How do lenders persue a shortfall on a mortgage? Advice please

arwalder

Unfortunately my mother in law is probably going to befacing repossession in the near future.

I was just wondering when/ if there is a shortfall on themortgage how do lenders pursue this?

Based on current house prices I would estimate the shortfallon the mortgage to be around £10,000. But then there would also be the lenders feesfor selling the house too.

Recently she’s been made redundant, is 65 and not in goodhealth so finding another full time job is not a sustainable option. She hassavings of £16,000 and is using these to pay the mortgage.

The house is on the market has been for some time- is she best to drop it down tothe absolute minimum to try and avoid repossession? Considering she has earlyrepayment charges of £5,000 + estate agents and fees?

If/when the house is repossessed can the lenders force herto pay the shortfall from her savings taking in to account the fact apart from herpension this will be all she has to live on?

Thank you in advance.

bigadaj

Has she spoken to the lender, early communication could make things easier.

Is the shortfall from an endowment, you mention early repayment charges, but surely these wouldn't apply at the end of he mortgage term?

You want to avoid repossession as you say there will be extra charges, and she would be liable for any shortfall so savings could be used to pay this.

Goldiegirl

Communication is key.

If a house is repossessed, some lenders will be willing to come to an arrangement for only part of the shortfall to be repaid, on the basis that getting some of the money back is better than none at all.

But if she speaks to the lender now, repossession could be avoided altogether. They may be willing to allow her to pay a reduced monthly payment until the property is sold. However if the property is sold, the mortgage would need to be redeemed in full, so she'd have to use her savings for that purpose.

Thrugelmir

Why not use the savings to clear the mortgage?

Thereby saving money in terms of costs.

holly_hobby

If she sells the lender may not accept the offer if they feel it is low, this will impact because with out they releasing their charge, the property can't be sold (as the purchaser will require free title).

If the lender sells following possession, or agrees to Mums sale with a shortfall - they may agree to come to a scheduled repayment arrangement, for all or a negotiated amount of the total os.

The legals of how they may pursue, will ulitmately be via the courts with a CCJ (which follows registation of default for the os debt). As part of the court process Mum will have to submit a financial and income and expenditure (inc savings) report for the Judge's consideration - upon which he will make judgement on the terms of the CCJ (eg monthly repayment amount etc).

Whilst the CML no longer operate a repossesions register, the resulting defualt/CCJ will be on Mums credit record for 6 yrs BUT (as a mge debt) importantly it may continue to be legally pursued by the lender or their reps (or assignee if sold) for a period of upto 12 yrs.

I would highly reommend speaking to Shelter (the homeless charity), whom are extremely helpful in repossessions situs, can liase with the lender for Mum and make sure they play by the rules. Here's a direct link to their site ... http://england.shelter.org.uk/get_advice/repossession. Also CAB are a valuable source of assistance too.

Of course, with regards to lender pursuance (after all avenues have been exhausted and all available monies throw at this), and I never raise this as a solution and don't do so lightly here ... but depending upon her financial and personal circs and if she may ever need finance/a mge in the future (which will be impossible in the early yrs following discharge), she may wish to consider bankruptcy, which IS NOT a get out of jail card to be ever used lightly or without consideration of the longterm ramifications it can have (inc exlusion from some occupations and private renting), however it may be a solution for Mum depending upon the figs ..... To be clear I am not recommending this, but just throwing it in the ring ... here's a link to CAB discussing the basics .... http://www.adviceguide.org.uk/wales/debt_w/debt_help_with_debt_e/debt_dealing_with_urgent_debts_e/bankruptcy.htm

Hope this helps ... I wish your Mum well at what will be a very worrying time for her ....

Holly xx

Dave_the_Ginger_Cat

Sorry to hear, it's a tough process to go through

Would I be right in thinking this has not gone to court yet?

There are a number of hearings before the posession order, and it is likely that one might make an order to repay part or all of the arrears out of savings. If this is the case, my advice would be consistent with the other posters to talk openly to the lender and to see what arrangement can be made. I guess I am saying it is likley she will be asked to pay these savings towards the mortgage or shortfall at some point, and the fees will be significanltly less the earlier in the process this can be done. The fees can run to thousands and these are added to the balance I'm afraid

To give more balanced advice, it would be helpful to know mortgage balance, property value, arrears value and monthly payment, but on the face of it I would err towards
* Bringing down the arrears as far as possible
* Agreeing with the lender a sale (perhaps with a small shortfall)
* Seeking alternate housing arrangements

If her savings are reduced, she may qualify for some state benefits - this is not my subject at all and perhaps other posters can comment