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What happens when your mortgage lender takes you to court

When might your mortgage lender take you to court

If you are in mortgage arrears, your mortgage lender will want you to clear them. If you don’t do this, your mortgage lender will start court action. This is called possession action and could lead to you losing your home.

However, don't panic, because you can stop this from happening. But you must take action straight away.

You may be able to stop the case from going to court by negotiating an arrangement with your lender. You can get free help to do this.

Even if it's not possible to stop the case from going to court, this doesn't necessarily mean that you will lose your home.

Your lender might want the court to grant a suspended possession order. This will allow you to stay in your home as long as you keep to an arrangement to pay off the arrears.

You may be able to argue that your lender has acted unfairly or unreasonably, or has not followed the proper procedures. This could help to get court action delayed or persuade the judge to issue a suspended possession order instead of an immediate possession order which could lead to you being evicted from your home.

The important things to remember are:

  • it's almost never too late to try and come to an agreement with your lender, even if court action has already started
  • you can get free help and advice to deal with a claim for mortgage arrears
  • if there's a court hearing, make sure you go to it. It may be the last chance you get to stop you from losing your home.

On the following pages you can find out:

  • what happens when a mortgage lender starts court action
  • how you can try to avoid the case going to court
  • what a mortgage lender must do before they start court action
  • what decisions the court can make and what these will mean for you
  • how you can defend a claim for mortgage arrears
  • how to change a court ruling after it has been made.

Second mortgages or secured loans

The information on these pages only deals with what happens when you are taken to court for arrears on a first mortgage on your property.

Some people take out second mortgages on their property to pay for things like home improvements, repairs, a car, or to pay off other debts.

You may also have taken out a loan from a bank or finance company, using your property as security. This is known as a secured loan.

If you are in arrears with a second mortgage or secured loan, the lender may start court action to try and get possession of your property. They will want to sell your property in order to pay off the loan.

If you are in arrears on a second mortgage or other secured loan, you should get advice from an experienced adviser, for example, at a citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

What your lender must do before starting court action

Your mortgage lender should not start court action against you without following certain rules laid down by the Financial Conduct Authority (FCA). The rules say that your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off the arrears, if you are able to. They must consider any reasonable request from you to change when or how you pay. Your mortgage lender should only start court action as a last resort, if all other attempts to collect the arrears have got nowhere.

If you took out your mortgage from 31 October 2004 onwards, your mortgage lender has to follow the FCA rules when dealing with mortgage arrears.

If your mortgage lender doesn't follow these rules, you can complain to the Financial Ombudsman Service.

As well as following the FCA rules, your mortgage lender should go through certain other procedures before they start court action. These are called a pre-action protocol. If the case does go to court, the judge will take into account whether or not your lender has followed the protocol. This could affect the outcome of the case. For example, if your lender hasn't followed the protocol, you can use this to help you persuade the judge to grant a suspended possession order rather than an outright possession order.

There are certain things you have to do as part of the protocol as well. The main things you have to do are:

  • keep in touch with your lender
  • act fairly and reasonably with your lender
  • try to sort out payment of your arrears.

Under the protocol, your lender must give you information about your legal rights if you miss any payments. They must also tell you:

  • how much your arrears are
  • how much is still left to pay on your mortgage
  • what interest or charges will be added.

Your lender has to consider any reasonable request from you to change when or how you pay.

If you make an offer to repay the arrears, your mortgage lender must get back to you quickly with an answer. If they refuse your offer they must tell you why.

Your lender should not start court action while you are trying to come to an agreement.

You can get help to talk to your lender if you need it, for example, from a Citizens Advice Bureau. You can also get advice about whether or not your lender has followed the protocol. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

If you make an agreement to repay the arrears but don't keep to it, your mortgage lender will start court action. But they should tell you in writing that they plan to do this at least 15 working days’ in advance.

Don't ignore any letters from your lender or their solicitors. You can always get help to answer them, if you need it.

When your mortgage lender can delay starting court action

Under the pre-action protocol, your lender must consider not starting court action in certain circumstances. These are when:

  • you can make a claim under a mortgage payment protection policy
  • you have made a claim to the Social Security Agency (SSA) for help towards mortgage costs
  • you take steps to sell your home and pay off the mortgage. You should get independent financial advice before doing this
  • you are making a complaint to the Financial Ombudsman Service about the way your mortgage lender has dealt with your arrears.

If your lender decides to start court action anyway, they should tell you this in writing.

Your lender starts court action

If your lender starts court action, you will get a claim for possession of property from the court. This will give you details about a court hearing and full details about the case against you.

Your lender should have followed a pre-action protocol first before taking this action. In some cases, they must also have followed Financial Conduct Authority guidelines. You should also have been contacted by your lender before court action is started.

If you haven't been contacted by your lender before court action, you should get advice from an experienced adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.

As well as the claim for possession from the court, you should also get a notice from your lender saying that court action has been started. The notice won't have your name on it and will be addressed to 'the tenant or the occupiers'.

The particulars of claim will set out how much you owe your mortgage lender, how much you should be paying and what steps the lender has taken to collect the arrears. If there is any wrong or missing information on this form, you should tell the judge at the hearing.

The defence form

Along with the claim form, there will be a defence form called the Form of Reply. You can use this to tell the court about your financial and personal circumstances and what attempts you’ve made to deal with the arrears and how they happened.  You must also fill out your income and spending, any other debts and if you are receiving government help paying the interest. This is so the judge can see how much you can afford to pay towards your arrears.

If you think you're not legally responsible for paying the mortgage, or you disagree with anything the lender has said in the particulars of claim, you should use the form to say why. Other things you might want to say in your defence include if:

  • you were pressurized by your partner into signing the mortgage agreement
  • you think your lender has treated you unfairly or unreasonably
  • you think your lender hasn't followed the procedures under the pre-action protocol.

It is not a defence to say you can't afford to pay the mortgage

You should send the form back to the court before the hearing if possible, but don’t worry if you can’t – just take it along on the day.   If you send the form back to the court you should keep a copy of it.

If you think you have a legal defence you should get help straightaway from an experienced adviser. A Citizens Advice Bureau should be able to help. To search for details of your nearest CAB, click on nearest CAB.

The court hearing

You’ll receive at least 21 days notice of the hearing, so there’s still time to try and come to an agreement with your lender.

But even if you do come to an agreement with your lender, this might not be enough to stop the case going to court. Your lender might want the court to grant a suspended possession order. This will allow you to stay in your home as long as you keep to the agreement to pay off the arrears.

It's essential that you attend the hearing even if the lender tells you that you don’t need to. If you don’t go, the court might grant an outright possession order which means you could be evicted from your home.

There are certain things you can do to prepare for the court hearing.

Decisions the court can make

If there are no complicated issues of law to decide, the judge will usually make a decision there and then, providing they have enough information.

If your case is more complicated, the judge may not be able to make an immediate decision. In this situation, the judge may put the case on hold (adjourn the case) and give directions about what will happen next. The court will confirm these directions in writing later.

The decision the judge makes at or after a hearing is called a judgment. The judge may make one of the following judgments.

Adjourn the case

An adjournment is when the judge puts the case on hold. The case could be adjourned for several reasons, including:

  • to allow either side more time to provide more information
  • to allow time for you to make a complaint to the Financial Ombudsman Service
  • if your lender doesn't turn up at the hearing
  • a general adjournment with no date set for another hearing. This could happen if you have paid off all your arrears by the time of the hearing. If you fall into arrears again, the lender can start proceedings from where they left off, rather than start from the beginning.

Adjournments can result in more costs for you to pay.

Dismiss or strike out the case

If, after hearing all the evidence, the judge isn't satisfied that your lender has proved they have a right to take possession of your property, they can dismiss the case. If the case is dismissed, you can ask the judge to make an order that your lender should pay their own legal costs.

Make an order for immediate possession

If the judge makes an order for immediate possession , this means that your lender has been given permission to take possession of your property.  You must move out within 28 days.  If you don’t, your lender will have to apply to the Enforcement of Judgements Office to evict you. You will have to pay any fees the lender incurs to have you evicted.

The court may also grant an order for immediate possession with a stay of enforcement.  This means that you will have longer to find alternative accommodation. You can continue to seek to come to an agreement with your lender during this time period to have the order suspended or withdrawn.

  • For more information about outright possession orders and what happens when you don't leave by the date on the order see Eviction for mortgage arrears.

Make a suspended possession order

If the judge makes a suspended possession order, this means that you will be able to stay in your home as long as you keep to an arrangement to pay off the arrears. The terms of the arrangement will be set out in the order. You will need to pay off the arrears at a fixed amount a week or month on top of your normal mortgage payment. You will need to be able to pay off all the arrears by the end of the mortgage term.

If you don't stick to the arrangement, your lender can apply to the court to evict you.

  • For more information about what your lender can do if you don't keep to the terms of a suspended possession order, see Eviction for mortgage arrears.

In some cases, the judge will issue a suspended possession order to give you time to sell your home. They will only do this if you can make enough from the sale to clear the whole mortgage debt. This includes all the money you borrowed as well as your arrears.

Make a money judgment

As well as a possession order, a money judgment can be issued by the judge at the same time.

A money judgment allows your lender to get back all the money owed on your mortgage.

This means that if your lender evicts you and isn't able to get back all the money you owe from selling the property, they can force you to make up the difference. They won't need to go to court again to do this.

If the possession order is suspended, the money judgment will usually be suspended as well. This means that it won't come into force unless you don't keep to the terms of the suspended possession order and your lender is allowed to evict you.

Make a time order

If you have a secured loan or second mortgage which is regulated by the Consumer Credit Act 1974, the judge may grant a Time Order, which can vary the reduce the interest rate or extend the term of the loan so the monthly repayments are reduced.

If you think you should get a Time Order, you should get specialist advice.

Changing a possession order after the hearing

After the hearing, you may be able to change the order made by the judge. You may be able to:

Appeal against the order

If a possession order is made and you want to appeal that decision you may appeal to the Chancery Judge. You may be able to do this if you think the correct procedures weren't followed, the law wasn't applied properly or the facts the judge used to make a decision at the hearing were wrong. You must issue a Notice of Appeal within 5 days of the decision being made. If you think you have reasons to appeal, you should get expert legal advice.

A Citizens Advice Bureau can also give you advice about how to find expert legal advice. To search for details of your nearest CAB, including those which can give advice by email, click on nearest CAB.

Cancel the order

You may be able to apply to get the possession order cancelled or suspended. For example, if you:

  • didn’t receive the court papers
  • didn’t know you could defend yourself
  • had a good reason for not attending the hearing
  • your circumstances change, eg you lose your job and are unable to keep up with the payments

If you think you have reasons to have the order cancelled, you should get expert legal advice.

Vary a suspended possession order

If the court has made a suspended possession order, you can apply to change (vary) the terms of the order. You might want to vary the terms if, for example, you can no longer afford to keep up the payments ordered or the sale of your property is taking longer than the court has allowed.

There will be another court hearing. You should attend the hearing with evidence to support your application.

Suspend an order for immediate possession

Costs

In mortgage cases, the lender is usually allowed under their contract to pass on all their recovery costs to you, the borrower. They do not need a court order to do this.

Costs include:

  • court fees
  • solicitors and barristers fees and expenses
  • witness expenses.

Costs will be added to your mortgage account for every hearing.

The court may, however, be able to order that some or all of the costs are not added. For example, if the court thinks they are unreasonable or your lender has behaved unreasonably in starting possession proceedings.

The situation may be different if you are getting legal aid. Your solicitor will be able to tell you more about this.

Further help

Financial Ombudsman Service

If you're not happy with the way your lender deals with your case, you can make a complaint to the Financial Ombudsman Service. You will need to use your mortgage lender’s internal complaints procedure first.

Financial Ombudsman Service
South Quay Plaza
183 Marsh Wall
London
E14 9SR

Consumer helpline: 0800 023 4567 (free for people phoning from a landline) or 0300 123 9123 (free for mobile-phone users who pay a monthly charge for calls to numbers starting 01 or 02) (Mon-Fri 8.00am-6.00pm; Sat 9.00am-1.00pm)

E-mail: complaint.info@financial-ombudsman.org.uk
Website: www.financial-ombudsman.org.uk

Housing Rights Service

The Housing Rights Service provides a dedicated helpline for mortgage debt and repossession advice.

Phone: 028 9024 5640 or 0300 323 0310
09:30 – 17:00 Mon, Wed, Fri
09:30 – 20:00 Tues and Thurs.

Website: www.housingrights.org.uk

They also have a public advice website www.housingadviceni.org which provides detailed advice and information on mortgage debt and repossession, including a video showing what happens in a court hearing for repossession.

Independent financial advice

If you have mortgage arrears and you are thinking about selling your home to pay them off, you should get independent financial advice. The following organisations can help you find an independent financial adviser:

Independent Financial Promotions (IFAP)

Website: www.unbiased.co.uk

Institute of Financial Planning (IFP)

E-mail: enquiries@financialplanning.org.uk
Website: www.financialplanning.org.uk

Personal Finance Society (PFS)

E-mail: customer.serv@thepfs.org
Website: www.findanadviser.org

The Money Advice Service

Go to www.moneyadviceservice.org.uk.

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