COVID-19 – Impact on mortgage repossessions
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Government policy on coronavirus is constantly evolving, but its clear priority, above all else, is for the public to remain in their homes to prevent spreading infection.
This has resulted in a number of emergency measures being put in place, both by the government and the Financial Conduct Authority (FCA), which impact lenders' ability to repossess property used as security for loans.
Below are some points to note in light of government measures to curtail repossession action, supplemented by guidance from the FCA, in response to some of the most common questions raised by our clients in the current crisis.
1. Can I commence possession proceedings against a borrower due to an event of default?
During this period of uncertainty, the government has introduced a moratorium on commencing or continuing possession proceedings to ensure borrowers do not lose their homes and are able to comply with guidance on self-isolation.
This applies to all mortgage borrowers at risk of repossession, whether or not their incomes are affected by COVID-19.
2. Can I enforce a possession order obtained before the COVID-19 pandemic?
The FCA has said that even where a possession order has already been obtained by a lender, it must not be enforced while the current guidance continues to apply.
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.
3. Am I able to continue to charge interest on the outstanding loan?
Yes.
The current guidance issued by the government and FCA permits lenders to continue to charge interest on a loan, plus any fees and other charges in accordance with the terms of the loan agreement.
4. Am I bound by the government's and FCA's guidance?
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.
Where there are companies which are unregulated (and technically out of scope of the FCA's guidance) which make decisions that affect mortgage borrowers, given the current emergency, those lenders are expected to adopt this guidance on a voluntary basis as an appropriate response.
5. What are the consequences of non-compliance with the guidance?
We recommend strict adherence to the guidance of the government and the FCA.
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.
In any event, with hearings being adjourned while the courts make arrangements to conduct hearings (and, in general, only urgent hearings) remotely, it is unlikely that any possession proceedings will be progressed by the courts in the foreseeable future.
Even if possession hearings are listed, courts may take the view that they should, in any event, be adjourned until the end of the crisis.
6. How long are these measures going to be in place?
Government policy is evolving on a daily basis. However, the FCA has said its guidance will be reviewed in the next three months.
Therefore, we should expect these measures to be in place until at least June 2020.
The property dispute resolution team at Fieldfisher will continue to monitor the developments in respect of repossessions and are readily available to provide further specific advice on all the issues raised above.
If you have any questions or concerns about mortgage repossessions, Fieldfisher's specialist property dispute resolution team (which is one of the leading teams in the UK) is able to provide further specific advice on all of the issues raised in this article.