If your mortgage is in arrears you will probably be concerned about what action your mortgage lender can take against you. Of course if you are simply no longer able to pay your mortgage and have exhausted all other possibilities to pay then the lender has the option of applying to the Court to repossess your home so that it can be sold to repay the mortgage you owe.
However to try and reduce the number of people at risk of repossession the Government put in place a code of conduct in 2009 that all mortgage lenders in the UK must follow to help their customers who are in arrears. This code of conduct is known as the Mortgage Pre-Action Protocol.
The Pre-Action Protocol is intended to ensure that a mortgage lender acts reasonably in any matter concerning the resolution of mortgage arrears. As the name suggests the idea is to encourage the lender and the borrower to take actions to seek an amicable resolution of the arrears problem before an application for a repossession order is issued.
How will the Mortgage Pre-Action Protocol help you?
If your mortgage gets into arrears the Mortgage Pre-Action Protocol states that your lender should help you in a number of ways before they can apply to the Court for the repossession of your home.
Ultimately the protocol is designed to ensure that lenders only take action to repossess a property as an absolute last resort given all other options to maintain the mortgage have been exhausted.
If your lender does decide to start a repossession claim it will need to be prepared to explain its reasons to the court. If the lender cannot show that they have followed the protocol code and considered all reasonable options to help you pay your mortgage it is far less likely that the courts will accept the application for the repossession order.
A mortgage lender will need to show that they have tried to help you in the following ways:
1. Explore options to reduce your mortgage cost
First and foremost your mortgage lender is expected to work with you to explore all options of reducing the monthly cost of your mortgage. These may include extending the term of the mortgage, changing the type of mortgage, deferring payment of interest, capitalising the arrears or a combination of these. The lender is also expected to consider a request to change the date of your monthly payments.
2. Understand the reason behind your mortgage arrears
Your lender should discuss the reasons why your mortgage payments have fallen behind with you and whether their cause is long term or temporary. If the problem is temporary a simple solution could be for them to allow a payment holiday. If the problem is more permanent then options to actually reduce the ongoing cost of your mortgage payments should be considered.
3. Consider all proposals you suggest
Your lender must respond promptly to all payment proposals that you make and discuss how these could be implemented and whether there are other options open to you.
4. Postpone repossession proceedings if your property is up for sale
The lender should consider postponing repossession proceedings if you have already put your property on the market. You must be able to demonstrate that reasonable steps are being taken to sell the property at an appropriate price in accordance to reasonable professional advice.
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