Understanding Repossession

"…I am writing to you about the arrears on your mortgage account…" Words that nobody wants to read over their morning coffee. With most mortgages, if a borrower is behind by the equivalent of two or more monthly payments, the mortgage company is entitled to issue proceedings to repossess the property. It is always worth talking to the mortgage company to see if an agreement can be reached before the matter gets to court.

If court proceedings are started the borrower will receive the claim form and a defence form from the court. A hearing will usually take place within four to eight weeks. However, there is free advice available: the Citizens Advice Bureau is very good at dealing with possession cases and there may be other local organisations offering free housing advice. At some courts free advice is available on possession days.

Be warned: there is a growing industry of debt advisors who charge for their services. This will almost certainly be a waste of money since the same, or better, advice can be found elsewhere for free.

Court Hearings

Possession hearings are relatively informal. The judge will look at the documents in support of the claim and ask the claimant's representative to confirm the latest figures on the account. The judge will then consider what order to make. The basic possession order gives the mortgage company the right to repossess the property 28 days after the hearing but the judge can make different orders.

Different Types of Possession Orders

If the judge is satisfied that the defendant can pay the full current monthly instalment and an additional monthly sum to clear the arrears over a specified period, (which can be as long as the remaining mortgage term) he can make a suspended possession order. The judge may ask about the defendant's income and expenditure and the reason for the arrears. Under a suspended possession order the property cannot be repossessed as long as the ordered payments are maintained.

Alternatively if the judge is satisfied that the defendant is selling or re-mortgaging the property he may make a possession order that is enforceable after a longer period: 56 days is common but this can range from six weeks to three months depending on the circumstances. Many people believe that, once court proceedings have been issued, it is too late for them to sell the property themselves. This is not true: a homeowner has the right to sell at any time until a mortgage company physically takes possession of the property.

Unfortunately the bad old days of negative equity are returning. If a property is worth less than the total amount outstanding on the mortgage, the judge is likely to make a 28-day possession order.

After the Hearing

If the term of the possession order expires or a defendant fails to maintain the ordered payments the mortgage company can request a warrant of eviction. On a specified date, the court bailiff goes to the property, ensures it is empty and changes the locks. Generally, defendants receive at least two weeks' notice of this. The defendant can make an application to the court to "suspend the warrant". Another hearing will take place and the judge may be prepared to give the Defendant more time to pay the arrears, or to sell or re-mortgage. However, every time the matter comes back to court the judge is less likely to give the defendant the benefit of the doubt.

Summary

• If a borrower gets into difficulties they should be proactive and talk to their mortgage company. Whilst it may not lead to an agreement it is more likely to delay court proceedings than if the mortgage company hears nothing.
• If a claim is issued it should not be ignored. There is plenty of free advice available. Organisations such as the Citizen's Advice Bureau can help prepare a budget and know what kind of information the court will be looking for.
• Do respond to the claim form by filling in the defence form and, most importantly of all - DO go to the court hearing: a surprising number of people do not, with the result that the Judge is almost certain to make a 28-day possession order.

Possession proceedings should not be taken lightly but they are not the end of the world. Judges will often bend over backwards to help defendants. It is vital that borrowers in arrears do not stick their heads in the sand and hope it will all go away: it won't. However, there is much that people can, and should, do to keep their homes.