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Securing a fair framework for homeowners
Today the Government announced new rules to help protect homeowners, who may be facing the threat of repossession. New court protocols will help make repossessions a last resort, and the Government is proposing that companies engaged in sale and rent back schemes, which may target vulnerable home owners, should be brought under FSA regulation.
The Master of the Rolls has today approved the Civil Justice Council's new protocol for the courts in mortgage repossession cases. This sets out clear guidance on the steps that lenders are expected to take before bringing a claim in the courts to ensure that repossessions are a last resort.
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. If a case reaches court, lenders will be required to tell the court precisely what they have done to comply with the protocol.
The Government will also be publishing a consultation paper on bringing sale and rentback under FSA regulation, responding to recommendations from the Office of Fair Trading's (OFT) study into the Sale and Rent Back market which was published last week.
Chief Secretary to the Treasury, Yvette Cooper said:
"We need to make sure we help those who might be hardest hit in the tougher times ahead, ensuring repossession is the last resort not the first. We also want to make sure that vulnerable homeowners are protected from exploitation and dodgy deals."
Justice Minister, Bridget Prentice said:
"The new Civil Justice Council protocol forms part of a wider package of measures which demonstrate this Government's commitment to provide the best possible support to debtors and vulnerable borrowers. The protocol sets out all the steps that a lender should take before issuing mortgage possession proceedings. 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."
Housing minister, Margaret Beckett said:
"We must ensure that every avenue has been explored before lenders seek to repossess homes. These new measures will further protect the most vulnerable households in the current economic climate. We have expanded free legal representation in county courts for households at risk of repossession, we have provided more free debt advice and will continue to work closely with lenders through this difficult time. It is important that households who have concerns over their mortgage seek advice at the earliest opportunity, starting by speaking to their lender."
Consumer Minister Gareth Thomas said:
"We need to ensure that these vulnerable consumers are protected from exploitation and know their rights.
"That's why we've responded so quickly to the OFT report and committed to working with mortgage industry representatives and consumer groups, through HM Treasury's consultation, to determine the best way of regulating this emerging market."
The OFT market study on the sale and rent back sector, was published on 15 October 2008, and looked at the impacts, from the growing sale and rent back market. The OFT report identified that there is potential for severe detriment to homeowners entering into these arrangements and made three recommendations to Government, including compulsory regulation, increasing consumer awareness and improving information about housing benefits This is part of a range of initiatives to raise consumer awareness about the risks around sale and rent back, and to help reduce repossessions. Actions have been, or will be, taken to raise consumer awareness and provide help, for example:
* guidance to local authorities on eligibility for Housing Benefit to avoid uncertainty surrounding eligibility of sale and rent back tenants for Housing Benefit.
* expanded free legal representation in county courts for households at risk of repossession.
* providing more free debt advice.
* joint guidance with National Homeless Advice Service for households facing financial difficulties - 'Worried about your Mortgage? Get advice now' is available from local authorities, courts and CAB offices. Notes for Editors
1. The measures announced today build on the Government's comprehensive housing package announced in September, which included support for 6,000 of the most vulnerable homeowners facing repossession through a Government mortgage rescue scheme, and also further investment in reforms of support for mortgage interest (SMI), which could help prevent a further 10,000 repossessions. Further details of these measures are available on
* the HM Treasury website: http://www.hmtreasury.gov.uk/newsroom_and_speeches/press/2008/press_88_08.cfm
* the Department for Communities and Local Government website: http://www.communities.gov.uk/news/corporate/950558;
* and the Department for Work and Pensions website: http://www.dwp.gov.uk/aboutus/news/ - smi
2. The Government asked the OFT to look at the sale and rent back market earlier this year, working to an accelerated timetable, and to consider options to strengthen consumer protections. The OFT reported on 15 October, and on the basis of its findings, has recommended action in several areas. The formal Government response to the OFT study can be found at http://www.berr.gov.uk/files/file48478.pdf
3. The OFT published its report on the sale and rent back market study on 15 October 2008: http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft1018.pdf
4. The Civil Justice Council is an Advisory Public Body, established under the Civil Procedure Act 1997 with responsibility for overseeing and co-ordinating the modernisation of the civil justice system. The CJC provides advice to the Secretary of State for Justice on the effectiveness of aspects of the civil justice system, and make recommendations to test, review or conduct research into specific areas. More information on the CJC, including its composition, can be found at: http://www.civiljusticecouncil.gov.uk.
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