High Court Blow For Uk Homeowners

[OnlyMe]

If you are in a burning building, make sure you are the first out.

http://www.ft.com/cms/s/0/76031846-aea9-11...?nclick_check=1

High Court blow for UK homeowners

By Alex Barker, Political Correspondent

Published: November 9 2008 23:33 | Last updated: November 9 2008 23:33

A landmark High Court ruling has paved the way for mortgage lenders to sell the homes of borrowers in arrears without seeking a court order, bypassing Gordon Brown’s efforts to make repossession a “last resort”.

The ruling, which the judge described as having “wide-ranging implications”, strongly reaffirms the statutory right of lenders under a 1925 law to sell a property independently after two mortgage payments are missed.

While the power is unlikely to be used by mainstream lenders, who customarily seek repossession orders from judges, lawyers and opposition politicians called on ministers to pass reforms urgently to prevent rogue lenders “threatening families with these powers”.

The judgment dismissed the human rights defence of the homeowners in arrears and backed the right of GMAC-RFC, a specialist subprime and buy-to-let lender that is part-owned by General Motors, to appoint receivers and auction the property.

[interestrateripoff]

I can see this happening a lot in the future.

Isn't UK law wonderful. If lenders can do this we should be able to hand the keys in like in the US.

[moneyfornothing]

What ? Sub prime in the UK?

[Har Fast]

Hang on, I don't understand this. According to the article, this was a buy-to-let mortgage that was in arrears. But it also refers to "homeowners". Does this mean it was a BTL mortgage secured also on a primary residence? Otherwise, it seems a bit odd to have a BTL mortgage on your own home?!

[Bjørn]

Hang on, I don't understand this. According to the article, this was a buy-to-let mortgage that was in arrears. But it also refers to "homeowners". Does this mean it was a BTL mortgage secured also on a primary residence? Otherwise, it seems a bit odd to have a BTL mortgage on your own home?!

It says "homeowners", not "ownhomers".

[Har Fast]

It says "homeowners", not "ownhomers".

right, but is it the BTL property being repossessed, or their primary residence being repossessed because of arrears on a (presumably separate) BTL mortgage?

[debt monkey]

This isnt really new.

They are referring to appointing a LPA Receiver to deal with the property. They have the power to do it if it is a commercial/investment property, a buy to let mortgaged property could fall into this category. GMAC have been doing this for a while. The only reason this case came to be highlighted is because the owner was living in the property instead of tennats.

[lurker07]

"The judgment dismissed the human rights defence of the homeowners in arrears"

Since when was it a human right to own a home? And if it was, then they should naturally be cheaper

[Har Fast]

This isnt really new.

They are referring to appointing a LPA Receiver to deal with the property. They have the power to do it if it is a commercial/investment property, a buy to let mortgaged property could fall into this category. GMAC have been doing this for a while. The only reason this case came to be highlighted is because the owner was living in the property instead of tennats.

Thanks - that clears things up.

So it's not really a "homeowner" more an investor, who ended up living in his investment. In that case, isn't the whole tone of the article, and the quotes from politicians etc, a bit OTT? It seems to me entirely reasonably that someone who borrows to fund an investment should have that investment repossessed if he can't keep up repayments on the loan. If this is simply an anomalous case where he ended up living in the property, then I don't see a problem.

On the other hand, the section:

But it [GMAC] said “a receiver would not have been appointed” in the case of a residential home loan, even though the judgment confirmed the power of all mortgage lenders to do so.

suggests that lenders are choosing not to appoint receivers in residential loans, and that if one of them changes this policy, others might follow, and that could be worrying for genuine "homeowners".

[jonb]

Hang on, I don't understand this. According to the article, this was a buy-to-let mortgage that was in arrears. But it also refers to "homeowners". Does this mean it was a BTL mortgage secured also on a primary residence? Otherwise, it seems a bit odd to have a BTL mortgage on your own home?!

I would hope that the BTL mortgage was own their own home. It would be very worrying if it was on someone else's home.

[Guest DissipatedYouthIsValuable]

2 months of missed payments and you forfeit your home?

Oh dear. This 'homeowning' is a risky business, I think prices will have to come down further.

[Har Fast]

I would hope that the BTL mortgage was own their own home. It would be very worrying if it was on someone else's home.

erm, I meant I meant that the mortgage to buy the BTL property was secured "on their primary residence" as opposed to, or in addition to, being secured on the BTL property itself. "Homeowners" is the traditional media/politician emotive language used when people are having their only/primary place of residence repossessed. In this case, from what debt monkey says, it seems that this was only because, by some anomaly, the person was living in a property originally bought as a BTL...

[DoctorJ]

So tenants can have their home sold from underneath them because their LL can't pay up? yeah, UK law is great isn't it

[Daft Boy]

This is great news for HPC's , the greater the misery the greater the price drops.

[renterbob]

Tell all your friends.

Two months and you're out.

A credit card payment missed, oh dear.

[FreeTrader]

Here's the actual judgment from Mr Justice Briggs which was made on 8th October.

Edit: typo

Edited November 10, 2008 by FreeTrader

[HovelinHove]

I can see the logic in this. They are going to repossess the BTL brigade very fast. With many of these muppets owning multiple properties with multiple lenders, the moment a lender sees trouble they need to move fast to get to the head of the queue. This won't be used with people who are living in their homes, or BTL properties with tenants in, but I think we are seeing the first signs of banks preparing for our very own sub-prime equivalent disaster that will rip the bottom of the market out. It is only just starting now, but this will be next years big story, with hundreds of articles in newspapers of former BTL millionaires not only losing their property empires, but being kicked out of their own homes too. I sort of pity some of the recent FTBs who have gone into the market and are now facing -ve equity, but the BTL scum...let the greedy fu(kers burn!

[Liquid Goldfish]

alreday covered

Edited November 10, 2008 by newdman

[Ash4781]

Two missed payments is scary.

Also millions on housing waiting lists.

Council housing sold off, and builders building properties for investors.

Weather's pretty grim today too.

[FreeTrader]

Two missed payments is scary.

Reading the judgment, looks like just one missed payment is sufficient.

Section 22 is notable too:

No description of Miss Beech's rights as mortgagor would be complete without mention of the mortgagor's inherent right to redeem, that is, to recover full legal and beneficial ownership of the mortgaged property, and a discharge of the mortgage, on payment of all that is due to the mortgagee. Leaving aside the technical differences between legal and equitable rights to redeem (which do not matter for present purposes) I shall refer to it as the mortgagor's equity of redemption. It constitutes an interest in the mortgaged property and, in terms of value, is the principal element of that which the mortgagor retains after the grant of the mortgage. Thus when a house owner describes herself as having an equity of £300,000 in a property worth £500,000 mortgaged to secure a debt of £200,000, it is strictly the equity of redemption to which the owner refers. While it is true that the mortgagor of registered land remains the registered proprietor during the subsistence of the mortgage, it is wrong in substance to describe the rights of such a mortgagor as tantamount to freehold ownership. For example, the equity of redemption is overridden once the mortgagee contracts to sell the mortgaged property in exercise of the statutory power of sale, or when a receiver, duly appointed under the mortgage contracts to sell the mortgaged property, whether on behalf of the mortgagor or mortgagee, pursuant to powers given by the mortgage itself. In the present case Miss Beech's share in the equity of redemption was lost when the receivers contracted to sell to Coastal pursuant to their powers contained in the Mortgage, rather than when, as agents for GMAC, they later transferred the Property to Coastal on completion.

[FreeTrader]

Seems to me that the interpretation of section 22 of the judgment is what led the FT journalist to say “...it is unclear whether they were entitled to the balance of the sale proceeds once the debt was cleared.”

So, you have a £1 million house and a £10K mortgage outstanding, which gives you “equity of redemption” of £990,000. You miss a couple of payments and the mortgagee exercises its statutory right under the 1925 LPA to sell the mortgaged property. If that right is exercised, at the moment when the property is contracted for sale your equity of redemption is forfeited i.e. you lose the £990,000.

Does anyone interpret that paragraph differently?

[Guest X-QUORK]

You've got to hand it to the banks, they've even got the judiciary sown up. No other businesses have successfully made themselves so integral to the system that they can't be allowed to fail. Bailed by the taxpayer, yet still able to click their fingers and throw those who paid for them out onto the street.

The hypocrisy is unbelievable.

[6538]

"The judgment dismissed the human rights defence of the homeowners in arrears"

Since when was it a human right to own a home? And if it was, then they should naturally be cheaper

It's not. The HR angle was one of the enjoyment of private property.

This has just about been talked out here, and isn't as sensational as the papers (wrongly) make out;

http://www.housepricecrash.co.uk/forum/ind...showtopic=94542

[ParticleMan]

Does anyone interpret that paragraph differently?

Also see this one...

51. The effect of the sale in the present case was not merely to overreach Miss Beech's share in the equity of redemption, but to discharge the mortgage, since the net proceeds of sale were sufficient for that purpose. There was therefore, by the time the claimant applied for possession in the present case, no subsisting mortgage, no continuing obligation to pay instalments, let alone discharge arrears, and therefore, nothing upon which the court could focus in concluding, as the condition for the exercise of a discretion to adjourn or stay, that there was something which could be paid by the mortgagor within a reasonable time.

Edited November 10, 2008 by ParticleMan

[tiggerthetiger]

Two missed payments is scary.

Also millions on housing waiting lists.

Council housing sold off, and builders building properties for investors.

Weather's pretty grim today too.

I love popping in here, it always cheers me up no end