Help For Homeowners In Financial Difficulties

If you are experiencing difficulties paying for your home it is important to seek help as soon as possible.

As a home owner, you can only be evicted if your lender or freeholder can prove a legal reason and the correct procedure is followed.

Repossession does not happen automatically. It may be possible to stop the process at any stage.

Pre-action protocol

Since 19 November 2008, lenders are expected to take certain steps when borrowers fall into mortgage arrears, and only use repossession as a last resort. These steps are known as the pre-action protocol and lenders must be able to demonstrate that the appropriate options have been exhausted prior to commencing court proceedings to repossess properties.

Repossession should only be considered as a last resort.

Other types of assistance

In addition to the pre-action protocol a number of measures have been developed to help people who are finding it increasingly difficult to pay their mortgages as a result of the economic downturn.

These include:

• Enhanced support for mortgage interest (SMI)
• Homeowners Mortgage Support (HMS); and the
• Mortgage Rescue Scheme

Enhanced Support for Mortgage Interest (SMI)

If you are claiming certain benefits, you may be able to get help with your housing costs, including mortgage interest and interest on loans you have taken out for repairs or improvements. This type of help is often referred to as support for mortgage interest (SMI) or income support mortgage interest (ISMI) payments.

From 5th January 2009, more assistance is available for homeowners receiving benefits to help them pay their mortgages.

If you are receiving income support, income-based jobseeker’s allowance, or income-related employment and support allowance, from 5th January 2009 you will be entitled to support on your mortgage interest payments after 13 weeks.

The previous waiting time for new claims was 39 weeks, or in some cases 26 weeks.

Before 5th January 2009, it was only possible to claim help with interest payments on loans up to the value of £100,000, or the first £100,000 of a larger loan.

For certain claimants, the capital limits on which you can claim relief have been increased from £100,000 to £200,000. This means that you may be able to receive help on paying the interest charged on a larger amount. The rate at which interest can be paid will be fixed at 6.08 per cent until June 2009.

If you receive income-based jobseeker's allowance, you will only be able to claim help with housing costs for up to two years.
There will be no time limit to existing claims or to new claims from people receiving income support, pension credit or income-related employment and support allowance. 

Homeowners mortgage support

Homeowners Mortgage Support aims to help people at risk of repossession.   It is for people who have recently experienced a temporary and unexpected drop in income as a result of for example a cut in overtime or reduced hours making it harder to meet their monthly mortgage payment.

It is a last resort to be considered after all other options have been explored with the lender.

Homeowners Mortgage Support enables people to postpone part of the interest payment for up to two years by negotiating a reduced payment with the lender to make the payments more affordable in the short term.  The money postponed is added on to the balance of the mortgage and must be paid back when the situation improves. It is not a payment holiday as regular payments have to continue to be made.

Not all lenders offer Homeowners Mortgage Support. Contact your lender or Purbeck Citizens Advice Bureau (Tel 01929 551257 or email bureau@purbeckcab.cabnet.org.uk) to check.

Download the Guide to Homeowners Mortgage Support Leaflet
Download the Customer Question and Answers

Mortgage Rescue Scheme

The Government’s Mortgage Rescue Scheme (MRS) aims to provide a safety net for up to 6,000 vulnerable households at risk of losing their homes through repossession.

Under the scheme eligible homeowners may be offered two options depending on their individual circumstances:

• Shared Equity - to own their home on a shared equity basis, with a share being sold to a Housing Association.

• Mortgage to Rent - the property is sold to a Housing Association enabling the homeowner to remain in the property as a Housing Association tenant on an assured short hold tenancy, paying a sub-market rent.

Who is eligible?

To be eligible for the scheme you will need to be a homeowner facing difficulties paying your mortgage with a lender who is willing to participate in the scheme. Your property must be in a reasonable condition, valued at less than £205,000 and have a combined household income of less than £60,000 a year.

The Council will also have to be satisfied that it would have a statutory duty to assist you if you became homeless as a result of having your home repossessed.

Mortgage Rescue will not provide a solution for every household facing repossession but it is one of a range of options that can be considered to prevent households from becoming homeless.

How to apply

If you are experiencing financial difficulty you can approach Purbeck Housing Trust’s Housing Needs Team at the Trust’s offices – 8 Westminster Road, Wareham, BH20 4SW (Tel 01929 558400)  - for advice on your housing options.  The Trust provides the Council’s housing advice and homelessness service.

In the first instance you will be advised to seek advice from your lender and seek money/debt advice as you must have taken steps to tackle your mortgage arrears in order for your application to be considered. This includes:

• working through all the possible options with your lender, and
• having a financial statement prepared by a specialist debt adviser from Purbeck Citizens Advice Bureau (01929 551257), Shelter (Dorset Housing Aid Centre 0808 800 0380) or the National Debtline (0808 808 4000).

Lenders should only be considering possession proceedings as a last resort and should therefore be willing to assist borrowers where they can.  Lenders can offer a range of options to assist their borrowers some of which are:

• Agree to change or lengthen the term of a homeowners loan
• Accept reduced payments from a homeowner in the short term
• Add a homeowner's arrears to the amount borrowed
• Reduce a homeowner's monthly mortgage payments for a certain period
• Spread the repayment of the total amount a homeowner owes
• Offer a homeowner a better loan rate
• Allow a homeowner time to sell his home if he wants

If Purbeck Housing Trust is satisfied that:

• all the lenders hardship options have been exhausted
• the lender is in agreement
• you are eligible for the scheme
• the financial statement demonstrates that Mortgage Rescue is a viable option; and
• it is an option you wish to pursue

Purbeck Housing Trust will complete a Mortgage Rescue Application and refer your case to Sovereign Housing Association who operate the scheme locally.

Everyone must be reasonably satisfied that this option will provide a long term sustainable solution.

On receipt of your Mortgage Rescue Application Sovereign Housing Association will undertake their own enquiries including a financial assessment and formal property valuation to determine the most appropriate Mortgage Rescue product and the viability before either taking the case forward to a successful conclusion or declining to proceed with the application.

If your application is not successful you will be referred back to Purbeck Housing Trust for further advice and assistance with other housing options.

Further information can also be found at www.direct.gov.uk/mortgagehelp