While the UK Council of Mortgage Lenders (CML) predicts a 11% increase in mortgage repossessions across the UK in 2011 as against the figure for 2010 [1], there are a number of reasons to think this figure could be optimistic; however there is absolutely no doubt that Scotland is on course for a ‘summer repossession spike’ according to Scotland’s Govan Law Centre (GLC). The principal reason for the Scottish spike is due to the fact that between 3,000 and 5,000 mortgage repossession court actions had to be abandoned following the decision of the UK Supreme Court in RBS plc v. Wilson and others, at the end of November last year. Many of these cases have had to be re-raised, and these new cases will start to call in court (following the time it has taken to undertake the pre-action ‘calling-up notice’ and the re-raising of proceedings in compliance with the Home Owner and Debtor Protection (Scotland) Act 2010).
In addition, the CML had estimated there were 15,000 historic cases in Scotland where lenders had obtained decree but not enforced it, because payment arrangements were in place; many of these cases will now require fresh court actions as such decrees are no longer sound following the Wilson case [2].In addition to these Scottish drivers, there are also UK-wide drivers which could not only result in more repossession actions in Scotland, but critically, lead to an increase in the number of cases which are very difficult to resolve:
- The UK Government’s decision last October to significantly reduce the level of Support for Mortgage Interest (SMI) for those out of work;
- The impact of UK Government public spending cuts on jobs, and the wider impact of welfare cuts too;
- The fact that additional forbearance by lenders – since April 2009 at the request of the UK Government – may now be masking the true number of financially difficult cases; and
- The uncertainty over when mortgage interest rates will ultimately begin to rise.
Govan Law Centre’s position is that three urgent solutions are required to help address the expected additional pressure in Scotland:
1. Scrap the restrictive Mortgage to Rent rules introduced by the Scottish Government in March 2009, invest more in the Scheme, and extend this excellent Scottish safety net. In June 2009, we contributed to a report which predicted the Scottish Government’s rules would result in a ‘post code lottery’ for vulnerable homeowners facing repossession with many households rejected due to the restrictive eligibility criteria.[3] A FOI response to Govan Law Centre from the Scottish Government confirms we were correct[4].
1. Scrap the restrictive Mortgage to Rent rules introduced by the Scottish Government in March 2009, invest more in the Scheme, and extend this excellent Scottish safety net. In June 2009, we contributed to a report which predicted the Scottish Government’s rules would result in a ‘post code lottery’ for vulnerable homeowners facing repossession with many households rejected due to the restrictive eligibility criteria.[3] A FOI response to Govan Law Centre from the Scottish Government confirms we were correct[4].
For the period 31 August 2009 to 31 August 2010 almost half of the people applying to the Scottish Government Home Owner Support Fund (the Mortgage to Rent Scheme and Shared Equity Scheme) were refused help; out of 719 registered applications, 315 did not proceed.Worryingly, of those Scottish households turned down for help, 37% were refused help because their home was valued more than the Scottish Government new valuation limit (which is a crude figure based upon the lowest quartile value of houses within a local authority area in relation to the number of rooms); while another 37% were refused help because no local authority of housing association was willing to participate in the Scheme. Clearly, the Scheme is unable to cope with the current demand, never mind the expected significant increase in demand which GLC predicts later this year.
2. Introduce a new ‘Post Repossession Tenancy’ in Scots law so that occupiers whose homes had been repossessed could lease them back from their lender until the properties were sold. At present lenders would be highly unlikely to do this, as they would be granting a Short Assured Tenancy of at least six months, with complex liabilities for repairs etc., However, we know that many properties can take several months or considerably longer to be sold and it would benefit lenders, repossessed occupiers and local authority homelessness departments if former owners could enter into a simple ‘no frills’ tenancy until the property was sold. Former owners who were unemployed or on low incomes would be eligible for housing benefit, and such an initiative would utilise otherwise empty properties in Scotland.
3. Enhance the requirement for early intervention to prevent homelessness in Scotland – we recommend an upgrading of section 11 of the Homelessness etc., (Scotland) Act 2003 to require local authorities to use innovative techniques (such as embedded homelessness triggers within their computerised client contact systems) to detect and prevent threatened homelessness much earlier, and to provide a co-ordinated and holistic response in terms of legal, money advice, welfare rights and social care services.
[4] Scottish Government Housing and Regeneration Directorate written response dated 12 November 2010, from Keith McDowell, HOSF Scheme Co-ordinator for Scotland.
