CML 6 year 'agreement'

The Financial Services Authority rules

From 31 October 2004 the Financial Services Authority (FSA) has taken over the regulation of mortgage lending and problems with existing mortgages.

The Mortgage: Conduct of Business Rules say that a lender “must deal fairly with any customer who has a mortgage shortfall debt”. If the lender decides to take action to recover the shortfall they must make sure you are told about this in writing, within six years of the date of sale of the house. If the lender does not do this, you can complain to the Financial Ombudsman Service.

INFORMATION
Contact details for The Financial Ombudsman are listed under the ‘Useful addresses’ section at the end of this fact sheet.


Council of Mortgage Lenders policy

The Council of Mortgage Lenders (CML) has a policy on the collection of mortgage shortfalls which should be followed by their members as a point of good practice.

From 11 February 2000 the CML says anyone whose property was repossessed and sold and who has not been contacted by their lender within six years from the date of sale will not be asked to pay the shortfall.

WARNING
The lender may argue that if they can prove they tried to contact you that this counts as ‘contact’, even if you did not receive the letter.

Under the CML policy, if your lender contacted you before 11 February 2000 then it appears that they can continue to try to recover the shortfall even if your house was repossessed and sold more than six years ago. If this applies to you then you could try arguing that it is unfair for the lender to keep trying to recover the money if your house was sold over six years ago.

Point out that they have limited the recovery period for new cases and have a ‘commitment to fair and sympathetic treatment for people for whom possession cannot be avoided’.


What should I do?

Work out when you last paid or acknowledged the debt and when the house was sold.

If this was over 12 years ago you can use sample letter M5 and argue that the debt is unenforceable under the Limitation Act 1980.

Check if your mortgage lender is a member of the CML.
If they did not contact you before 11 February 2000 and it is six years or more since the house was sold without any contact from your lender, you can argue the CML policy with your lender. Use sample letter M4.

Has your lender sent you a letter within six years of the sale confirming that there is a mortgage shortfall and that they intend to recover the debt?

If you did not receive this letter you may be able to complain to the Financial Ombudsman Service. Ask your lender for a copy of their complaints policy and follow this first.

ADVICE
Options for dealing with a mortgage shortfall are complicated. You may need to contact us to discuss which option may apply to you in your situation. Phone us for advice.