First Mortgage Trust
Address: P.O. Box 2587, BATH, BA2 6ZA
Email: admin@mortgage-loan-uk.net



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Property Repossession Debt - Can you negotiate?


Property repossession is distressing. If a lender does claim a shortfall following the sale of your property you do have options. In most situations seeking professional advice and starting negotiations is the sensible option. With skilful negotiation often a settlement can be reached by paying only a fraction of the initial claim. Be careful when acknowledging a debt however.

Threre are numerous cases where the lender has been unable to pursue the borrower because they are ‘out of time’. This policy changed February 11th 2000 ,the CML initiative put forward was to limit actions against individuals who end up owing money after their homewas repossessed.

The law originally allowed a lender to start action to recover cash from former borrowers up to 12 years after their home was repossessed. The CML members agreed any proceedings would begin within six years. Any former home-owner who lost their house to repossession six years ago or more and who has not been contacted by their mortgage lender by that date will be in the clear.

The change in policy followed a report from the National Association of Citizens Advice Bureaux (NACAB) published in December 1999, which showed thousands of people who lost their homes were being contacted years later with payment demands. However complexity however can often work in your favour, thew Limitation Act 1980 also mcomes into play. Any lenders costs in addition to the defaulted loan / mortgage agreement must be reasonable. All settlement figures are paid on the understanding that it is in full and final settlement of the debt.

MIG (Higher Lending Charge) - The insurance that doesn't insure you
HLC is controversial - policies are issued to protect the lender and not the borrower. If there is an amount outstanding after the property is repossessed then the MIG insurer will compensate the lender – not the borrower. Even though you have paid for the insurance, the lender is the only one that benefits. The HLC/MIG insurer will pursue you, the borrower, for the shortfall (known as 'The right of subrogation').

If the borrower has evidence, from the lender or his agents, stating that the policy is for the borrower’s benefit and that the borrower may not be left with a debt following repossession, then he / she may well succeed in arguing that they should not have to cover the shortfall.

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