Changing Places
Having your home repossessed is a traumatic and stressful life-changing event, but there are steps you can take to minimise the emotional and financial damage caused.
 
 
There is no getting away from it – having your home repossessed will have a cataclysmic effect on your life.

A 1999 study by the Joseph Rowntree Foundation of some 30 families whose homes had been repossessed found that the experience was immensely stressful for the families involved, and the protracted administrative processes of the lenders, courts, and local authorities compounded this.

The biggest problem was the sense of uncertainty brought into their lives. The families very often felt that they lacked any control over their circumstances. They also reported how they had lost self-confidence and self-esteem, and their personal and family relationships were disrupted, and in some cases shattered. While in some cases members of the household's extended family offered support, in other cases these relationships became more difficult.

The experience of repossession affected the physical and mental health of many of the people who participated in the study. Most of the men and women had suffered from depression, and chronic conditions among both adults and children, such as asthma or seizure, got worse. It also affected people's attitudes to their own health – for instance, one woman who had given up smoking took up the habit again.

People described the profound sense of loss they felt at losing the family home. A more recent study led by Dr Mark Taylor of the University of Essex also found that falling into arrears had a large negative effect on mental health. It concluded that housing payment problems had ‘independent psychological costs over and above those associated with general financial hardship’, and the magnitude of the effect was similar to that seen with marital breakdowns and job losses. Knowing how you are likely to feel and react when faced with repossession is important, as this can help you deal with the emotional fallout.

If you are in a relationship and with a family, the events will undoubtedly put a serious strain on your relationships and on family life. Emotions will run high and that in turn could lead you into making decisions, which, in the end, may not be for the best. So it is vital to stay composed, and to approach the problem in a methodical, rational and unemotional way.

Financial repercussions

Many think that once the keys of their home are handed back to the lender, they can draw a line under it and move on, but that isn’t necessarily so. The repercussions can go on for years, particularly if your home sells at auction for less than the outstanding mortgage. The lender will look to the borrower to make up the difference, and under English law, it can pursue the outstanding debts for up to six years (five years in Scotland). They can also sell on these debts to commercial debt collection agencies, which will sometimes employ heavy-handed tactics to recover the debt.

You may also find yourself liable for the costs of your own repossession hearings, as mortgage contracts usually contain clauses in which the borrower agrees to cover the lender for legal costs incurred during the recovery of arrears. Because of this, lenders do not have to ask for costs in court. Instead, these are simply added to your final bill.

After your property has been sold, within 28 days you should be sent a statement giving how much it was sold for, and how much all of the interest charges, early redemption charges, auctioneers and estate agents fees, bills for repairs, and legal costs have amounted to. If there is a shortfall, you will be asked you how you intend to pay the balance. You might be given a little time to rebuild your finances before having to pay, but make no mistake; you are going to be pursued for that debt.

In addition, having your home repossessed will undoubtedly affect your credit rating, and make it harder for you to borrow in the future, as Neil Munroe, external affairs director at credit reference agency Equifax, explains. You will get a County Court Judgement on your record, which any future lender will see, but also the lender will also make an entry with the council of mortgage lenders which could make it near-impossible for you to raise a mortgage.

“In the early 90s, there were a lot of people that weren’t in arrears but just decided to surrender [hand back voluntarily] their property back to the lender. As a result of that, a database was created by the council of mortgage lenders called the repossessions register which is where properties are registered and shared between mortgage lenders or repossessed properties. “That database is still there and is still being populated,” he adds.

The data on this register includes the date of possession, whether the possession was voluntary, or following a court order, and whether or not any outstanding debt on the mortgage has been paid, and the previous and current addresses of the borrower.

“From a credit rating perspective, you may have had it repossessed because you have not been able to keep the payments up. If that is the case your credit file will probably already be showing that you have been in arrears on your mortgage, because information on pretty much all mortgages is reported now to the credit bureaus whether you are actually up-to-date or behind in payments.”

“That is the extent to which data and performance is shared these days. The reason why it is shared is to make sure people aren’t borrowing more than they should do.”

Munroe points out that people can get a copy of their credit report for £2, within 7 days, and it is worthwhile checking what it says.

“Also, everybody has the right under the Consumer Credit Act and the Data Protection Act to put a statement (historically called a ‘notice of correction’) of up to 200 words on their file, says Munroe.

“All lenders are obliged to read that statement before they process your applications. For example, you might put a statement on there saying that ‘I fell behind my repayments because I lost my job’.

“Now it doesn’t stop someone turning you down of course but it does give you the opportunity to have your say. A lender might be inclined to act differently than if it wasn’t there,” he adds.
NC

Part of a series of self-help articles on house-repossession. First published by 'NewsConfidential', November 2008.

 
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The Consumer Credit Counselling Service/Centre for Repossession Counselling Website: http://www.cccs.co.uk Telephone: 0800 138 1111

Experian Website: http://www.experian.co.uk Address: Consumer Help Service, PO Box 8000, Nottingham NG1 5GX

Equifax Website: http://www.equifax.co.uk Address: Credit File Advice Centre, PO Box 1140, Bradford, BD1 5US

 
 
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