Court Action for Mortgages & Secured Loans
If you have mortgage arrears, and unable to clear them, your mortgage lender is likely to court action, which could lead to you losing your home. You may be able to stop the case from going to court by making an affordable repayment arrangement with your lender. Even if the case does proceed to court it doesn't necessarily mean that you will lose your home.
Before Court Action
Your lender should contact you before initiating court proceedings and must follow a pre-action protocol first. In some cases, they should also follow Financial Conduct Authority guidelines. You should be notified of a court hearing three to eight weeks before and may still be able to negotiate with your lender.
Pre-action protocol - From the 6th April 2015 there has been a new pre-action protocol, which sets out the procedures you and your lender must follow before the lender takes any court action.
When court action commences, you will receive a claim for possession of property from the county court. This will provide you with information about the court hearing and full details about the case against you. You will also receive a notice from your lender saying that court action has been started and will be addressed to 'the tenant or the occupiers'.
The particulars of claim (N120) will set out how much is owed to your mortgage lender, how much you should be paying and what measures the lender has taken to collect the outstanding arrears. Notes for you as the defendant (N7) are included.
At the hearing you should inform the judge, if there is any incorrect or missing information on this form. The defence form (N11M) enclosed can be used to tell the court about your financial and personal circumstances and what attempts you’ve made to deal with the arrears. There’s also a budget form to complete. This is so the judge can see what you can realistically afford to pay towards your arrears.
If you think you're not legally responsible for paying the mortgage, felt under pressure into signing the mortgage agreement, feel your lender has treated you unfairly or hasn't followed the procedures under the pre-action protocol you should put this on the defence form. You should send the defence form back to the court before the hearing, but if this is not possible, take it along on the day.
The Court Hearing
You should ensure you attend the hearing as otherwise, the court might grant an outright possession order, in your absence which means you may be evicted from your home.
Decisions the court can make
If there are no complicated issues of law to decide, the judge will usually make a decision on the day, providing there is enough information. If your case is more complicated, the judge may not be able to make an immediate decision and make an adjournment until another date.
Adjourn the case
An adjournment is when the case is put on hold and can result in more costs for you to pay The case could be adjourned for several reasons, including:
- to allow time for either side to provide further information
- to allow time for you to make a complaint to the Financial Ombudsman Service
- if your lender doesn't turn up at the hearing
- a general adjournment with no date set for another hearing. This could happen if you have paid cleared your arrears by the time of the hearing. However if you fall into arrears again, the lender can start proceedings from where they left off, rather than starting the process again
Dismiss or strike out the case
If the judge isn't satisfied that your lender has proved they have a right to take possession of your property, they have the power to dismiss the case. If the case is dismissed, you should ask the judge to make an order that your lender should pay all of the legal costs.
Make an outright possession order
If the judge makes an outright possession order, this means that your lender take possession of your property. There will be a date on the order telling you when you have to leave by.
Make a suspended possession order
If the judge decides to make a suspended possession order, you will be able to stay in your home as long as you keep to an arrangement to pay off the arrears. The terms of the arrangement, as agreed at the hearing, will be set out in the order. You will need to pay off the arrears at a fixed amount per week or month on top of your normal contractual mortgage payment. Your lender can apply to the court to evict you if you don’t keep to the payment arrangement.
Alternatively the judge may order a suspended possession order to give you time to sell your home yourself. This may be an option providing you can make enough from the sale to clear the whole mortgage debt, including all the money you borrowed as well as your arrears.
Make a money judgment
In addition to a possession order, a money judgment can be issued by the judge as well. This allows your lender to get back all the money owed on your mortgage. If your lender evicts you and isn't able to get back all the money you owe from selling the property, they can force you to make up the difference without having to go back to court.
If the possession order is suspended, the money judgment is likely be suspended as well. If you don’t keep to the terms of the arrangement then the possession order and money judgment will come into force.
In mortgage cases, the lender is usually allowed under their contract to claim their recovery costs, including; court fees, solicitors and barristers fees and expenses as well as witness expenses. Costs will be added to your mortgage account for every hearing held. If the judge thinks the lender has behaved unreasonably in starting possession proceedings the full costs may not be applied.
Action you can take after a Court Hearing
Appeal against the order
After the hearing, you may be able to change the order made by the judge by making an appeal to a higher court. You can only do this if you think the correct procedures weren't followed, the law wasn't properly applied or the facts the judge used to make a decision at the hearing were wrong. The time limit to appeal is 21 days and you should seek expert legal advice.
Set aside the order
If you have good reason for not attending the hearing you may be able to apply to set aside the possession order but you should seek expert legal advice.
Vary a suspended possession order
If the court has made a suspended possession order, you can apply to vary the terms of the order, if for example, you can no longer afford to keep up the payments ordered or you have not sold your home within the time the court has allowed. An application to vary can be made on form N244. You can obtain one from the court or you can print one off from the Ministry of Justice website at: www.justice.gov.uk. There will then be another court hearing which you should attend, together with evidence to support your application.
Financial Ombudsman Service
If you're not happy with the way your lender deals with your case, you can make a complaint to the Financial Ombudsman Service. You will need to use your mortgage lender’s internal complaints procedure first.
Consumer helpline: 0800 023 4567 (free for people phoning from a landline) or 0300 123 9123 (free for mobile-phone users who pay a monthly charge for calls to numbers starting 01 or 02) (Monday to Friday from 8.00am to 8.00pm; Saturday from 9.00am to 1.00pm)