Dealing with repossession

When people think about buying their dream home, they often consider how it will change their lives. They believe that it will give them a place to call their own, with their own space, the ability to build a future and to realise their dreams. However, following the Mortgage https://www.beaconfinancialtraining.co.uk/wp-content/uploads/2020/06/cemap-online-and-classroom-training-uk.jpget Review in April 2014, additional, stricter regulation was introduced, which included a more stringent affordability calculation.

The Financial Conduct Authority (FCA) wanted to ensure that people entering a mortgage agreement would be able to maintain the required monthly repayments, which generally is the intention of all borrowers, as they do not wish to jeopardise the roof over their heads.

As a mortgage professional who has studied for and passed your CeMAP exam, you will cover repossession and the process as part of your studies. This means that you can help homeowners, who would never plan to fall behind on their mortgage payments, but changes to their personal circumstance, such as loss of income or illness, are usually unpreventable.

What is repossession?

Repossession is a process that begins when you fall into arrears with your mortgage provider. When you miss payments, the lender will initially write to the borrower in case they have made a simple error, thus helping to make sure things get back on track. However, it is when a number of consecutive payments are missed, and despite numerous attempts by the lender to agree an acceptable repayment plan, that repossession may occur, even though this may well be outside of the borrowers control.

One of the things that a mortgage adviser needs to inform customers of during the interview and application process is that they may lose their home if payments are not maintained.

It is a serious matter as it in effect makes the borrower homeless, so the lender needs to demonstrate to a court that it has taken sufficient steps to support and assist the homeowner, while allowing them time to bring the payments back up to date.

What a lender must do

When a homeowner falls behind with the repayments on their mortgage, there are clear rules that the lender should follow. It should ensure that any communication is conducted in a clear, easy to understand fashion.

It should also provide a leaflet outlining the process that will follow if the situation does not improve, as well as clarifying:

• The amount outstanding to bring the account up to date
• The total mortgage balance
• Accruing charges and interest
• That people in difficulty should contact the housing department of the their local council for further support

How a lender can help to avoid repossession

Lenders have an obligation to use repossession as a last resort, and it is their interest to help the borrower to reach a more acceptable solution. As long as the homeowner is open about the reason for the arrears and how they feel they can repay, the lender will look at working with them. This will include:

• Deferring interest payments
• Converting from repayment to interest only to reduce required payments
• Extending the term
• Switching to a cheaper deal.

It is only if a mutual agreement cannot be reached between all parties that court proceedings to instigate repossession would begin.



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