Treating Customers Fairly (TCF) is an imperative for all lenders and administrators.
Lenders are required to thoroughly assess not only the short-term affordability of the mortgage payments, but also the long-term viability of the mortgage.
Unfortunately, sometimes a lender will have to take the decision that repossession is the only solution and ultimately the most TCF result for a borrower.
However, in some cases, the courts appear to only be taking into consideration the borrowers’ claims that they can make the mortgage repayments and are setting Suspended Payment Orders (SPOs) without requiring evidence that the repayments are affordable or taking into consideration the other factors that lenders are bound to consider.
As a result, borrowers can be put in a worse financial position than they would have been had the repossession gone ahead.
We have experience of cases from which the borrower would have been able to walk away with sufficient equity to obtain new housing without residual debts. By not taking action, the borrowers are put in a position where, when the lender does obtain possession, they will still be liable for a substantial shortfall when the property is sold.
What can lenders do to try and help the courts understand the borrower’s true position and ensure that this situation does not occur?
A welcome step was the advent of Pre-Action Protocol (PAP) in April 2011, meaning that at last we can be sure that the courts are aware of all of the actions that have been taken by lenders to try to avoid repossession.
However, our experience is that, on occasion, the courts are not using the information provided or questioning the borrower about their failure to make payments and adhere to arrangements. Courts are taking the word of the borrower at face value and we need to do more to support our application for possession.
There are three key areas that we have found invaluable in ensuring that we are able to put forward a case to the courts with a positive outcome: agents, hearing attendance and counsel.
Our early attendance of court hearings highlighted agents, attending on behalf of lenders, who did not have sufficient knowledge or qualifications of either the case or the law in order to properly defend the lender’s position. This lead to them misinterpreting or misunderstanding instructions, despite being fully versed with the circumstances of the case.
Solicitors should have a full chronology of the account, together with evidence of unaffordability, such as bank statements and payslips, so that the agent is fully informed and able to properly inform the court of the facts.
Unless the agent has this information, the court will only hear the borrower’s side of the story and will often have no option but to grant a suspended order.
Having the case handler attend an application hearing can be invaluable and can make a real difference to the outcome, ensuring that the agent is aware of the lender’s side while the hearing is happening.
Hearing attendance can also be very useful in unauthorised let/fraud cases.
Very often, even though the agent will raise the fact that the borrower is not resident in the property, the borrower will invariably state that this is not correct and, in the absence of in-depth case knowledge, the agent will not be able to argue the case further. Being at the court with the evidence can influence the outcome.
Also, the court hearing will sometimes be the first contact that the lender has been able to get with the borrower and there have been occasions where a positive relationship has developed from this first contact.
In the more difficult cases, it can be worthwhile instructing counsel to attend a court hearing instead of a standard agent.
Although the cost is higher, significant savings can be made when compared with escalating arrears, depreciating property value and further solicitor and court costs, and we have experienced real success in this area.
The courts are granting SPOs without taking account of individual borrower circumstances and affordability, and these decisions are putting borrowers and lenders in a worse position and, in our view, they do not provide a TCF outcome.
Multiple warrant enforcements are becoming more common and the courts appear to be granting SPOs, despite borrowers failing to adhere to them.
Lenders can mitigate this by ensuring that the agents that represent them in court are competent, well instructed and have all of the information that is needed available at the hearing. Court hearing attendance does also help and it is important to be able to supply the court with all the background information to the case.
Appeal is always an option, but in reality, the costs and time involved do not make this a commercially viable option and could actually delay further action.