Court Duty Schemes & Mortgage Repossessions

Jon DaltonJoint Chair AHAS

Housing Needs ManagerHarrow Council

jon.dalton@harrow.gov.uk

New Initiatives

• Mortgage Rescue Scheme

• Home Owner Mortgage Support

• SMI changes

• Pre Action Protocol

• Repossession Prevention Fund

Court Duty - Debt Counselling

• 1. Income maximisation

• 2. Working out essential outgoings, (giving budgeting advice and identifying) identify any surplus income.

• 3. Negotiating agreement with lenders representatives.

• 4 Representation

• 5. Referral

Income Maximisation

• Income Tax • Redundancy pay• Tax Credits• Income Support/JSA• Council Tax Benefit and Rebates• Child Benefit, Grants etc• Lodgers/Boarders• Childminding• Maintenance

Support for Mortgage InterestSMI - Housing costs for “home owners” are covered by Income Support

rather than Housing Benefit (used to be ISMI). These costs are:

• mortgage interest payments • interest on loans for repairs and improvements that are necessary to

maintain the fitness of the home (for human habitation) • ground rent • some service charges • hire purchase interest payments for purchasers buying a home by

hire purchase • payments by way of rentcharge.

Other costs such as water charges, some repairs and insurance costs are treated as being covered by the personal allowance

Rules that apply to new claims from 5 January 2009

• There is a waiting period of 13 weeks before help is provided at 100% of eligible mortgage interest.

• The capital limit up to which mortgage interest can be met is £200,000.

• There is a two year time limit on payment of mortgage interest but only for new Jobseeker's Allowance claims.

Standard Interest Rate (SIR)

The SIR is normally based on the Bank of England interest rate plus an additional 1.5 per cent. However, in November 2008, the Government froze the SIR at 6.08 per cent for six months, for all existing and new SMI customers, including those claiming Pension Credit. This has now been extended to the end of December 2009. Watch this space …

Boarders

Special rules about taxation of income from lettings to help people who let out rooms in their home, mean that the first £4,250 of rental income can be disregarded for tax purposes as from April, 97.

Boarders and IS/JSA For a boarder on a commercial basis, the first £20 of each

boarder's weekly charge is ignored. If you receive more than £20 a week, then 50 per cent of the excess is also disregarded. The other 50% is also disregarded if it is used to pay housing costs NOT covered by SMI.

Childminding

• Childminding can be a useful source of income for those partners staying at home and looking after children. Clients need to register with Social Services.

• For those on benefit two thirds of income from childminding will be ignored and they will not be treated as being in full time work despite the fact they may work more than 16 hours per week.

Repossession Prevention Fund

• Most London Councils got c. £66K

• Recommended for “Loans”

• Not Ring Fenced

• Who can authorise payment?

- One off payment to reduce arrears?

- Monthly payments for a short period?

EQUITYThis is always an important consideration. It is much easier to argue where there is a

large amount of equity in the property so that the lender can be sure of getting back their money if all else fails.

If the client has a previous good payment history this will enhance the argument.

Usual Solutions

• 1. Extend the Term• 2. Monthly Arrears Payment• 3. Interest Only Payments• 4. Moratorium on Arrears• 5. Capitalising Arrears• 6. Capitalising And Extending The Term• 7. Converting From Endowment to

Repayment• 8. Local Authority Buy Back• 9. Voluntary Sale• 10. Selling and Trading Down

MRS & HMS

• See Carolyn Howell,s Powerpoint

Pre Action Protocol

Before going to court:• NHAS Booklet. Info about arrears.• Encourage ADR

• Should listen to borrowers proposals• Property up for sale – stop action

• NON COMPLIANCE – adjourn• Complaint to Finance Services Ombudsman- adjourn.

Court Procedure

• Pre Action Protocol• Calling in notice• Jurisdiction• Particulars of Claim• Notice to Occupiers• Defence Form• Mortgage Deed. Office Copy EntryPART 55 CPR

Powers of the Court

Administration of Justice Act 1973 s36

Can use discretion if borrower can

“Repay Arrears in a reasonable period”

Consumer Credit Act 1974 s135

At the hearingBorrower must be present. No power to change contractual payment

date under AJA s36. No power to intervene in all monies charges

C& G v Norgan

• Is it reasonable to expect the lender, in the circumstances of the

particular case, to recoup the arrears of interest

– over the whole of the original term, or – within a shorter period, or even

• within a longer period, i.e. by extending the repayment period?

Gather information

• Be organised Restrain client from giving their life story.Is it credible?

• Check papers. Is it the first hearing?• Get info from agent

• Work out the “story”

Representation• - Most cases are dealt with in a few minutes, be organised and succinct. Refine your

narrative.• - Is your clients explanation credible, and does it conflict with the facts?• - Your client should be aware that the lender’s agent at court is not there to help

him/her • - Avoid making an unrealistic offer (and try to restrain your client from so doing)

• Play to your strengths and if possible avoid your weaknesses. Admit obvious mistakes and explain why it will be different in future.

• Most lenders will only consider a year or two to clear arrears as “reasonable” while courts have to consider C&G v Norgan. It is up to the adviser to prove why the proposed repayment term is `the reasonable period' for whatever reason eg. there is a large amount of equity and the lender is guaranteed to get their money back even if the borrower falls down on repayment in the future.

• It is possible to have an order with a stipulation that it be reviewed after so many

months. This is useful where only low repayments can be initially offered.

Court Orders

• i. Case dismissed/Struck out• ii Case adjourned• iii Suspended possession order• iv Possession Order• v Warrant of Possession (Possibly suspended)• and Eviction by Bailiff's Warrant• vi Money judgment

BEFORE EVICTION IT IS NEVER TOO LATE

• Order for Costs