Unit 6:29 Legal Rights

Question 1

Legal remedies for mortgage default (England & Wales)

Answer 1

• Sue for possession
• Foreclosure (now not used)
• Exercise the power of sale
• Appoint a receiver
• Sue on the borrower’s personal covenant for recovery of the debt

Question 2

Commonly used legal remedy

Answer 2

• To take possession, the lender must petition the county court for a possession order
  
  1. Grant an outright possession order
  2. Adjourn or suspend the case until a future date

Question 3

Granting an outright possession order

Answer 3

• 28 day after court order lender can take possession of the property
• If lender can prove that they haven’t been able to work with borrower

Question 4

The Right to Appoint a Reciever

Answer 4

• Only useful when the property generates income (like rental payments)
• Lenders can appoint someone to collect money from the property when borrowers default
• The receiver takes the income and uses it to pay down the mortgage debt
• Even though the lender appoints them, legally they’re considered the borrower’s agent

Question 5

Possession procedures

Answer 5

• If lender needs to repossess after reasonable attempts to resolve issues, they must give 15 days’ written notice
• Most properties are vacated voluntarily by borrowers
• Once vacant possession is obtained, lender changes locks to prevent re-entry
• After repossession, lender typically prepares property for sale to recover debt

Question 6

Lenders cannot start possession proceedings if borrowers can demonstrate

Answer 6

• A claim has been submitted for SMI loan, Universal Credit, MPPI policy or mortgage rescue scheme
• There is reasonable expectation of payment from DWP, insurance policy, local authority or charity
• They have financial or personal difficulties affecting affordability and need time to seek debt advice

Question 7

‘Nursing’ a property

Answer 7

• Setting a sale price and not selling the property until an offer at or very near that price is received, regardless of the time taken to achieve it
• If there’s any shortfall after sale, the lender has six years to chase the borrower to cover that shortfall

Question 8

Rights when lender is short after property sale

Answer 8

• The lender has the right to sue the borrower for the amount of the shortfall
• If the lender, insurer or another party decides to pursue the borrower for the shortfall, they must notify the borrower within six years (five years in Scotland)
• This applies even if the shortfall was partially covered by a mortgage indemnity guarantee (MIG) claim

Question 9

Mortgage Charter Creators

Answer 9

• The FCA
• The Chancellor
• UK Mortgage Lenders