When homeowners get into difficulty paying their mortgage, there is often help available to ensure that they can get over any temporary debt problems. If problems with mortgage payments continue, however, it is possible that the homeowner may have to face the prospect of repossession.
What is Repossession?
Home repossession – also known as mortgage repossession or property repossession – occurs when a mortgage holder has defaulted on a series of mortgage payments. It should only occur in the direst of circumstances, as before it is reached the lender should have tried to offer help to the holder of the mortgage in making repayments: this help could include a payment holiday, the freezing of interest, or perhaps help with the remortgaging of the property so that lower repayments are spread over a longer period.
What is the House Repossession Process?
If the lender decides on a course of house repossession, however, then a certain course of action must be taken. The lender must apply to the court for an order to repossess the property; in the UK they must give the property owner fifteen days’ notice of the hearing, including telling them when and where it will be. At this stage, homeowners may be eligible for help from their Mortgage Rescue Scheme: run by housing authorities, this fund is intended to help those in real danger of being made homeless by repossession. Assistance could involve a loan to lessen mortgage payments, or a managed sale to an approved buyer who would then rent the property back to the occupant.
If however, the court date is reached without any other resolution, then the hearing must take place. Borrowers that cannot pay for their own defence may be eligible for legal aid or legal advice from the Housing Possession Court Duty scheme, but whether they have representation or not they must bring evidence of income and outgoings to the hearing, such as payslips, statements from bank accounts, details of benefits, etc. It is essential that the homeowner attends the hearing, as if they do not the court is highly likely to find against them, resulting in eviction.
If the court decides against the borrower, a repossession order will be issued. This does not necessarily mean the homeowner will be evicted immediately; instead, a number of conditions could be imposed on them. A time order could change the amount or frequency of mortgage payments, or the period in which they have to be made (though these are usually only for second mortgages and the like). For most types of mortgage, a money order might be made, which specifies the amount of frequency of payments, and also sanctions for missing payments such as taking money directly from the homeowner’s salary or benefit payments, and/or instructions for bailiffs to seize assets. Possession orders, which can stand alone or be combined with money orders, order the homeowner to leave their property, usually within twenty-eight days. These can be suspended, meaning that the borrower has a chance to avoid eviction by making payments; if they do not, however, the possession order will come into force.
If a possession order with a date for eviction is issued, they can sometimes be suspended if the homeowner can prove they can begin to make adequate mortgage payments. Also, the decision can be appealed if the borrower is convinced the judge has made a serious mistake in issuing the original order. This can be costly, though.
Help During and After Repossession
If a person’s house is repossessed, they should contact their local council to inform them they are homeless, as the local council should try to help them find emergency accommodation.
Before this, however, it is essential that those in this situation get all the advice they can on how to stop house repossession. Many charities provide free debt advice, including house repossession advice as well as help with more general debt management. Input from such bodies could make the difference for homeowners between staying in their home and being evicted.
Repossessed Property for Sale
After property has been repossessed, many mortgage lenders will offer the repossessed property for sale. One way this is done is via house repossession auctions, where repossessed properties are auctioned off to the highest bidder. Aside from this, other house repossessions for sale may be advertised in the press or in specialist trade publications; there can also be general house repossession sales organised by lenders where a number of properties are offered, with the possibility of buying a number of properties at once.