Struggling homeowners need more help

More people will have their homes repossessed unless greater support is provided in 2010.

A report published by AdviceUK, Citizens Advice and homeless charity Shelter identifies shortcomings in the current system which could mean more people losing their homes needlessly.

While it acknowledges that the government’s support schemes and the fact that it has insisted on mortgage lenders practicing forbearance with struggling homeowners have mitigated the impact of the recession to some extent, the charities say more must be done.

They want to see urgent action taken by mortgage lenders, the government and the regulator to prevent people getting into arrears and falling through the net.

The report, Turning the tide? is based on research into hundreds of cases seen by advisers who give last minute advice to people at court on the day of their repossession hearings.

It revealed that in a third of cases the mortgage lender had not met the new rules obliging them to take court action as a last resort against defaulting mortgage borrowers, after offering them other alternative ways to deal with their arrears. And yet judges only took action to address the lenders’ failures in a handful of cases.

Sub-prime mortgage lenders were more likely to take swift legal action against their customers than mainstream lenders, and a number of sub-prime players had a disproportionate number of cases in court than their market share would indicate appropriate.

Loss of employment and other loss of income were the most common reasons given for borrowers defaulting on their mortgages, and low income homeowners were the most likely to have their homes repossessed.

The government’s Support for Mortgage Interest (SMI) scheme is specifically targeted at homeowners who lose their jobs, but in reality many borrowers who wound up in court were paying a higher rate of interest on their mortgage than the SMI would cover.

The research highlighted the importance of the advisers on the court duty desk, who are on hand to give last minute support in repossession cases. Almost 8 out of 10 (77%) of people who sought their advice avoided immediate repossession.

Citizens Advice chief executive David Harker said:

“Government, lenders and regulators have taken swift and welcome action to protect people affected by the recession from losing their homes unnecessarily. Our advisers see evidence of these initiatives working in many cases, but our research makes it clear that the safeguards already in place to protect people from avoidable homelessness need to be strengthened if they are to succeed in stemming the rising tide of repossessions.”

Kay Boycott, Shelter director of policy and campaigns, said:

“Measures to help struggling homeowners are clearly working in many cases but we shouldn’t fail anybody at this time. The most common cause of mortgage arrears is job loss and with 2,000 people losing their job every day, we must close these gaps urgently to ensure every vulnerable homeowner gets the protection they need."

Steve Johnson, Chief Executive of AdviceUK, said:

“Court desk advisers play a vitally important role in helping struggling homeowners to remain in their homes. Recent initiatives from the Government, regulators and mortgage lenders are welcome and have assisted many vulnerable households from becoming homeless. However, this report makes it clear that not all lenders are showing forbearance and that additional protection is needed if we are to avoid a repeat of the repossessions crisis of the early 1990s.”