I received a letter out of the blue recently for a 10 year old mortgage shortfall running in the tens of thousands I wont post up the company details but they are a full member of the council of mortgage lenders.

I owned a property with my former partner on a joint mortgage who passed away suddenly over 4 years ago leaving me with 2 small children to bring up on my own.

We thought we were insured for payment protection but it did not cover pre existing illnesses for my partners epilepsy. I shut my company to support her through a very difficult time so you get the picture of how things changed quickly at that time.

Over the last 10 years my circumstances have not changed at all after the big collapse in 2007 I ignore any type of finance and credit and do not subscribe to anything.

I have no assets and perform voluntary work whenever required I own nothing and like to keep it that way. I have a great life without it and we are very lucky to have a supporting network around me.

This is a reminder of everything I had once and left behind so I would appreciate any advice on how to best react to this. My first thought is to simply ignore it and let them stretch their legs in the hope that I respond to them which isn't very likely.

This is the first correspondence I have received in all of this time since the property was repossessed. This is likely to do with me not being registered anywhere so I would love to know how they tracked me here I am fascinated.

I would appreciate any views on the matter if you have enough to go on from the information I have provided so far.

Mortgage shortfalls

October 2015

What is a mortgage shortfall?

In some situations where you have had your home repossessed, or handed back the keys to your mortgage lender, you may later be told you still owe money. This happens when the amount your home is sold for is not enough to pay the outstanding mortgage and any secured loans.

Money you still owe to your mortgage or secured loan lender in this situation, is called a ‘mortgage shortfall’.

Sometimes the debt includes the monthly instalments and interest added to the debt while your home is being sold. Until the house is sold, you are liable for these costs, as well as legal and estate agents’ fees.

How long can I be pursued for the debt?

The legal position under the Limitation Act

Information:

limitation periods

Limitation periods for debts are important. This is because if the creditor has run out of time, you may not have to pay the debt back.

The Limitation Act 1980 sets out the rules on how long a creditor (who you owe money to) has to take certain action against you to recover a debt. If, by law, your creditor has run out of time the debt is ‘statute-barred’.

There has been some confusion in the past about mortgage shortfalls and the Limitation Act. However, the Court of Appeal has now decided that the following limitation periods apply to mortgage shortfall debts.

If you owe mortgage capital

Mortgage capital is the money you originally borrowed. For this part of a mortgage shortfall debt, the lender has 12 years to use court action to make you pay. This is under section 20 (1) of the Limitation Act.

sure somebody with lot more knowledge than me will be along soon? but it may be that it is coming to SB time within 2 years they are acting upon it? not sure!

a debt resulting from a mortgage shortfall, the time allowed is twelve years. .????

Best not to respond to the letter, as if you do then they will have record of having had contact with you. Once that happens, you will receive more communications.

It is likely that the mortgage shortfall will have been chased to other addresses you may have lived at during the last 10 years and you have not received these. Eventually after a search they have found you at your current address and are seeking to initiate contact.

As already advised statute of limitations is 12 years for mortgages. It might have taken say 2 years for the house to be sold and for the shortfall to be created. Therefore the date the 12 year period runs from, can be open to argument. If necessary, at some point, if you are being threatened with court enforcement you should send the mortgage company a subject access request.

Under Council for Mortgage lender handbook rules which were implemented from 2000 and are now part of FCA rules, if the mortgage company are found not to have chased the debt for 6 years, then the debt should not be chased. In most cases, the mortgage company will usually have record in sending letters, but if need be a subject access request can be obtained to find out.

That's great its what I suspected it would be. I will let them stretch their legs and see how determined they are prepared to be at which point a sar request will be issued and everything will be assessed in finer detail. Including the private detective they hired and charged me for so they didn't have to pay out any payment protection insurance on my large mortgage but that's another story.