Useful Information

When you have money troubles, time is not your friend. The longer you wait to act, the fewer good chances you might have to resolve the situation without much pain. If you wait until the last minute to take some action, your options will be severely limited. As an example, in order to avoid repossession, if you act early, you might be able to contact the lender to find out if there are any special internal programmes to rewrite the loan, maybe give you a payment holiday, take time to focus on increasing income, etc.

Facing the repossession of your home is a scary, stressful and frightening experience and what we would love most of all, although we are here to help you when you need us, is for you to be able to avoid even having to think about the possible loss of the roof over your head by repossession.

Another possible option is an IVA. An IVA is an individual voluntary arrangement that may allow you to restructure your debt to give you enough room each month to afford your home payment. You can get a free review to see if an IVA is right for you.

You might also hear about a debt management plan, DMP. This is where one of those credit counseling groups will tell you that you can get one payment for all your bills each month and your creditors will get off your back. The problem is that a DMP is not binding and there is no guarantee that it will give you the long term relief you need to really deal with getting the house sorted so you don’t lose it through repossession.

So the best idea is if you find yourself under financial pressure, get advice early and don’t delay. But if you do find yourself in a situation where you might lose your home due to repossession, contact us as soon as possible.

Someone else recently wanted to help those going through repossession buying the property fast by finding ‘foreclosures’. So he was trying to figure out how ‘find’ people who are in trouble. Further research showed that he had been reading far too many property books meant purely for American completion. Foreclosure is a term used in the US. Law works differently in UK, and it refers to repossessions.

Same thing? Hardly!

Lets us talk about foreclosures versus repossessions first, and then some other common myths.

Myth 1: Just hand the keys over to the bank
Many people believe that if they are struggling to keep up with paying the mortgage then handing over the keys to their bank manager will clear them of any further obligations for making payments - because they do not own the house.

Sadly this is far from the truth.

A mortgage company lends you the money (cash) and requires you to pay back the whole amount plus interest in cash. If the company has to sell the house on your behalf then you are still liable for any interest incurred till all the arrears are cleared.

Myth 2: Property repossession allows you to make a fresh start.
Only as long as all debts are cleared from the proceeds of your property!

If the proceeds from your property only pay back a part of the loan to your mortgage company then you are still liable to pay back the outstanding amount. These situations can happen if the property prices have crashed below the borrowing levels negative equity.

Myth 3: UK Repossessions are not the same as USA Foreclosures 
In UK, companies are not allowed to seize the house as is the case in US. Courts allow them only to repossess the house to be sold at the fair market value, pay the owed amount (and expenses) from the proceeds and send the balance to the borrower.

The Building Societies Act 1997 directs companies to “take reasonable precautions to obtain the true market value of the mortgaged property.”

The true value of any property is often subjective - and depends on the opinion of a purchaser. So how can a mortgage company determine its true market value?

Auction is a route that many companies take. However the mortgage company does not have to sell the property via auction to obtain the true market value. Courts generally accept this method as a determinant of fair value, but as long as a company can demonstrate, if questioned, that other methods were used, it is allowed.

Some companies sell the property via local estate agents without disclosing that the property is repossessed. By way of like for like comparison, they can demonstrate that fair value was achieved.
However US housing lenders are allowed to apply to the court (and granted permission) to seize the house back, sell it and keep the whole proceeds. Normally court allows rep.

Remember, if property is sold via your lender (after repossession) then you not only become liable for further charges (e.g. bailiff etc), this also gets recorded against your credit score for future reference.
Many people prefer to sell the property to an investor who can buy the property fast. These investors can be located by doing a search on Internet, searching your local papers or speaking to JMR Property UK but increasingly they are allowing foreclosures. This means that investors can buy the house from the company cheap and make a profit by reselling it at full market price.

So, if you are facing repossession threat then it is best to speak to some one competent about your situation. One advice is: do not ignore correspondence from your mortgage company. Second, get neutral advice as soon as you can. You do not always have to pay for the advice. Many free advice resources are listed on this link.ng to those in the know.

Researchers explored the impact the experience of repossession had on people, especially households with both adults and children.

Although most families were re housed in social housing, researchers found that the overall experience was extremely distressing and enduring social, psychological and health consequences for both parents and their children.

The main findings were:
The experience of repossession was distressing enough  on its own. It was compounded by the stress from administrative processes and procedures of the lenders, the courts and local authorities.

Although most people try extremely hard to find a solution to their problems, they remembered long after this painful experience how they did not have any control of events. They felt a profound sense of loss for a long time afterwards.

Where the repossession occurred due to mortgage arrears, families faced long-term poverty and substantial debt. Women suffered more when repossession was a direct result of marital or relationship breakdown.

Repossession had consequences in 6 main areas of peoples' lives. It altered: their social status and identity; their personal and family relationships; their health and well-being; the quality of their lives; their future hopes and aspirations; and the lives of their children.

Repossession is no doubt a traumatic, emotional and stressful life event that most people do not wish on their enemies. But this is the sad reality that some people and their families have to go through for various reasons.

Here is a direct quote from one respondent interviewed by researchers. This was a typical response of many others:
"What is going to happen to me? When I go into court are they going to suspend it again, are they not going to suspend it again? If they don't, what am I going to do? Where am I going to go? Am I going to end up on the street? Am I going to come back from somewhere and find my furniture in the garden? You know - what's going to happen? The fear of the unknown."

How can things be improved?
Researchers came to a conclusion that the effects of mortgage repossession on families are so great that repossession should be avoided wherever possible, and all alternatives should be explored.

Our Thoughts:
The message is simple: If you feel vulnerable then try your best to avoid your house being repossessed. Seek experts who can help you in this situation.

Say No to Repossession!

Many agencies that will help you provide advice on debt management, legal aspects and other areas. Citizens Advice Bureau or Credit Counseling are generally considered a good start. Also see other links on this site.

House repossession and your eviction are the last resort for the court. This is how the process works:

Lender’s Letters

Lender will almost certainly let you know by a letter that your payments are behind schedule. It will usually ask you to either bring the arrears up to date or contact the lender to discuss your situation. If they do not hear from you within specified time then they will write to you again. Failing that they will instruct their solicitors.

Lender's Solicitor

Lender’s solicitors will generally give you a few days (usually 7-14 days) to pay off your arrears before starting proceedings. The proceedings are generally court action.

Remember, courts are likely to be sympathetic towards you if you have made an effort to pay off the debt or address the problem. So it is crucial that you contact some one who could advise you at this stage, or even buy the property off you so that you can pay off the debt.

Property Possession Order

Often it is possible to negotiate a repayment plan. Remember what I mentioned above: lenders or courts do not want to go down the route of evicting you from your property. Many lenders are sympathetic and open to suggestions on how the loan can be paid back. It may even mean that the payments are reduced for the time being till your situation changes. If you are honest with them at earlier stages then this will help establish trust with your lender.

But if you carry on ignoring letters or other communication then eventually you will be served with a county court claim. This can happen as soon as within the six months of the first missed payment.

This order is a confirmation that legal proceedings to repossess your home have begun. Your lender will notify to the judge during subsequent hearings that your arrears constitute a breach of contract between you and the lender. Since the lender is entitled to recover his money, he will ask the judge’s permission to repossess the property.

If the judge agrees, lender will be granted possession of the property. Bailiffs will be instructed to evict you from the house at a pre-determined date. In due course the lender will sell the house to recover his money.

Important: Please note that if lender is unable to recover all its money (including expenses e.g. legal and admin costs, bailiff costs etc) then you will still remain personally liable to the lender for the subsequent claims.

So it is best to be proactive and seek advice and help. Your aim should be to keep the house. If all fails then try not to get to the stage where house is repossessed. Sell it your self and pay back the loan. That way you will be able to protect your credit reputation and record for future. You may even be able to sell and rent back the same property. Some companies even allow you to sell and buy back in the future, at a pre-agreed price should you wish to.

Remember: you have more options than you may think