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Housing: Vulnerable Home Owners

Volume 704: debated on Wednesday 22 October 2008

My right honourable friend the Chief Secretary to the Treasury (Yvette Cooper) has made the following Written Ministerial Statement.

The Government are committed to doing everything possible to help to ensure that the right framework is in place to support vulnerable mortgage borrowers facing repossession.

Repossessions are low by historical standards and, while the numbers have been rising recently, the proportion of people affected remains small. But for the individual, repossession can have major financial, social and emotional consequences.

The Government announced a comprehensive package in September this year, including support for 6,000 of the most vulnerable home owners facing repossession, through a government mortgage rescue scheme, and further investment in reforms of support for mortgage interest (SMI).

I am pleased to report today that the Government, the Financial Services Authority (FSA) and the Civil Justice Council (CJC) are taking further steps in two areas to help to ensure a fair deal for vulnerable home owners: the sale-and-rent-back market, and repossession cases in the courts.

The sale-and-rent-back market offers home owners the option of selling their property at discounted rates in exchange for tenancy arrangements. We have listened to concerns that in some cases vulnerable individuals facing repossession may be selling their houses for much less than they are worth in exchange for limited tenancy arrangements.

In March this year, the Government asked the Office of Fair Trading (OFT) to consider options to strengthen consumer protections in the sale-and-rent-back market. The OFT reported last week and recommended action in several areas, including new regulation to protect borrowers considering entering into these arrangements, action to raise consumer awareness of their potential risks and new guidance on the interaction between these arrangements and housing benefit eligibility.

I am pleased to confirm that the Government accept the OFT’s recommendations in full. The Treasury will consult shortly on bringing these arrangements within the scope of Financial Services Authority (FSA) regulation. The Treasury will take into account the OFT’s findings and engage stakeholders closely in its consultation.

I am also pleased to confirm that today the Master of the Rolls has approved the Civil Justice Council’s protocol for mortgage possession cases, which complements existing regulation and sets out clear standards that judges may expect of lenders bringing repossession cases in the courts.

The new protocol makes it clear that repossession should be a last resort. Where possible, lenders are expected to try to discuss and agree with borrowers alternatives to repossession. Where a case subsequently comes to court, lenders will be expected to be able to tell the court precisely what they have done to comply with the protocol.

The protocol will take effect for all cases issued from 19 November. This means that lenders will have to begin complying with it immediately, ensuring that it can bring benefits to borrowers as soon as possible.

Copies of the Government’s response to the OFT’s market study have been deposited in the Libraries of both Houses and the Civil Justice Council’s protocol for mortgage possession cases will be deposited and available shortly.