taken your mortgage they are already placing you in a pool for securitisation and you will end up with an SPV (special purpose vehicle). They identify your profile that matches exactly to an ‘investor’ portfolio. They are NOT mortgage lenders as you are led to believe. In industry terms they are packagers or orginators reasdy to sell you on.

    You will now be with a debt collector only type entity.

    Don’t expect any help…they just didnt tell you that is all.

    TaffR

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