In their guidance to lenders, the FCA has said: “Firms should not commence or continue repossession proceedings against customers at this time, given the unprecedented uncertainty and upheaval they face, and government advice on social distancing and self-isolation. This applies irrespective of the stage that repossession proceedings have reached and to any step taken in pursuit of repossession. Where a possession order has already been obtained, firms should refrain from enforcing it.” This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by COVID-19.
This has the effect of putting a stay on all possession proceedings issued by a lender, regardless of what stage of proceedings the case has reached. This includes even if a lender has already successfully obtained a possession order but has not had the chance to enforce the same by virtue of an attendance of a bailiff or a high court enforcement agent. Lenders are now being asked not to proceed with any form of enforcement and allow borrowers to stay in their homes. Clearly, a moratorium on enforcement of possession orders is in line with the government’s objective to ensure borrowers are able to comply with advice on self-isolation and stop the spread of infection.
To meet the challenges coronavirus could pose to borrowers, the FCA has said it expects all regulated mortgage lenders and administrators to comply with the guidance.
However, what does this mean if you are a borrower with a loan from an unregulated lender registered against your property?
Whilst the above guidance is only directly enforceable against financial institutions regulated by the FCA, where unregulated financial institutions make decisions that affect mortgage borrowers, those lenders are expected to adopt the above guidance on repossession on a voluntary basis. The FCA has said it will consider the extent to which a lender has (or has not) adopted this guidance in assessing whether those companies, or senior individuals within those firms, are fit and proper as part of any future application for authorisation. This is to act as a deterrent for lenders who are unregulated from proceeding with enforcement on the basis of their unregulated status.
Regardless of this fact, with hearings being adjourned while the courts make arrangements for only the most urgent hearings to be heard remotely, it is unlikely that any possession proceedings will be processed by the courts in the foreseeable future. Many Courts are now unstaffed or closed- if you have a hearing listed- please contact your solicitor who will be able to assist you.
Whilst it is unclear when these measures will be lifted or relaxed, the government has indicated that they are set to review matters in June 2020, so we can expect these measures to be in place until June at the very earliest.
In the meantime, interest will still continue to be charged within this period and that while many lenders are granting payment holidays, this is no guarantee. It is likely the lender will spread outstanding payments out over the remaining term of your mortgage so borrowers will see an increase in their monthly mortgage payments as lenders return to the (new!) normal.
If you are a borrower or a lender and you are unsure what can be done during this uncertain period, please do not hesitate to contact us on 020 7228 0017. We will be more than happy to navigate you through this deeply unsettling time with certainty and precision.
Kate Kenneally is a Solicitor in Hanne & Co’s Property Litigation & Dispute Resolution Department