Mortgage repossessions - Sue Galloway backs new help scheme

Cllr Sue Galloway, who has taken over Executive responsibility for Housing in York, will announce at the next Council meeting on 30th June her support for a new scheme aimed at reducing the levels of homelessness caused by mortgage repossessions.

The initiative would be coordinated by the "golden triangle" local authorities (Leeds, York and Harrogate) and their Registered Social Landlord (Housing Association) partners.

The aim of the scheme would be to prevent homelessness and support homeownership and sustainability.

The scheme would provide an equity loan to eligible households who are unable to meet their mortgage repayments because of a range of reasons such as interest rate rises, the ending of fixed rate deals, and/or a change in household circumstances.

This could be done through a range of options, either by clearing arrears and providing financial assistance to help a household remain in their home or through an equity loan to allow time for the household to enable a planned sale together with advice and assistance for their future housing options.

Three "buying time" options could be made available.

Option A - Pay off a household's arrears - this loan would pay a household's arrears and be added as a charge on the property. There would also be the option to repay the loan at any time, or in stages, while the family are still in the property. When the property is sold the loan would be paid back.

Option B - Pay off a household's arrears and provide an equity loan - this loan would pay any arrears and provide an equity loan to bring the household's mortgage payments to an affordable amount. Again the loan would be added as a charge (second or other) on the property, so that when the property is sold in the future the household would repay back the loan. The household would also have the option to pay back the loan completely or in stages, at any time whilst they are in the property.

Option C - Pay off a household arrears to enable a planned sale - a loan would be provided to pay off a homeowner/s arrears, stopping repossession proceedings and enabling a planned sale of the property. This would ensure the owner gets the market value of his/her home. This option would also assist in paying the household's monthly mortgage payments until the sale of the property. The loan provided to pay the arrears/mortgage payments would then be paid back when the sale completes.

The scheme could also assist households with their future mortgage payments for an agreed length of time.

The three options would be part of a flexible package as it is realised everyone would require differing levels of help to stay in their own home.

It is also understood that some people will be unable to keep their home, hence the last option, to enable a planned move.

Sue Galloway says,

"National predictions are that the numbers of mortgage repossessions are set to double this year. Being thrown out of your home can be a very traumatic experience and Councils have a statutory duty to provide replacement housing.

Pressure on our housing waiting list will be eased if we can keep people in their current homes for longer.

The merit of this scheme is that no public subsidy is involved with the loan being repaid when either the household once again finds its financial feet or when the house is eventually sold.

In many ways it would be a win win situation for all concerned".

The scheme is likely to be discussed at the next golden triangle meeting in late July. ENDS

Editors notes:

Who will administer the scheme?

· The scheme will be administered through one or more of the Golden Triangle local authorities approved RSL partners, who will provide a full administrative service - from receiving initial referrals through to assessing and accepting eligible applicants onto the scheme.

· The RSL will hold the stake in the property on behalf of the Partnership and have responsibility for securing the legal charge on the property (second or other).

· When the property is sold, the repaid equity loan and any uplift in value will be retained and recycled by the RSL who will use to provide further affordable housing.

· Referrals for the scheme will be through advice agencies such as CAB, HARP etc.

· It is intended the RSLs taking part in the scheme will be paid a fixed administration fee for each successful applicant provided with an equity loan.

Further Detail Required

· Ongoing discussions/ further work is taking place to confirm the legal agreement and the referral arrangements to ensure applicants referred to the scheme are facing repossession and have received appropriate debt advice.

Independent Financial Advice

· Applicants will be required and advised to take appropriate independent financial advice.