Don’t Trust Your Lender!

Repossession House Keys

When your lender is putting pressure on you to pay off your arrears, don’t agree to a plan that doesn’t work for you and your family.

Never ever agree to pay your bank more than you can afford – either today, or on a payment plan and make sure you get every single agreement in writing.

IMPORTANT TIP: Sometimes the bank will refuse to put these agreements in writing. Instead they say something like ‘I’ll make a note on the system’. Well, in that case write to your bank with a description of your call, what was discussed and what was agreed.

The chances are the bank will not respond, but take that to a Judge and the Court will be more likely to side with you and grant you more time.

Get your free Stop Repossessions Guide Here – Updated for 2017!

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Could This Christmas Be When YOU Get Repossessed?

The Risk of Repossession at Christmas

Christmas is the worst time for anyone facing repossession. Not only does Christmas mean extra expense for everyone, but maintaining your family’s spending to keep up appearances can lead to disaster in January.

House Repossession

Is Your Home in 'Upside Down Negative Equity'?

There are some key risks to the Christmas period if you’re worried about repossession and keeping up your mortgage payments:

  • Extra spending on presents for family and friends
  • Extra use of credit cards or payday loans
  • More eating out or parties to keep up appearances at work
  • Fewer working days for most freelancers
  • A mortgage payment date over the holiday that’s easy to miss

Avoid The January Bill Shock That Could Lose You Your Home

It’s a very common theme every year when I speak to people in January as the heavier bills start arriving the week after New Year.

If you’re facing repossession over the Christmas period, then make sure you stick to any payment plan you have with your lender or the Court – especially if you have a suspended possession order already.

Find Out How to Stop Repossession Here

FREE Ultimate Stop Repossession Guide – Updated for 2013

We’ve compiled Your Ultimate Guide To Stopping Your Repossession.

This 50 page eBook is FREE for a Limited Time Only

You can get your copy by clicking on the image below.

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Some Facing Repossession Still Think Their Homes Are Worth More

Sometimes it’s best to sell up and walk away or lenders may chase you for 12 years

Today I got a call from a frantic seller who is facing repossession – I’ll call him Mr. B. He owns a house in North London, but in a not so great area where prices have been steadily depressed for some time.

He told me that he has a ‘repossession order’ for next week. The first thing I try to do when someone calls in a panic to tell me about a court possession order on their home is to try an find out exactly which stage the reposession / possession is at. Many people confuse a Court Order for Possession with a Bailiffs Warrant for Possession. The two things are very different.

If you just got the first one, you have some time to sort out your finances and a very good chance to avoid repossession.

However, if you just received the Bailiffs Warrant, then look out. That’s the nasty one, and much harder to deal with simply because time is no longer on your side.

Mr B. told me that his was a bailiffs warrant for early next week. That in itself is not impossible to deal with by any means, but sometimes seller’s own expectations are simply too high.

Mr B. has a house worth £300,000 – his valuation of course, and as a homeowner like all of us, this will be the top valuation. He owes £200,000 to his mortgage lender, sub-prime specialist GMac.

He told me that he would like to sell to avoid the bailiffs coming next week. That’s a pretty tall order, to find someone who is willing to put down cash in today’s climate to buy a house in a couple of days. That would mean exchanging contracts at least and then submitting a form n244 to the court to get the bailiffs warrant suspended.

Unfortunately Mr B. also has arrears of a substantial sum of £22,000. This means that he would have to sell for a minimum of £222,000. Except that he also has a second charge loan with Black Horse Lloyds for £13,000. Once fees and penalties and costs are added to this Mr B. is looking at a minimum of £240,000 just to clear his debts.

Mr B told me that he understood that he time was against him and so he is willing to sell at a discount – but absolutely no less than £280,000.

This represents a discount against the value of the house (his valuation, mind) of approx 6.5%.

Now house prices are falling at a pretty fast rate. Lenders are telling surveyors to downvalue properties, but Mr B. not only wants someone to pay 93.5% of his price, but also wants to buyer to pay cash (no choice if they are going to exchange before the bailiffs arrive) which would almost certainly have to include the arrears of £22,000 as deposit if GMac are going to accept a conditional exchange.

I suggested to Mr B that any cash buyer will be looking at a serious discount in return for doing this in such a short time frame and any buyer is going have difficulty in remortgaging above £250k because of the stamp duty threshold.

There had already been a buyer and Mr B had used this to get the court to suspend the possesion order. Courts usually give a second chance, and the Judge did, but then the buyer pulled out.

Real Cash buyers are few and far between right now and they have the pick of hundreds of properties at fire sale prices. Even an estate agent trying to sell a home to an normal owner occupier will admit that 10-20% is the minimum discount from asking price if you really need to sell right now (and that sale would take at least 8 weeks via the normal process). If Mr B. thinks that he will find one of these normal homebuyers, with cash in hand and who doesn’t know there are bargains to be had, then he really is kidding himself.

When prices were rising, a rise in the valuation of a property of 10-20% over a 2 to 3 year period was considered by many to be a god given right. Now that values are slipping in the reverse direction many owners are clinging to the notion of ‘equity’ in their homes as their ‘money’ but that equity simply no longer exists.

I tried to get Mr B to be realistic and outlined the alternatives to him as I see them.

Reality No 1 : Find the money to pay off the arrears in a reasonable time frame and use an N244 form to apply to the Court for more time to pay GMac. Not definite but in the current climate a strong chance the Court would insist that GMac accept terms and the Court would suspend the bailiff’s warrant.

Reality No 2 : Sell the house to a cash buyer for what he owes and simply walk away from the problem with NO DEBT. Sure, he loses his home, but he keeps control of his future and his future income. With no equity in his house and huge arrears of £22,000 and mounting, what exactly is there to lose?

Reality No 3 : He waits until the last possible moment to decide on one of the options above and instead the bailiffs arrive, take control of his house and sell it at auction. GMac will sell it right now for whatever they can get (local comparisons on Auction sales sites show similar properties worth £285,000 selling at auction in the last 6 weeks for £152,000!). Mr B. may well think that is the end of the affair, but GMac won’t forget. Nor will Black Horse Loans.

Black Horse actually are quite good at turning secured charges into unsecured loans if they think they will get nothing at auction, but GMac were jsut involved in demanding repayment from Woolworth’s so they are unlikely to care about Mr B’s feelings when they use their legal right to pursue him for up to 12 years for the difference between what he owes them today and what they get for the house at auction.

Which option do you think Mr B will go for?

It’s a shame but my experience tells me it will be No 3. Instead of being honest to himself about his situation I feel he will remain in denial. After all, the whole repossession process actually takes months to get the position that he is now in. Really Mr B. is lucky. Tens of thousand’s of people are now in negative equity and don’t even have the luxury to be able to sell to anyone for enough to cover their debts and walk away debt free.

The moral of the story?

Act Now to stop your repossession!

Like any difficult situation it also helps to deal with it earlier than later. Stay in control of your own future, by either finding the funds to pay the arrears and settle with your lender in Court, or sell your home and pay off your debts. The alternative is too scary to think about.

Is Sell and Rent Back The Right Option For Me

When Sell and Rent Back is not an option

One of the questions we get asked most is ‘Is Sell and Rent Back and Option For Me’?

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The answer really depends on a number of circumstances and every situation is different, but generally speaking sell and rent back options are not feasible for those whose properties are worth £300,000 or more.

We have seen a massive rise in those seeking help to stop repossession whose properties are valued at over £300k.

For sell and rent back options to work, the buyer must be able to charge a rent that covers the cost of financing their mortgage.

With interest rates currently at around 6% for Buy to Let mortgages, this means that for every £100,000 that the buyer needs to mortgage, he or she must pay £600 pcm in mortgage interest. For a property over £200,000 this already equates to a rental figure of over £1200pcm.

Even if you might be prepared to pay £1200pcm now (and it may seem attractive if you are currently paying a lot more in servicing your debts), but the problem is that market rents in most areas of the UK are nothing like that amount. The average UK 3 bed semi may be worth £200k on the open market, but rental averages are probably more like £650 pcm.

This means that market rents are out of sync with property values. No investor can afford to buy a property and rent it back to the previous owner unless the rent covers the cost of their buy to let mortgage. No lender will lend against a property for a buy to let mortgage unless it believes the rent will cover the cost of the buyer’s interest payments comfortably.

For most lenders this means 125% coverage. For example is the interest was £1000pcm, the market rent must be at least £1250pcm otherwise they will not lend against the property.

For those who are facing financial difficulties with properties over £300k the obvious option is to sell on the open market and realise the best price.

Sometimes it might be possible to enter into a sell and rent back option providing the seller has enough equity in the property to allow a sale at a much lower figure, with an option to buy it back at a discount at a later stage.

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…)