Mortgage Support Shift A Danger, Say Lenders

[exiges]

http://www.bbc.co.uk/news/business-16069054

Lenders have raised concerns about potential changes to the way support is given to those struggling to pay their mortgage.

The government is reviewing the Support for Mortgage Interest Scheme, where homeowners who lose their jobs may receive financial help.

It says the programme, which costs £400m a year, is unsustainable.

But a lenders' group has said proposed changes could undermine the scheme's effectiveness.

Future charge

The Support for Mortgage Interest (SMI) scheme, which helps people receiving some benefits, operates across the UK.

Under the SMI, those who lose their jobs receive financial help with mortgage interest payments. This comes 13 weeks after losing their job, a timescale previously cut from 39 weeks. However, the assistance only lasts for up to two years.

Chancellor George Osborne said in this year's Budget that the scheme would operate until at least January 2013.

Now Lord Freud, the minister for welfare reform, has launched a review of the scheme.

"We are committed to supporting homeowners to stay in their own homes when times are hard, but in the future this type of support must be fair and affordable," he said.

These changes could see a charge put on the property of anyone who receives the assistance, which is recovered when the house is sold.

The suggestion was welcomed by the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA).

Concerns

Two other proposals have raised worries from the CML, which represents those who give home loans.

The first is a plan to make the payment to the homeowners themselves, rather than straight from the government to the lender. Lord Freud said the current system did not encourage people to get on top of their own finances.

CML director general Paul Smee said: "The principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose".

The CML is also concerned that the qualifying period may return to 39 weeks after somebody has lost their job.

The BSA is calling for the amount received in SMI payments to reflect the actual rate the borrower is paying, rather than a set standard rate.

[exiges]

Under the SMI, those who lose their jobs receive financial help with mortgage interest payments. This comes 13 weeks after losing their job, a timescale previously cut from 39 weeks. However, the assistance only lasts for up to two years.

Does anyone know how to get the BBC to correct this error ?

Edited December 7, 2011 by exiges

[Redcellar]

I can understand why banks would be jumpy. A charge against a sale would no doubt have priority over the banks own loan. So with NegEquity an additional chunk of the actual sale would go back to the government. That's more losses for the bank, so it's in their interest to foreclose as soon as possible.

Or am I missing something?

[rented]

Does anyone know how to get the BBC to correct this error ?

For jobseekers only it is time limited to 2 years for new claimants.

[The Masked Tulip]

Does anyone know how to get the BBC to correct this error ?

Go and post a comment on the BBC Newsnight website - it may then get picked up.

[bomberbrown]

The head line should read:

"Industry in receipt of free money wants to continue receiving free money"

[Democorruptcy]

The BSA is calling for the amount received in SMI payments to reflect the actual rate the borrower is paying, rather than a set standard rate

Building societies have seen an opportunity to increase the mortgage rate for people receiving SMI

[Venger]

These changes could see a charge put on the property of anyone who receives the assistance, which is recovered when the house is sold.

The suggestion was welcomed by the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA).

Concerns

Two other proposals have raised worries from the CML, which represents those who give home loans.

The first is a plan to make the payment to the homeowners themselves, rather than straight from the government to the lender. Lord Freud said the current system did not encourage people to get on top of their own finances.

CML director general Paul Smee said: "The principle of paying the benefit to claimants rather than lenders is dangerous in terms of potentially reducing its effectiveness in meeting its intended purpose".

I think they're exaggerating and don't really welcome any government 'charge' proposals. on the property, but can't openly say so. What repercussions does it have for lenders? They've got first charge. If I was a bank I just wouldn't want someone else coming along, putting a charge on my security. Any other lender with a secured loan would want their charge to rank above SMI charge. Any SMI payback can't be before any monies due towards mortgage debt are paid off. I agree it should be done but hopefully it will turn lenders off forbearance even more, knowing the government will be looking for a future cut.

If housing benefit is now paid directly to tenants, and they're supposed to be responsible to pay their landlords out of the money they receive.

Then a homeowner who the bank saw fit to lend to, should be responsible enough to receive the SMI money and pay it on to the lender. It is ridiculous the government pays it direct to the lender, nannying the whole process for the individual claimant. Else is it the individual claimant who is getting the benefit, or the bank? If the SMI doesn't get paid or passed on then the banks will have get tough with the borrower sooner. Including perhaps some pensioner owners not on any SMI time limit who might be stupid enough to get themselves some treats, or put the heating on for longer, with their SMI benefit. That guy with the sleeping bag for one.

[ingermany]

I can understand why banks would be jumpy. A charge against a sale would no doubt have priority over the banks own loan. So with NegEquity an additional chunk of the actual sale would go back to the government. That's more losses for the bank, so it's in their interest to foreclose as soon as possible.

Or am I missing something?

And for the feckless borrowers, they currently have a vested interest in getting free money via SMI to keep the loan serviced in the hope that the house value increases and they can then keep the profits (and use them to to finance a BTL or two). The current system is an immoral collusion to protect those with property assets at the expense of renters/taxpayers. But will Nick Clegg and his mates see it like this?

[Bloo Loo]

I can understand why banks would be jumpy. A charge against a sale would no doubt have priority over the banks own loan. So with NegEquity an additional chunk of the actual sale would go back to the government. That's more losses for the bank, so it's in their interest to foreclose as soon as possible.

Or am I missing something?

yes...they are receiving payments thety otherwise wouldnt have.

Every bailout has to be paid for by someone.

And if the cost is only £400m, then maybe those same banks could take a 5% cut in their bonus pool to cover it.

[okaycuckoo]

These changes could see a charge put on the property of anyone who receives the assistance, which is recovered when the house is sold.

The suggestion was welcomed by the Council of Mortgage Lenders (CML) and the Building Societies Association (BSA).

That would tend to bugger up selling/remortgaging, because all charges have to be cleared from the proceeds. £300 pm is typical for this kind of support = £7.2k over 24 months. And will they apply interest - say, at the rate at which the state has borrowed in order to provide these funds + RPI? lol

Gubmint will probably waive its charge when the pressure comes on . It certainly will if the house is being bought by a housing association under the mortgage rescue scheme.

Will the gubmint then pursue enforcement of a money judgment?

This is like jenga. The youngest kid will get bopped on the nose when the tower collapses - snotty tears for the rest of the afternoon.

[eric pebble]

The head line should read:

"Industry in receipt of free money wants to continue receiving free money"

PRECISELY.

A COMPLETE SCAM. A MASSIVE, MASSIVE SUBSIDY PAID BY TAXPERS TO THE BENT Property "market" --

PROPPING UP THE BENT "PRICES".

UTTERLY DISGRACEFUL. :angry: :angry:

[RufflesTheGuineaPig]

SMI to pensioners is ridiculous.

That took out a mortgage knowing they wouldn't be able to pay it off, then the government pays the interest. SMI for pensioners is simply immoral.

If you're a year before retirement and you take out a mortgage, you clearly plan to have the government pay.

It's not like you suddenly unexpectedly hit 65 is it?

[The Knimbies who say No]

SMI to pensioners is ridiculous.

That took out a mortgage knowing they wouldn't be able to pay it off, then the government pays the interest. SMI for pensioners is simply immoral.

If you're a year before retirement and you take out a mortgage, you clearly plan to have the government pay.

It's not like you suddenly unexpectedly hit 65 is it?

Indeed. I wonder of some of these pensioner equity release schemes are designed to take advantage of this. Could a mortgage-free 65 year old arrange some equity release and put a claim in for SMI?

[John The Pessimist]

Lenders concerned that they will be liable for feckless lending.....

[winkie]

What is the difference between equity release and SMI charged to the property?.....

[kilroy]

I can understand why banks would be jumpy. A charge against a sale would no doubt have priority over the banks own loan. So with NegEquity an additional chunk of the actual sale would go back to the government. That's more losses for the bank, so it's in their interest to foreclose as soon as possible.

Or am I missing something?

Won't someone please think of the poor RMBS holders....

[Venger]

Indeed. I wonder of some of these pensioner equity release schemes are designed to take advantage of this. Could a mortgage-free 65 year old arrange some equity release and put a claim in for SMI?

My understanding was the SMI is only applied to the initial mortgage. Not to any greater amounts added through equity release. It's confusing though because other sources suggest debt added to original for improvement purposes might be covered.

Additionally, the SMI will not necessarily pay the WHOLE of the Interest on your mortgage. Further borrowings that have been made against the property for debt consolidation, and non-essential home improvements will not be covered. With this restriction in the level of further benefit you will receive it is often very difficult to maintain the additional payments. If the full contractual payment cannot be maintained then the Lender can still apply for possession proceedings against you.

[SHERWICK]

The head line should read:

"Industry in receipt of free tax payer money wants to continue receiving free tax payer money"

Corrected.

Corporate welfare alive and well, thank you very much.

[olliegog]

SMI to pensioners is ridiculous.

That took out a mortgage knowing they wouldn't be able to pay it off, then the government pays the interest. SMI for pensioners is simply immoral.

If you're a year before retirement and you take out a mortgage, you clearly plan to have the government pay.

It's not like you suddenly unexpectedly hit 65 is it?

*sigh*

not all pensioners get SMI for their mortgage - only those who were unable or unwilling to make provision for their own retirement and receive the 'passport' benefit pension credit receive help with mortgage - btw they also get council tax credit, cold weather payments etc.

this is not ALL pensioners with a mortgage. rant over