Page last updated at 12:38 GMT, Wednesday, 22 October 2008 13:38 UK

Plan to ease repossession rates

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Lenders predict that 45,000 homes will be repossessed this year

Guidance will be issued to judges in an attempt to ease repossession rates, Prime Minister Gordon Brown has said.

Mr Brown told the Commons that lenders would have to demonstrate to the courts that they had exhausted every avenue.

Charities have argued that some lenders have turned to repossession too early, rather than as a last resort.

The Council of Mortgage Lenders (CML) estimates that 45,000 properties will be repossessed this year - up from 26,200 last year.

The charity Citizens Advice welcomed the new guidelines.

"This timely introduction of a pre-action protocol for mortgage arrears will ...ensure that court action is only taken as a last resort where all other options have failed and no agreement can be reached," said the charity's head of consumer policy, Sue Edwards.

Existing rules

Chief Secretary to the Treasury Yvette Cooper said on Sunday that she wanted "stronger rules across the board" to make sure homeowners were supported.

The new protocol will state what the courts should expect of lenders bringing repossession cases.

This is in addition to existing Financial Services Authority (FSA) rules that stipulate how lenders should go about dealing with homeowners who fall into arrears.

Regulators have said that some small lenders have been too aggressive

The two codes are expected to operate in tandem.

CML figures show that the number of actual repossessions across the UK rose to 18,900 in the first six months of the year - up 48% on the same period of 2007.

This is far fewer than the number of homeowners who faced the earliest stage of a threat of losing their homes, known as "possession claims".

Housing charity Shelter has said that escalating bills mean many households now fear losing their homes, but it said that they could be offered more support with mortgage repayments.


During the summer, the FSA suggested that there was evidence of specialist lenders being aggressive in their repossession policies as the squeeze on finances continued.

Lenders will be expected to consider ways of resolving problems outside the court system
Justice Minister Bridget Prentice

Lenders will now be expected to demonstrate that they have tried to discuss and agree alternatives to repossession when borrowers get into trouble with their mortgage repayments.

Typically, this might include agreeing some form of full or partial repayment holiday, until the borrower can resume full payments.

It could also mean changing the type of mortgage or extending the term of repayments.

If a case reaches court, lenders will be required to tell the court precisely what they have done to comply with the protocol.

"Lenders will be expected to consider ways of resolving problems outside the court system, so that mortgage possession claims are only brought to court after all other suitable options have been exhausted," said Justice Minister Bridget Prentice.

In a parallel move from lenders, the CML is publishing its own guidance for mortgage providers on dealing with those facing arrears.

"Despite the fact that the rate of repossession is modest, we recognise that there is significant public concern about this subject," said CML director general Michael Coogan.

Sale and rent back

The government also announced that it planned to bring firms offering mortgage rescue schemes under the regulation of the FSA.

Last week, the Office of Fair Trading called for tighter regulation of these schemes - also known as "sale and rent back".

Under these deals, people struggling to pay their mortgage sell their home at a discount to firms who let them stay on in the property as tenants.

But an OFT report found that this was not the best option for some, and others were quickly evicted.

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