Administrative Aspects

Whilst Lenders operate different administration procedures to deal with possession cases, the following procedures are common:

(a) Should direct contact with the borrower not result in an arrangement (for example, an alternative payment arrangement) which would enable the borrower to remain in the property, then solicitors may be instructed to start possession proceedings. This is usually the only course of action available to the lender by that time.

(b) In some cases, further follow-up contact may continue to be made up until, and after, the court hearing, every effort being made to encourage the customer to discuss suitable repayment arrangements and avoid the need for possession.

(c) Instructions for a warrant to be issued for possession are implemented by the lender, after a full review of the borrower's file by a person fully aware of the facts, and a final letter or telephone call to the borrower.

(d) Before taking possession, a lender may liaise with the relevant local housing department. The borrower may also be advised to register on the local authority's list as soon as possible. Lenders recognise that it is important to give local authority housing departments as much notice as possible where borrowers and their families might need to be re-housed. However, this has to be balanced against the possibility that alternative arrangements might be reached between the lender and borrower which would enable the borrower to remain in the property. The timing of providing advice to housing departments will vary from case to case and lenders will only take this course of action with the consent of the borrower.

(e) On taking possession, the Court Officer may be accompanied by the lender's representative, after which the property will usually be put on the market as soon as possible to minimise the mortgage interest continuing to accrue on the account. A record of the possession may be held on the CM Possessions Register.

CML/Government Statement on Arrears and Possession Procedures

In December 1991, after detailed discussions with the Government, the CML reaffirmed that it is the policy of lenders to take possession only as a last resort, and to handle arrears problems efficiently and sympathetically. A formal announcement was made by the Chancellor of the Exchequer in the House of Commons and at a CML Press Conference on 19 December 1991.

The announcement referred to the fact that:

(a) Where borrowers have suffered a significant reduction in their income but are making a reasonable regular payment, lenders do not seek to take possession.

(b) In the knowledge that income support will in future be paid direct, lenders will not take possession in cases where mortgage interest payments are covered by income support.

From October 1995, income support has been paid by the Department of Social Security at a "standard rate" of interest, which may be less than the interest rate charged by the lender. Borrowers will need to make up any shortfall in the mortgage repayment. Some lenders have decided not to participate in the direct payment scheme. In these cases, the borrower will be responsible for passing on the income support for mortgage interest payment to their lender.

Sale of Properties in Possession

When selling properties which have been taken into possession lenders are under a duty to obtain the best price reasonably obtainable. A lender is not bound to postpone the sale in the hope of obtaining a better price at some future date; however, the lender should allow sufficient time to permit, for example, proper advertising so that the best price obtainable may be achieved.

Mortgage lenders generally use the following administrative procedures for selling properties which have been taken into possession:

Administration

(a) The sale may be dealt with either via a lender's in-house department or through a separate property management company employed by the mortgage lender. Dedicated staff are responsible for coordinating the sale of properties in possession which will include reviewing the offers received from potential purchasers as well as monitoring the condition of these properties and their valuation.

Valuation

(b) A valuation of the property is obtained from either one or two qualified surveyors and another from the appointed estate agent. Prices are usually reviewed every three to four months and more often when the circumstances justify a revaluation.

Estate Agents

(c ) Properties are usually marketed through an estate agent in the immediate locality of the property being sold.

Agents may advertise properties in the local press, with such advertisements being repeated as and when necessary. Mail shots and national advertising may also be carried out in some cases. In general, lenders do not market these properties as "repossessed properties"; in many cases estate agents are specifically instructed not to do so.

Report On Activity

(d) Estate agents are usually required to report on activity every four to six weeks if a property remains unsold.

The estate agent will notify a mortgage lender of any offers received. Only when satisfied that the best price has been obtained, would the estate agent recommend this offer for acceptance. If the offer is substantially below the asking price, the agent must provide supporting evidence to suggest that this would be the best offer obtained. In practice, all offers are accepted or declined promptly. Where there are a number of very close offers on a property, a sealed bid procedure may be carried out whereby the person putting forward the best offer would be the successful purchaser.

Visits to the Property

(e) The agent will usually visit the property on a regular basis and ensure that any repairs and maintenance to the property are carried out and that the property is secure. When properties are first put up for sale, mortgage lenders will usually arrange that essential repairs, cleaning and tidying of the garden are carried out. Whilst the estate agent will take care of minor repairs which are identified on the regular visits, other repairs usually require the approval of the mortgage lender. Where this work is carried out, estate agents will be required to obtain competitive estimates. Prospective purchasers will normally be accompanied by the agent when viewing a property.

Being repossessed? Call us today for a confidential chat on 0208 245 4543

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