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.

Mortgage Approvals at 3 Year Low – Repossessions Rise

From BBC News 29th November

The property market is showing signs of slowing down, analysts say.

The number of mortgage approvals has fallen to its lowest level for nearly three years, says the Bank of England.

In October there were 88,000 new mortgage approvals, down from 100,000 in September and 128,000 a year ago, the Bank said in a report.

The figures suggest that the property market is slowing down quickly, under the impact of higher interest rates.

Earlier, lender the Nationwide said house prices saw their biggest monthly fall for 12 years last month.

Mortgage approvals have been falling steadily since the start of the year.

But October’s number was the lowest since February 2005 and represents a slump of 31% from the same month last year.

The fallout from this falling approval rate is affecting not just those who need to remortgage with sub prime lenders, but also many amateur buy to let landlords seduced by years of press and TV coverage into thinking Buy to Let can be an easy way to make money.

If landlords get repossessed, then there will be more tenants evicted by lenders, and rents will rise to record levels as the source of rental accomodation dries up.

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