The number of homeowners in England and Wales facing repossession after falling behind on their mortgages has risen.

The Ministry of Justice said 28,658 orders were made by the courts in England and Wales in the second quarter of 2008.

That was up 24% on the same period in 2007 and 4% higher than the first quarter of 2008.

The figures come a week after lenders’ data for actual repossessions across the UK also showed a leap in numbers.

Losing a home

Repossession orders come early in the process and so do not always end with somebody losing their home.

Homeowners facing repossession must not bury their heads in the sand, a judge says.
It is when a court grants an order for the possession of a home, but is sometimes abandoned if a repayment deal can be struck between mortgage lender and borrower.

Mortgage possession claims – the earlier first stage of the repossession process – grew by 17% in the second three months of 2008 compared with the same period a year earlier.

See regional breakdown of repossessions

There were 39,078 claims, which showed no change on the first three months of the year.

The credit crunch has led to more expensive mortgages which people have been struggling to pay as other household costs rise.

But the data shows that the numbers have not been accelerating at a significant rate throughout 2008.

Chasing arrears

The Ministry of Justice said that the number of orders increased the most in the Midlands (up 43%) and the least in London (up 12%).

Some lenders are chasing arrears aggressively, the regulator says

Last week, the Council of Mortgage Lenders (CML) said that the number of actual repossessions across the UK rose to 18,900 in the first six months of the year – up 48% on the same period of 2007.

Housing charity Shelter said lenders were “still using repossession as the first rather than last resort”, with the charity reporting a 55% rise in the past six months of people coming to the charity for help.

“Every day Shelter is seeing more and more ordinary hardworking people who are terrified of losing their homes,” said chief executive Adam Sampson.

“They are being punished by rising household bills, escalating fuel charges and food prices that are going through the roof.”

The Financial Services Authority recently suggested that there was evidence of specialist lenders being aggressive in their repossession policies as the squeeze on finances continued.

But the CML said this unfairly tarnished the whole industry. The CML’s Bernard Clarke told the BBC that the number of mortgage possession claims – the first stage of the process – was five-times the number of actual repossessions.

With house prices falling, he said that it could be in both the lender’s and borrower’s interests to deal with the situation quickly before more equity was lost on the property.

Payment options

However, the CML is still predicting that repossessions will eventually rise to 45,000 this year.

“We are making sure the right advice and support is available for the minority of borrowers who may need it at the moment” Caroline Flint, Housing minister

Q&A: Home repossessions

It wants people to contact their mortgage lender as soon as possible if they find themselves in difficulty making repayments.

“There are a range of options your lender can consider to help reduce or reschedule your payments for a period of time while you get back on your feet,” said CML director general Michael Coogan.

David Harker, chief executive of Citizens Advice, agreed that the majority of people could come to a “workable agreement” with their mortgage lender that would prevent them losing their home.

Housing Minister Caroline Flint said: “While we are not seeing repossessions on the same scale as the early 1990s, we are making sure the right advice and support is available for the minority of borrowers who may need it at the moment because of global economic pressures.”

Philip Hammond, shadow chief secretary to the Treasury, said: “Lenders must now act responsibly – even if our prime minister has not done so – to minimise the number of people losing their homes.”

Liberal Democrat Treasury spokesman Vince Cable said: “The level of growth of repossession orders suggests that we are on track for a repossession crisis very similar to the early 1990s.

“It is absolutely vital that the government should intervene and require a proper code of conduct to be implemented by mortgage lenders.”

News reported by The BBC

The Financial Services Authority (FSA) has been accused by mortgage lenders of being “unfair” in its recent criticism of their repossession policies.

Last week the regulator warned it would take action against lenders who were too aggressive to customers in arrears.

But the Council of Mortgage Lenders (CML) said the FSA was wrong to suggest the whole industry was at fault.

The FSA replied that potential problems with repossession policies were found with all types of lender.

“There were issues discovered across the piece with all lenders which is why the warning was addressed to the whole market place,” said an FSA spokeswoman.

Unhappy

The unusual public spat between the two bodies hinges around a press release published on 5 August.

“In tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?” CML

In it, the FSA published the findings of a “thematic review” of how lenders deal with customers who are behind with their mortgage repayments and thus are in danger of losing their homes.

The regulator did acknowledge that the aggressive approach of which it disapproved was not typical of mainstream lenders, but was more usually found among specialist lenders.

It found that they were too keen to repossess at the first sign of a customer’s financial problems.

But the CML is very unhappy about the presentation of the FSA’s findings, which it said were confusing to lenders and in danger of misleading the public.

“The key message given to media and the industry was that lenders are failing to treat customers fairly,” the CML responded in its latest fortnightly newsletter.

“But in tarnishing the whole industry with the same dirty brush, is the regulator treating lenders fairly?”

“To publish a report in such ambiguous terms is unfair and confusing for the majority of lenders who are making significant efforts to comply [with industry rules],” it added.

Payment problems

Recent figures have shown that repossessions are on the rise, going up by 41% in the first half of the year, and are expected by lenders to reach 45,000 in total this year.

Although that would be a level of repossession that is far lower than in the housing recession of the early 1990s, there are many more potential problem cases in the pipeline.

The CML estimates that by the end of the year there may be 170,000 people who are more than three months behind with their repayments.

The FSA responded by repeating its earlier conclusions about mainstream mortgage lenders.

It said it had found that some of them could do more to help with their customers’ arrears; levied unfair charges on customers; and didn’t pay enough attention to the way debt recovery agencies or bailiffs acted on their behalf.

News reported by The BBC