CML background clarification note on repossessions

This background note sets out some salient facts.

* There has been inadvertent media confusion between the flow of properties being taken into possession, and the stock of properties in possession, when comparing Northern Rock's figures with the wider market. The CML publishes both a flow figure (ie the number of properties repossessed during a period, column 2) and a less widely-used stock figure (ie a snapshot of the number of unsold repossessed properties held by lenders at a particular point in time at the end of the period, column 4) in this table. By coincidence, the stock and flow figures published at the end of the first half of 2008 were identical.

* The stock figure does not show the number of households who have experienced repossession - it is simply a snapshot of how many unsold repossessed properties lenders have on their books at a given point in time.

* Overall, the CML continues to expect a total of around 45,000 properties being taken into possession this year. This expectation has not changed. Out of 11.7 million mortgages, this remains a very modest repossession rate of around 0.38%. Over 98% of borrowers continue to pay their mortgages in full and on time, and where arrears occur these are usually because of changes in the household's circumstances (eg unemployment or other loss of income).

* All lenders of all types are bound by the FSA rules on arrears management and repossessions (set out in the section 13 of the FSA's Mortgage Conduct of Business Rules - MCOB 13). There is no logical rationale for a difference in approach for different lenders based purely on their ownership structure. This does not mean that the same policy should apply in every case - each borrower's circumstances are different, and their prospects may differ markedly. But all lenders should be making best efforts to avoid repossession except as a last resort, as required by FSA rules.

* Borrowers gain significant protection too from the court process, as well as from the Financial Ombudsman Service.

* Lenders and the CML support the mortgage rescue scheme currently being developed for implementation through local authorities and housing associations to help some targeted households to stay in their homes on a shared equity or rental basis.