Summary: This article reviews the circumstances under which a mortgage lender can take an individual to court, as well as what they should ensure before taking court action.
Missing a mortgage payment will result in the individual going into arrears. While this is far from an ideal situation as it causes increased pressure, it does not necessarily mean that the mortgage lender will start court action.
When could a mortgage lender start court action?
Simply put, if an individual is in arrears, and there is no reasonable plan in place to repay the outstanding arrears payments, then the lender is likely to begin court proceedings, as they want to ensure they get their money back. This is known as a Possession Order and could ultimately lead to the property being repossessed. However, this process could be delayed by contacting the lender as soon as a problem appears a problem. By doing so, an arrangement could be agreed to reduce monthly repayments, or even to provide a mortgage holiday, to allow the individual time to resolve any financial issues.
Can I be taken to court over missed mortgage payments without any prior warning?
The Financial Services Authority (FSA) govern all mortgage lenders, and they state that customers must be treated fairly, allowing an individual reasonable time to repay any arrears. Furthermore, if the individual has been in contact with the mortgage lender, then any request made that may assist in repaying the arrears must be considered by the lender. Court action is only to be taken as a last resort.
If a mortgage lender does take court action, then they must communicate this in writing to advise of the reasons why. They must also ensure that they have provided written notification of how much the arrears amounts to, the total mortgage still left to repay, and any potential interest or charges that are to be added as a result of the arrears.
Are there any circumstances when a mortgage lender is not allowed to take me to court over missed payments?
There are a few rules that mortgage lenders must adhere to before taking court action, and these are known as Pre-Action Protocols. A mortgage lender should not start court action if:
• The individual is in current negotiations with the lender to resolve the issue.
• The individual can make a claim under a Mortgage Protection Policy.
• The individual has applied to the Department of Work and Pensions (DWP) for help with the mortgage such as Support for Mortgage Interest (SMI), or to the local authority for help under a Mortgage Rescue Scheme.
• A complaint has been made by the individual regarding the lenders actions over the arrears.
(Sourced from adviceguide.org.uk)