Lenders Support Mortgage Repossessions Suspension

Towards the end of January (2021), UK Finance reported that lenders had agreed to extend the moratorium on mortgage repossession executions. In turn, the Financial Conduct Authority (FCA) confirmed the decision.

For hard-pressed homeowners in financial difficulty, the two extra two months of breathing space proposed in the draft guidance will mean no evictions before 1st April 2021. Although welcome news, the extension to the deadline applies only to owner-occupiers experiencing repayment problems with mortgage loans for residential property.

In contrast, other specific guidance on consumer credit defaults enables companies to repossess goods and vehicles immediately, should they so choose. This measure came back into force from 31st January (2021). However, creditors are to take such action only as their last resort. Additionally, they must take customers’ vulnerability into account.

As a spokesperson for UK Finance elaborated, the banking and financial sector was committed to supporting borrowers facing financial hardship due to the Coronavirus pandemic. The extension of the moratorium until the beginning of April 2021 would ensure that homebuyers did not lose their house at this challenging time. Lenders would make other support measures available, including deferred payment and bespoke assistance for individuals who needed additional help.

While adding that mortgage possession action was the last option, the representative urged customers under financial pressure to seek help. They should speak to their lender as soon as possible.

In summary, the key points relating to this suspension of residential mortgage repossessions are:

• Mortgage lenders can initiate court action and obtain possession orders, but must not apply for a warrant to enforce the possession while the moratorium is in force. Also, they will not enforce existing warrants.
• Lenders will telephone or write to borrowers again if they were already subject to legal proceedings for possession initiated before March 2020. Similarly, they will re-contact customers in payment arrears who have not been in touch recently.
• Wherever possible, companies will try to resolve cases by alternative means – including rehousing.
• Lenders may issue customers with formal demands detailing how much they owe and emphasising the possibility of repossession.

In exceptional circumstances, such as empty properties or at the borrower’s request, repossessions can proceed.

Finally, in the case of buy-to-let loans, lenders can opt to use a Receiver of Rent. That way, tenants who pay their rent regularly could remain in the property concerned.