Government to protect homeowners

The Master of the Rolls has approved the Civil Justice Council's new protocol for the courts in mortgage repossession cases, which sets out clear guidance on the steps that lenders are expected to take before bringing a claim in the courts to ensure that repossessions are a last resort.

Lenders will now be expected to demonstrate that they have tried to discuss and agree alternatives to repossession when borrowers get into trouble with their mortgage repayments. If a case reaches court, lenders will be required to tell the court precisely what they have done to comply with the protocol.

The Government will also be publishing a consultation paper on bringing sale and rentback under FSA regulation, responding to recommendations from the Office of Fair Trading's (OFT) study into the Sale and Rent Back market which was published last week.

Chief Secretary to the Treasury, Yvette Cooper said: "We need to make sure we help those who might be hardest hit in the tougher times ahead, ensuring repossession is the last resort not the first. We also want to make sure that vulnerable homeowners are protected from exploitation and dodgy deals."

Housing minister, Margaret Beckett added: "We must ensure that every avenue has been explored before lenders seek to repossess homes. These new measures will further protect the most vulnerable households in the current economic climate. We have expanded free legal representation in county courts for households at risk of repossession, we have provided more free debt advice and will continue to work closely with lenders through this difficult time.

Finance and Leasing Association Director General, Stephen Sklaroff commented: "Today's Pre-Action Protocol is consistent with the action lenders are already taking, in line with the FLA's Code of Practice, to help homeowners in financial difficulty and keep families in their homes. New good practice guidelines under the Code are being developed to further support borrowers with debt problems. Repossession is a last resort taken when all reasonable alternatives have been exhausted."

It is important that households who have concerns over their mortgage seek advice at the earliest opportunity, starting by speaking to their lender."

The OFT market study on the sale and rent back sector, was published on 15 October 2008, and looked at the impacts, from the growing sale and rent back market. The OFT report identified that there is potential for severe detriment to homeowners entering into these arrangements and made three recommendations to Government, including compulsory regulation, increasing consumer awareness and improving information about housing benefits This is part of a range of initiatives to raise consumer awareness about the risks around sale and rent back, and to help reduce repossessions. Actions have been, or will be, taken to raise consumer awareness and provide help.

The help may be in the form of:

* guidance to local authorities on eligibility for Housing Benefit to avoid uncertainty surrounding eligibility of sale and rent back tenants for Housing Benefit.

* expanded free legal representation in county courts for households at risk of repossession.

* providing more free debt advice.

* joint guidance with National Homeless Advice Service for households facing financial difficulties - 'Worried about your Mortgage? Get advice now' is available from local authorities, courts and CAB offices.