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The following is the letter I sent to Ruth Kelly the Treasury Minister on the 17th December, her reply follows.
Mr N Baker, MP 204, High Street, Lewes, East Sussex. BN7 2NS 17th December, 2002.
Dear Mr Baker,
Many thanks for your letter of 10th December, 2002. This letter is in response to Ruth Kelly’s letter of 2nd December, 2002. Before commencing I would like to take this opportunity of wishing both yourself and Ruth Kelly a Happy Christmas and a Happy New Year.
The Minister starts by referring to the CML’s 6 year voluntary code which will become law in 2004. It is my opinion and those of many others in the Home Repossession Action Group that this is not of much help to mortgage shortfall victims. Until 2004 it is only voluntary, nor do all lenders subscribe to it (although I recognise this will change). Furthermore this CML 6 year period starts from the sale of the repossessed property which can be years after possession. It also only applies to those not contacted within 6 years after the sale. In the relatively few cases where lenders don’t contact the borrower within this 6 year period it will be easy, I believe, for them to just sell on the debt to a debt collecting agency, in fact, there are rumours that this has already happened. Where a lender contacts the borrower within the 6 year period the normal 12 year limitation period applies. The start of the 12 year limitation period usually commences (in respect of capital) from the 2nd or 3rd missed monthly payment on the mortgage, as was decided in the Court of Appeal (Bristol & West v Bartlett plus two other conjoined cases, Paragon v Banks and Halifax v Grant). None of which served to help mortgage shortfall victims, except in clarifying when the limit runs from and that it was specialty debt not simple contract debt. Mortgage shortfall victims had to wait more than a decade for this very unsatisfactory ruling!
Furthermore, where a mortgage shortfall victim has inadvertently acknowledged the debt or made part payment the limitation period starts anew. Where a money judgment order has been issued the lender/debt collector can pursue the victim forever! This only came to light in a House of Lords case ‘Lowsley & another v Forbes’ in 1998! Additionally, many people, including myself were given poor advice in the 90s.
The FOS cannot consider complaints that were brought to it, as the Minister rightly says, more than 6 years after the event complained about. In many cases lenders didn’t contact borrowers until many years after the event, resulting in borrowers being time barred from making a complaint. Yes, they are free to go to court, but, I repeat, how can one do that with very little money?
Not only have mortgage shortfall victims suffered the indignity of having their properties repossessed, but in many cases they were undersold too! Some were sold to building society employees, friends of employees etc. etc. Under the Building Society Act 1986 schedule 4 a legal obligation existed to obtain the best price reasonably available regarding the sale price of repossessed properties, but this schedule was repealed when the Building Society Act 1997 was brought in, and the best price ‘promise’ is now supposedly covered by the CML (Lenders) code of practice. I would like to know why the Government allowed this to happen. It seems to me that vested interest played the main part in this decision. I mean, if the lenders HAD been complying with schedule 4 and behaving in a lawful manner – why the need to repeal the schedule? Perhaps the Minister is now starting to appreciate the problems.
I am concerned that the Minister did not respond to my questions regarding what the Labour Government has done for ‘repossessed’ mortgage shortfall victims since the early nineties, what they are doing now, and what they propose to do in the future. Nor did the Minister mention anything regarding the points listed in my letter to her of the 4th of November, 2002, apart from the one dealing with the 1980 Limitation Act. I look forward to Derry Irvine’s response to my representations on mortgage possession time limits.
As regards the endowment issue I fully support the Consumer Association’s letter to the Treasury dated the 20th November, 2002, re the Financial Services handling of endowment mortgages.
I do realise that the Minister has a lot on her plate, but I would very much appreciate a full response to the questions put forward, as these problems directly affect the lives of many people.
M D Amos (Mr)
This letter and any subsequent reply may be issued to the media and other interested parties.
Ruth Kelly's reply now follows:
HM Treasury, 1 Horse Guards Road, London, SW1A 2HQ
Norman Baker Esq MP House of Commons London SW1A OAA 3rd February,2003.
Thank you for your letter of 14 January enclosing further correspondence from your constituent, Mr MD Amos of............about mortgages.
I am not sure there is much more that I can say. It is for Derry Irvine to comment on the details of when the Limitation Act kicks in and I am again copying this correspondence to him.
Mr Amos comments that, under the 1986 Building Society Act, there was a legal obligation to obtain the best price reasonably available regarding the sale of repossessed properties. He says that this requirement was repealed when the 1997 Building Societies Act was brought in and asks why the Government allowed this to happen. The 1997 Act was brought in under the previous administration, so I cannot comment on the whys and wherefores of that change.
What I can say is that when the FSA regulation comes into force in October 2004, there will be a requirement that firms market a repossessed property promptly and obtain the best price that might reasonably be obtained taking account of all the circumstances. This is broadly consistent with the duty of care that lenders already have to consumers where there is the sale of a repossessed property.
Finally, Mr Amos asks what the Government has done for repossessed mortgage shortfall victims of the early ‘90s. Given the then legislative position, there was not much the Government could do for the individuals concerned. But we have learned the lessons of the past. This is why many of the criticisms of the previous arrangements have been considered and are being addressed under the FSA regime. For example, and apart from the requirement to obtain the best price possible in repossessions mentioned above, a number of other issues have been included in the FSA’s proposed rules. These include: the provision of information to consumers when arrears first occur, as well as on an ongoing basis whilst they remain in arrears; that there will be a legal limit of six years to pursue mortgage shortfall victims; and a requirement that lenders will be responsible for the actions of debt collection agencies they have employed.
I hope that Mr Amos will find this helpful.
RUTH KELLY MP
Any comments? I suspect that the Minister is confusing the 6 year legal limit with the CML's 6 year voluntary code, which is due to become law in 2004. This is something I wish to double check. I still feel the Government could do more for current victims, for e.g. they could initiate an investigation into underselling. Any further suggestions?
-- M Amos (email@example.com), February 16, 2003
I must admit to feeling slight unease at the line that says lenders have a duty to obtain the best possible price taking into account 'all the circumstances'. What does that mean, that they need to offload a property hastily as it is a burden? It seems to me that might open a whole can of worms. It seems a very standard dodge the issues answer. I think you should write again and double check over the confusion. We wrote to our MP, and he never bothered to answer, now we have a card through the door stating he will shortly be in the area ready to answer any queries we may have - oh I do so hope he knocks on our door!!
-- Chris (firstname.lastname@example.org), February 17, 2003.
Well done Mark though the'answer'you received is no more than I expected - just a load of ducking, bobbing and weaving!! That, in fact, does tell us something.... that there is recognition that the whole subject of repossession and the greedy corruption that obviously rules it needs very 'careful handling'to save . Personally I can't think that could intail if the lenders and their cohorts have complied , and are still, complying with the principles of the repealed legal obligation of 1986 regarding prices obtained. Add to that the unforgiveable delay in sorting out the time limits and then ice the cake with
-- Joy Harker (email@example.com), February 17, 2003.
Well done Mark though the'answer'you received is no more than I expected - just a load of ducking, bobbing and weaving!! That, in fact, does tell us something.... that there is recognition that the whole subject of repossession and the greedy corruption that obviously rules it needs very 'careful handling'to save the skins of those who perpetrate the endemic 'legalised' robbery. Personally I can't think what that handling could entail if the lenders and their cohorts have complied , and are still complying with the principles of the repealed legal obligation of 1986 regarding prices obtained. Add to this the unforgiveable delay in sorting out the time limits and then ice the cake with the endowments debacle and you have a sure fire recipe for a stinking mess. Oh,I nearly forgot, Ms Kelly also states that there will be a requirement by the FSA that lenders will be responsible for the actions of the debt collection agencies they employ....hooray. But what about the actions of the estate agencies and the valuers they employ who, in cahoots with the lenders, bring about the artificial shortfalls created by underselling.
Let's see what happens before October 2004 shall we .... there's is plenty of scope for falls in properties values, higher interest rates and goody goody . more repossessed to sell cheap.
Learned lessons from the past have they?
Excuse me if I say goodnight folks.... I'm going to play my violin.
-- Joy Harker (firstname.lastname@example.org), February 17, 2003.
You do have a good way with words Joy. Another thing I would like to know is whether the 'requirement' to market a repossessed property promptly and obtain the best price etc. will be a legal requirement.
-- M Amos (email@example.com), February 17, 2003.
This morning I have received a reply from my MP - I wrote to him following the advice on this site. It seems he has been taken in by the lies told by my former lender! I still don't have copies of all the documents I have been asking for -including the original mortgage deed, still have no real answer as to why they need my NI number and still keep receiving almost weekly threats of litigation - to actually take action of course will cost them money. And the rich and famous think they suffer harrassment!
-- Bet (firstname.lastname@example.org), February 22, 2003.
If you are not happy with your own MP I would suggest that you try another one, perhaps Mike Hancock or one of the others listed on his Early Day Motion 62 (see the Repossession page). Who is your MP as a matter of interest? Let's find out so we know who to vote for next time. Have you seen the posting/s of 29th September 2002 entitled 'Being Harrassed then use this! The Administration of Justice Act'?
Best wishes, Mark.
-- M Amos (email@example.com), February 22, 2003.