Everyone dreads the thought of repossession. It’s a nightmare no homeowner with a mortgage wishes to experience, not even those reading this Quick Property Sale guide. Nevertheless, clench your teeth and keep reading because this is crucial information. So, how does repossession work? Let’s find out.
All mortgage lenders must follow the correct repossession guide lines before they can repossess your property. The repossession process can be halted at any point, so get advice as soon as you can. Please note: it is important to know that 94% of repossessions are avoidable, so do not become part of the 6% danger statistic of losing your home.
The repossession action
If you fall into any arrears with payments on your mortgage or secured loan on it, your lender has the right to take legal action against you to repossess and sell your home in order to recoup any debt owed. Even if your home mortgage payments are up to date, you could lose your property if you get behind with payments on a secured loan linked to that property.
But, as stated before, your lender cannot evict you immediately; the individual must meet the necessary protocols, including pre-action requirements, and also obtain a legal order for you to vacate the premises. If you find yourself in this unfortunate situation and find that you cannot service your mortgage, you can take advantage of several solutions available to help prevent repossession.
Getting notices from your mortgage lender
You usually can expect to be sent at least two letters from your lender, inviting you to contact them to discuss your current situation. If you have not been in touch with them or reached a satisfactory arrangement, or if you chose to ignore any of their correspondence, or if they are unhappy with your response, they will warn you that they will start court action to repossess your home. However, you can still negotiate with your lender at this stage too; because they would rather be paid any arrears, than go through with repossession of your home.
The key stages
What happens during repossession? You may wonder how it works. The lender will file a possession order with the court. The individual or entity will only repossess your home after a court order is issued. This court order gives them the right to repossession. To obtain this order, the lender must file a petition with the local county court, detailing that a judge should grant them custody of your property.
The court will, in turn, will send you a letter notifying you of the hearing date. It is on this date that the judge determines if you should retain ownership of the property, or that the mortgage lender becomes the new custodian. The court will give you a copy of the lender’s claim form, which will include the following information:
- The time and date of the court hearing
- The reasons for repossession
- A defence form for you to complete and return to the court
Your response to the court should be through the defence form. You may also request the help of an adviser to prepare for the court hearing, procure evidence, and come to an arrangement with the lender or lender’s solicitor.
What happens when the case gets to the court?
If there is no agreement between you and the lender before the court hearing, then there is a high chance that a judge will preside over the repossession case. It is worth noting that this individual decides the fate of the borrower on property ownership. The judge reads and hears the evidence from both parties (the borrower and the lender) before passing a verdict. This decision may include any of the following:
- Ruling a repossession on the property – implies that you are one step away from eviction. Once repossessed, the lender can sell the home to recoup the mortgage debts.
- Making a suspended possession order – a permit for you to remain in your home provided that you adhere to specific orders and guidelines.
- Adjourning the case – indicates that the litigation has been postponed to a later date so that you and the lender can take further actions before the case returns to the court.
- Dismiss the charge brought against you.
The court issues a repossession order
When a court rules a repossession on the property, the judge will issue a possession order and set a deadline for you to leave. The court specifies the date. Ideally, it takes 28 days, but the judge can give you up to 56 days. Judicial fees can be imposed on you. In most cases, the lender will apply their attorney fees to the unpaid loan. However, the court may pass a suspended possession order if it feels that you have another chance to retain your property.
This order permits you to reside in the home provided that you agree to the conditions provided during the time of the hearing. For example, that you pay your monthly installments plus your mortgage arrears at a set amount.
Bailiffs dispatched to evict you if you fail to vacate the premises
The lender can request that the court’s bailiff remove you from the property if you do not vacate it by the date specified in a court order for repossession, or you have failed to comply with a court-ordered repayment deal reached as part of a suspended possession order. To begin with, the lender requests a bailiff’s warrant from the court. Without this warrant, the bailiff cannot act; hence, you can still reside in your home.
Once the bailiff’s warrant is in motion, the bailiffs send you a letter notifying you about their visit to your home for repossession. Bailiffs are prohibited from using physical aggression or abusive words while evicting you. If you do not leave willingly, they have the authority to call the police. The lender will most likely include the bailiff’s warrant fees to the unpaid mortgage. Your mortgage lender will then sell your property.
Concluding this repossession ‘Blog Bits’
Once the lender has repossessed the home, the individual or entity sells it to recoup the mortgage. However, you have to pay the interest on the loan pending when the property is sold. The lender retains the money owed after the sale and refunds the remaining amount. They will also add the extra cost of repossessing the property to the outstanding loan.
Should the home sell for less than the amount owed, you have to pay off the outstanding balance to the lender. If you have had a property repossessed, you may be unable to take out another mortgage for a new home in the future. It is always better to try and resolve mortgage arrears and, if necessary, sell the property yourself rather than be liable for the additional expense of the mortgage lenders legal and sales costs.
For further information on repossession you can visit the official Government website here or contact the charity Shelter – England for assistance too.
There are a series of these information blogs about repossessions, take a read through our previous posts and look out for more in future Quick Property Sale repossession publications.