Mortgage lenders must follow certain rules before they can take court action. Repossession of your home should always be a last resort.
How your lender should deal with you
All mortgage lenders are regulated by the Financial Conduct Authority (FCA).
The FCA has rules about how lenders deal with their customers. These are called the Mortgage Conduct of Business (MCOB) rules.
Your lender must treat you fairly. They must consider any suggestions you make to deal with payment problems and arrears.
Your lender should not repossess your home unless all reasonable attempts to resolve the situation have failed.
Alternatives to repossession
With your agreement the lender should consider whether to:
- delay interest payments
- extend your mortgage term
- change the type of mortgage you have
- add the arrears onto your total mortgage debt
They should allow you time to sell your home if you can't come to a repayment arrangement.
They must keep records of their contact with you including phone calls where arrears or charges are discussed.
What they must do before starting court action
The lender must provide you with the following information:
- a list of missed payments
- outstanding mortgage debt
- total amount of arrears and charges
They must inform you that they are starting repossession action and tell you to contact the council for homeless help.
If your lender doesn't follow these rules
Make a formal written complaint to your lender if they don't follow the MCOB rules.
Complain to the Financial Ombudsman Service (FOS) if you're unhappy with the response or you don't hear from the lender within 8 weeks of your complaint.
The FOS can look at the way the lender has dealt with your case. Sometimes the FOS will tell the lender to stop court action and come to a reasonable repayment arrangement out of court.
Court rules about repossession
The court has rules about what a lender should do before starting court action.
The rules are known as the pre action protocol for mortgage arrears.
The lender will have to show the court that they've followed the protocol if there's a repossession hearing.
Information from the lender
The lender must give you details of:
- the amount of your arrears
- payments over the past 2 years
- interest or charges that will be added
- monthly instalments and total mortgage debt
They should also give you an information sheet about mortgage arrears from the Money Advice Service or Shelter.
If you make a proposal to repay the arrears
Your lender must consider any repayment plan you suggest.
If they don't accept your proposal, they must write to you within 10 working days to explain why.
Keep to any agreement you do make. The lender must give you 15 working days' notice if they intend to go to court because you've broken the agreement.
If you've applied for benefits or other financial help
Your lender may delay court action if you've applied for and are likely to qualify for any of the following:
- universal credit
- homelessness help from the council
- support for mortgage interest loan (SMI)
- mortgage protection payments from an insurance policy
They might not delay court action unless you can show that you:
- are seeking debt advice
- can meet any payments not covered by benefits or insurance
- expect your finances to improve in the foreseeable future - for example, you've been offered a better paid job or you're taking in a lodger
If you're taking steps to sell your home
Your lender must consider delaying court action if you're taking steps to sell your home.
You need to:
- show the property is on the market at a realistic price
- provide the lender with an energy performance certificate and sale brochure
- give permission for your estate agent and conveyancer to speak to your lender
If you've complained to the Financial Ombudsman Service (FOS)
Your lender must consider delaying court action if you're waiting for the outcome of a complaint to the Financial Ombudsman Service (FOS).
If the lender proceeds with court action before the FOS decides the complaint, they must write to you and explain why.
If your lender starts court action
Your lender must write to you 5 working days before they start court action and explain why they are applying to court.
At the repossession hearing, the lender needs to show that they've followed the protocol. They must provide a copy of the pre action protocol checklist.
The judge could adjourn the hearing and tell the lender what to do to comply with the protocol if they haven't followed the rules.
Last updated 05 Nov 2019 | © Shelter
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