Mortgage Express ‘Right to Consolidate’

Sell One, Sell Them All

It’s not just owner occupiers who face the serious threat of repossession. Landlords can too, and regardless of what you think about buy to let landlords, there are far reaching consequences that can affect numerous families in other properties owned by the same landlord – even if the landlord is up to date on their mortgages!

There’s been a lot of talk on landlord forums recently about Mortgage Express and their alleged ‘right to consolidate’. What does this mean is plain English?

Basically, it means that even though buy to let borrowers who took out mortgages with Mortgage Express prior to their bankruptcy in 2008 were being offered those mortgages on a property by property basis, the Government’s lawyers (UK GOVT owns most of MX – that means us the taxpayers own it)  have found something in the small print that means they can influence what happens to a landlord who wants to sell one of his/her properties.

Innocent Tenants and Landlords Affected

We may all be familiar with the obvious fact that if a landlord defaults on some mortgages in their portfolio that the lender is likely to ask the court to be given custody of ALL the properties so that it can claim back the money borrowed. This means that tenants (who may have done nothing wrong and paid their rent on time each month) may be evicted by the lender because of actions of the landlord.

Sometimes the landlord is the innocent party and has been victim of so-called professional tenants, but just as often the landlord simply has not kept up the mortgage payments for personal reasons. Many landlords believe that they should be allowed to hold on to those properties that are not in arrears. The mortgage lenders quite logically, think otherwise. They claim that a landlord could easily allow poor quality properties in negative equity to go into arrears – giving them a headache of repossessing – whilst leaving the landlord to cherry pick their best properties to hold on to.

The human cost of this, however, is that once a BTL landlord gets into arrears on one property, the lender is likely to take control of all them, and in the case of zombie banks like Mortgage Express will do its utmost to sell the properties and get its money back, even if that means evicting otherwise innocent tenants in the process.

My Landlord is Not Facing Repossession

What is less well known is that even where a landlord wishes to sell one of his/her properties that is mortgaged with Mortgage Express, this zombie bank is now invoking a clause which says ‘sell one, sell them all’. In other words their Terms & Conditions allow MX to force a landlord selling one property to sell ALL of them and redeem ALL the mortgages at the same time. Clearly, that is impractical but the net effect of this would be the same as the lender taking control of the properties in a repossession and evicting tenants.

Why is this troubling? Well as a tenant you may breathe a sigh of relief that your landlord is one of the many good landlords who follow the regulations, behave ethically towards their tenants and always pay their mortgages on time. But, we’ve come across many examples of such landlords falling foul of MX’s new policy and only finding out at the last minute.

Even Landlords Not in Arrears Can Be At Risk

Mortgage Express state that they don’t wish to invoke this clause forcing borrowers to repay ALL loans if repaying only one, but they are then using this as leverage to insist that if a landlord sells a property that ALL proceeds from the sale must go to Mortgage Express.

To be clear this includes all money over and above the amount that the borrower has secured against the property he/she is selling. So, where landlords took out mortgages one by one over time, MX is now effectively bundling these properties together as one big loan.

Of course MX is not taking the profit and keeping it from a sale – it is using it to pay down outstanding debts on the other properties (reducing the Loan to Value and monthly payments) left in the portfolio, but it is removing the fundamental right of the property owner to decide how and when he or she sells their properties and pays down their mortgage before the term ends.

Whilst not strictly a repossession issue, this does highlight a further unstable element to the private rental sector which may easily effect tenants as well as landlords.

How can Mortgage Express act like this when they’re owned by the taxpayer? Well, that is also the perfect excuse. They can probably claim to be duty bound to provide the best possible value to the taxpayer whilst reducing their mortgage debts on their books and that this is what is driving this new policy.

Real Life Repossession Cases – Mrs B vs Kensington Mortgages

In order to help other home owners who are facing repossession, we are going to start posting actual cases.

These will be based on situations faced by people who have contacted us but of course, names and identifying information will remain hidden.

Case #1

Mrs. B
Location: Wakefield
Value of Home: approx £500,000
Total Mortgage: £108,000
Lender: Kensington
Second Charge: None
Loan Arrears: £24,000

Mrs B contacted us after receiving a Bailiff’s Warrant for Possession from her local county court on behalf of her lender, Kensington.

She had followed standard procedure to ask the court to allow her to pay her substantial arrears over 2 months. For this she used the Court Form N244. Because her court was busy the judge could only hear her case late on Friday morning, repossession by bailiffs was set to take place at 11am on Monday.

Normally, if a homeowner asks the court to help agree a repayment plan with their lender the judge will recommend that the lender accepts the plan and will suspend the repossession.

However, the judge can only suggest this to the lender.

In Mrs B’s case, the judge took on board the extenuating circumstances (serious illness in the family, coupled with a very low mortgage compared to property value and no other lenders involved) and urged the lender’s solicitors to ask them to accept the payment of £24,000 arrears over a 2 month period.

This is a large sum of money, but also a very short repayment period for the lender to agree to, and Mrs B was able to show that she could make these payments.

However, the lender refused the Judge’s recommendation and stated that only arrears payment in full before the bailiffs arrived on Monday would be acceptable. This was lunch time on Friday.

Unfortunately, Mrs B didn’t contact us until late afternoon on Friday.

If she had contacted us earlier we would have been able to arrange a cash buyer for her home with an option to buy it back later. Unfortunately, there was not enough time to even get ID documents to a solicitor before the repossesion was to take place on Monday morning.

To make matters worse, Mrs B had made a payment of £5,000 on the Friday morning, which instead of being money she and her family could use to find rented accommodation after the bailiffs repossessed her home, would only slightly reduce the overall amount owed to her lender, especially once the lender had added on its legal fees, penalties and costs of selling her home at auction, probably with a very low reserve just to cover their costs.

If you even think you might be facing a similar situation in the near future, seek advice now, because like Mrs B, you might believe that just paying arrears when you go to court will be enough to stop your lender from repossessing your home.

Increasingly, lenders are unwilling to accept arrears repayment arrangements because they fear that by not repossessing today and getting their money back, that your property may not be worth enough to cover your mortgage and loans if there is a property crash.

For more information on the repossession process visit our website Stop Repossessions Org

Citizens Advice Bureau Claims Repossessions Lender’s Fault But Is CAB To Blame Too?

Reuters reported a couple of days ago that the Citizens Advice Bureau are claiming that UK home repossessions are dramatically rising due to the lender’s aggressive arrears recovery policies and brokers’ misselling.

Whilst both of these statements are undoubtedly true, and we have accused lenders of such practices on this very blog, the Citizens Advice Bureau also plays its part in homeowners being repossessed.

How so?

Well in a number of cases that have come to our attention, including ones we have been involved in, the CAB has advised homeowners facing repossession that they must surrender to their fate and let the bank take their home, rather than pursue alternatives such as a cash property sale or that bete noir of NGOs and the press, the sell and rent back.

Our fictional Mr & Mrs Smith have 4 months’ mortgage arrears, a court possession order, and bailiffs due to evict them in 10 days. Where to turn?

The Citizens Advice Bureau promotes itself as the place to go for impartial debt related advice. Mr Smith mentions that they are thinking about selling and renting back.

The CAB advisor warns them against this. They will be losing money. Their home is worth at least 20% more than the Smiths have been offered.

The Smiths are relieved to benefit from the wisdom of the CAB.

However, the logic of this advice is somewhat strange.

If a homeowner allows a lender to repossess they immediately lose all control over the sale price of the home, whereas with a cash property buyer, the owner is free to decide whether or not to sell at a discount in order to pay off his/her debts, once the property is in the hands of the lender the property will be sold (usually at auction) to cover only the mortgage debt of the first charge.

Most repossessions involve second and third charges for secured loans. These high interest rate sub prime lenders are not going to shrug and walk away.

The will chase their debts aggressively for up to 12 years.

Of course selling your home for a discount is not something to be happy about. But what are the real options? Homelessness and another 12 years of being pursued by your lender with interest and charges racking up?

With so many properties now being repossessed prices for repossessions at auction are once more becoming bargains. However, if the lender sells the property below the mortgage debt redemption figure, then the lender can pursue the previous owner for the balance of the debt.

If you compare this with the owner selling for a price to cover their debts and recover at least some of the equity in their home then the CAB’s blanket condemnation of cash property buyers makes little common sense.

We have come across a number of people who have taken the CAB advice to allow themselves to be repossessed rather than accept a cash offer. Once repossessed, the person taking the advice is then not only homeless (and depending on their situation) with little chance of the local council rehousing them, but without any funds with which to rent in the open market.

Selling to cash buyers and sell to rent schemes may not be the answer to everyone facing repossession, but the attitude of the CAB seems to be a very middle class and patronising hair shirt ‘you’ve made your financial bed now lie in it a while’ coupled with sheer horror that a third party might make money out of somebody’s repossession situation.

Well, the banks, especially the sub prime lenders are making a lot of money out of repossessions with massive fees and penalties, the victims are ending up homeless when the options of selling at a discount and moving on or renting back their homes and getting their lives back together are simply not open for discussion by CAB advisors.

But at least the staff at the CAB can sleep well knowing that no property investors have made a penny from our Mr & Mrs Smith (who tonight may be sleeping in a council run B&B on the wrong side of town…)