As highlighted in the press today there are 3.3M people who have interest only mortgages and 1.7M of those do not have a repayment vehicle in place. As it stands these people cannot benefit from the Financial Conduct Authority Rules and the Legal Precedence that protects Mortgage holders who are facing the threat of repossession as a result of arrears on their mortgage.
Indeed many people who have these mortgages are not in arrears and many will have never had any financial issues. However, once the term of the mortgage has expired there is no legal protection they can turn to force the Lender to extend the term. Another complication is that most people who have mortgages that have expired or are about to expire are older and due to the tightening up of the FCA rules regarding lending beyond retirement age means that despite high equity and a clean credit history they will not be able to secure a re-mortgage elsewhere. Of course there are other products available such as equity release or retirement mortgages but these can be very expensive and not suitable for everyone.
At Revival we have dealt with many cases of this kind where we have negotiated with the lender and secured a term extension or enough time to sell the property on the open market at the full market value. This process however is far from straight forward and also very dependent on the lender. Many of the high street mortgage providers have a prescribed process of making an application for a term extension, they have dedicated and specialist teams that will properly consider all the facts before deciding what, if anything, they can do. Of course there is no guarantee that they will do anything and any agreement will be based on full affordability checks and most probably a credit check. You can expect to have to provide a detailed Income and Expenditure Breakdown, provide evidence of your income and have a clear “Plan of Action” regarding how long you want to extend the term for and what you will do then, as the lender is most unlikely to keep extending it, time and time again. Only in extreme cases have we ever seen a mortgage lender allow the home owner to stay for the rest of their lives and that was in the case of a terminally ill client and based on full payment of the contractual monthly instalment.
The situation is quite different with sub-prime or 2nd tier lenders as many of them are looking to close their lending books and eventually close the company down – they are in run-down – and will see the expiry of a mortgage as a way of getting their money back and either force you to sell your home yourself or commence possession proceedings in the courts. Additionally there are many such lenders who due to their structure and commercial objectives that are regulated by the FCA (Financial Conduct Authority) to manage mortgage accounts but they are not regulated to offer new product so the truth is that they couldn’t offer you a new mortgage in any event.
The only way this can be argued is on the grounds of “reasonableness” and whether or not the lender has acted reasonably and fairly. We have seen a number of cases where the mortgage company has let people stay many years after the expiry, they were never given an extension of term, the mortgage company simply continued to collect payment for years beyond the expiry only to send a letter out of the blue to say “Pay your full mortgage balance or we will commence repossession proceedings”. In such cases we have seen the court intervene as the lender has “to some extent” waived their right to take such action by allowing the person to stay on and accept payments for so long. It is then considered “unreasonable” for them to act in such a way without warning. That said each time we have had a case like this it has always gone to court.
This area of law is highly complex and in each case we have had to instruct a Barrister to prepare a detailed witness statement and make an application to the court for a hearing before the Judge. In every case the lender has opposed our application and proposals before the hearing and at court, despite the lender giving the impression that they would work with their client and “do something” in the end they do very little.
Our firm guidance would be to get advice and representation very early in the process so that we can be proactive and be seen to be trying our best to propose solutions prior to the expiry of the mortgage. Then if action is taken we can demonstrate that the lender has been “unreasonable” by not considering any term extension or other solution.
Revival and the Citizens Advice Bureau is currently lobbying the Government and have asked that a detailed debate is opened with the Financial Conduct Authority and the Council of Mortgage Lenders to debate this issue in detail and establish a new framework which lenders must comply with. This will hopefully give people a better understanding of how they can expect to be treated, the process of making an application and what type of extension they can get, 1 year – which is effectively nothing more than time to sell, 2 years, 5 years or more…
Until such a decision is made, and to be honest it is not on the cards anytime soon we will have to deal with each case on a lender by lender basis. As outlined the outcome cannot be guaranteed and is also dependent or what court you end up in and what Judge as there is no legal precedence in these cases. The other thing to consider is that any solution will be based on your ability to make the full contractual monthly payment and prove your affordability.
Please call us for a free case review, we will consider your case and explain the process that you should go through. Of course if you decide to use our service then we do charge a modest fee to keep the service going but the initial enquiry is free of charge. We will do all we can to help guide you through this complex area of the law at what will be a very worrying time. Call us today for a confidential chat on 0800 567 7547.
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