A new Bill to regulate mortgage repossession

A Bill was introduced on 10 May 2006 to provide that the repossession of residential property may be sought only under certain conditions. It aims to rationalise the regulation of mortgage repossessions and is designed to protect borrowers hit by circumstances outside their control that make it difficult for them to meet their mortgage repayments.

The Bill has not yet been published, but Hansard, reporting on Parliamentary business, gives the following details of what is proposed:

• A single regulatory regime for secured loan products with one regulator. At present, some loans are regulated by the FSA under its mortgages regime and some are regulated by the Office of Fair Trading under the new consumer credit legislation.
• A pre-court protocol for mortgage repossessions.
• The court would have to take into account the length of time a borrower had been in the property before deciding whether to make an order for repossession.
• The court would have to consider the damaging effect of repossession on children.
• Local councils would have to improve their procedures for providing alternative housing on eviction.

The Bill has been ordered to be read a second time on 14 July. Lack of Parliamentary time may prevent the Bill from becoming law.

The pre-court protocol is in keeping with the strategy of the Department for Constitutional Affairs for reducing unnecessary court action. It would also be modelled on the pre-court protocol for rent arrears possessions.

There was a 60% increase in repossessions last year, with over 200 properties a week being repossessed due to mortgage arrears. The adverse social consequences of mortgage repossession has been documented by the Rowntree Trust, showing that it hits six main areas of people’s lives, all to the general detriment of society as a whole.

Law: The Bill will be published on the UK Parliament website.