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Mortgage shortfall Oakwood Homeloans, is there any redress ?


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Long standing problem with Oakwood and my wife's cottage. Eventually they repossessed it and then gave it away in auction.

Before they did we had the property on the market for 120k and had offers of 75K, 79k, and 82k. Within 5 months they auctioned it for 60 k leaving my wife with a 15 k shortfall, they are now threatening to bankrupt her for as she ahs a half share in the 90k equity in our house, I assume.

Is there any hope of arguing in court against this. They have, in discussions offered to lower the shortfall to 8k, which we can't afford.

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I would fire off a letter to Oakwood stating that the cottage has been seriously undervalued while reminding them of their obligation to get the best possible price for the property.I would also advise them that i would be getting in touch with the financial service authority with a view to bringing a case against Oakwood in relation to the auction of the property,then just wait for the reply,at the same time s.a.r.s request may unearth some paperwork which may be to your advantage.By doing these two things you are showing oakwood that you mean business and will not take threats of bancrupcy and the like without a fight.

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Hi...........Newstarter advice is good,get the SAR underway,cost £10 postal order send recorded,be specific as to what you require,(1) all statements.(2)detailed accounts from all companies and persons involved with a complete breakdown of every item,(I think you may be surprised as to what you have been charged for and the amounts.Very often the charges are vague0....(3) copies of all data held...................try this.............good luck..........FS

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The council of mortgage lenders have guidelines which lenders should adhere to when marketing a property after repossession



Sale of Properties in Possession

18. When selling properties which have been taken into possession lenders are under a duty to obtain the best price reasonably obtainable. A lender is not bound to postpone the sale in the hope of obtaining a better price at some future date; however, the lender should allow sufficient time to permit, for example, proper advertising so that the best price obtainable may be achieved. Mortgage lenders generally use the following administrative procedures for selling properties which have been taken into possession.


(a) The sale may be dealt with either via a lender's in-house department or through a separate property management company employed by the mortgage lender. Dedicated staff are responsible for co-ordinating the sale of properties in possession which will include reviewing the offers received from potential purchasers as well as monitoring the condition of these properties and their valuation.


(b) A valuation of the property is obtained from either one or two qualified surveyors and another from the appointed estate agent. Prices will be reviewed regularly based on local circumstances.

Estate Agents

© Properties are usually marketed through an estate agent in the immediate locality of the property being sold. Agents may advertise properties in the local press, with such advertisements being repeated as and when necessary. Mail shots and national advertising may also be carried out in some cases. In general, lenders do not market these properties as "repossessed properties" and estate agents may be specifically instructed not to do so.

Report on Activity

(d) Estate agents are usually required to report regularly on activity if a property remains unsold. The estate agent will notify a mortgage lender of offers received. Only when satisfied that the best price has been obtained, would the estate agent recommend this offer for acceptance. If the offer is substantially below the asking price, the agent must provide supporting evidence to suggest that this would be the best offer obtained. In practice, all offers are accepted or declined promptly. Where there are a number of very close offers on a property, a sealed bid procedure may be carried out whereby


the person putting forward the best offer would be the successful buyer.

Visits to the Property

(e) The agent will usually visit the property on a regular basis and ensure that any necessary repairs and maintenance to the property are carried out and that the property is secure. When properties are first put up for sale, mortgage lenders will usually arrange that essential repairs, cleaning and tidying of the garden are carried out. Whilst the estate agent will take care of minor repairs which are identified on the regular visits, other repairs usually require the approval of the mortgage lender. Where this work is carried out, estate agents will be required to obtain competitive estimates. Prospective purchasers will normally be accompanied by the agent when viewing a property.


(f) Properties in possession may be sold via auction. These properties are reviewed relative to sales experience and the length of time on the market. There are occasions when properties may be sold by auction because either the auction is specifically targeted at the type of property in question, eg a period type of residence, or the property will generally appeal to the speculator market because of its condition. Such properties are referred to an appropriate auctioneer. A catalogue would be issued and the properties are available for viewing.

Indemnity Insurance

20. Mortgage indemnity is insurance which a lender may take out for its protection where a high percentage loan is made. This insurance policy covers the situation where, at some future stage, the lender has to repossesslink3.gif the property and sell it and the lender suffers a loss. For example, if the property is sold for less than the amount of the borrower's outstanding mortgage (including accrued interestlink3.gif and costs) the lender can claim on the mortgage indemnity to recover some or all of its loss. The basic security for the mortgage is the property. The mortgage indemnity, therefore, acts as a form of additional security for the lender. It provides no protection to the borrower who gains no benefit, other than a higher loan advance than would otherwise have been granted.

21. In most cases, the mortgage indemnity will cover the lender only for part of its loss and, in addition, once an insurer has paid a mortgage indemnity claim, it gains the right of subrogation; this means that the insurer can reclaim from the borrower any money it has paid to the lender under the mortgage indemnity claim. Either the lender or its insurer may take legal action against the borrower to recover the shortfall if the borrower does not repay it voluntarily. In most cases, the lender contacts the borrower to recover the shortfall on behalf of itself and its insurer. This does not mean that the lender recovers the loss twice; any money paid by the insurer which is subsequently recovered by the lender from the borrower is then passed back to the insurer.

Debt Following Mortgage Possession


What happens to a mortgage debt after a home is repossessed?


After a lender takes a property into possession, interest will generally continue to

be charged on the mortgage loan until the property is sold. There will also be other costs charged to the mortgage account, including the estate agent’s costs in selling the property and legal costs.


The lender has a legal duty to sell the property for the best price that can reasonably be obtained. If this results in a surplus after all the money owed to the lender and any other party with a registered legal interest has been repaid, then this surplus is returned to the former borrower. The lender will send the borrower a detailed final statement of the account and advise the borrower of the date on which the property was sold. This statement will be sent to the borrower’s last known address. The borrower would be able to raise any queries on the statement with the lender.


But if the sale proceeds are not enough to pay off the money owing to the lender, the borrower faces a “shortfall debt”, which they still owe to the lender after possession.

What will the lender do if there is a shortfall debt?


The action that the lender will take depends on the circumstances. Usually, the lender will contact the borrower as soon as possible after the sale of the property and give a final statement of the mortgage account. This will show the level of debt still owing to the lender. It is important that borrowers keep lenders informed of their addresses after possession so that they receive this information.


If there is a shortfall debt, the lender may:

• immediately invite the borrower to contact them with their proposals to discuss how they might repay the debt; or

• try to give the borrower some time to get back on their feet financially before contacting them about repaying the debt.

How long after the repossession can lenders seek the recovery of the debt?


In England, Wales and Northern Ireland, a lender legally has 12 years in which to contact the borrower to begin the process of obtaining repayment of shortfall debt; this period is usually 5 years in Scotland.


However, lenders are committed to fair and sympathetic treatment of people who have suffered the unavoidable loss of their home, and accept that individuals should not face long delays before lenders contact them to discuss repayment of the shortfall. In practice, where a forwarding address is known, most lenders will contact borrowers fairly soon after possession has occurred with a view to agreeing a manageable arrangement for repaying all or some of the debt.


You need to check that all the recommendations have been met by your lender. In any defence you will need to show the court that the sale of the property has been conducted to your disadvantage.



Affixed is a subject access request template letter for mortgage lenders. You need to send by recorded delivery (and keep a copy for yourself). Send a £10 postal order and write on the back "Fee for Subject Access Request Only". Take a photocopy of the front and back of the postal order and keep with your copy letter.

Mortgage SAR.doc

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My advice is based on my opinion and experience only. It is not to be taken as legal advice - if you are unsure you should seek professional help.

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