The Council of Mortgage Lenders (CML) has expressed concern over plans announced by the Scottish Executive to help people whose homes are under threat of repossession.
The proposed National Mortgage to Rent Scheme is a Government-funded initiative that will help people with mortgage repayment difficulties in Scotland remain in their home, by allowing housing associations to buy the property to which the debtor would then pay rent.
The Scottish Executive is hoping to work with lenders in order to make the scheme a success. But Kennedy Foster, chairman of the CML, Scotland, said the initiative could leave troubled borrowers in even more debt. He added that the scheme could also result in an increase to lenders’ costs, pushing up the overall cost of mortgages.
‘Lenders are sympathetic to the aims of the Scottish Executive in wishing to assist borrowers in difficulties. Indeed, under the Mortgage Code lenders are pledged to do just that. But the scheme as set out still has considerable weaknesses that have yet to be addressed. There is a risk it will only assist a very small number of people, and at considerable expense. If this is so, the scheme could raise false hopes and prolong the process for a large number of households, leaving borrowers even further in debt,’ he said.
Jackie Baillie, social justice minister for the Scottish Executive, said: ‘Repossession is a personal tragedy for the individuals and families involved. It has a cost that goes far beyond people simply losing their homes. It causes disruption to family life, affects the education of the children and causes worry and distress. Taken together, mortgage to rent, the Mortgage Rights (Scotland) Act and the lenders’ own good practices will give people in mortgage arrears a number of options to resolve their difficulties.’
Benefits to lenders outlined by the Scottish Executive include being able to offer further options to borrowers with repay- ment difficulties. It will also help reduce losses borne through repossession by avoiding sale by auction and help households in arrears to get back on track quicker ‘ avoiding increasing arrears during possession proceedings.
Individual lenders were unable to comment on the scheme until official talks between the CML and the Scottish Executive had taken place.
