Help! Husband's 18year old mortgage debt landed on our doorstep today. I'm terrified.

[cerberusalert]

Don't forget the code of practice.... six years.

[perplexedofdorset]

but what exactly is this code of practice and why if mortgages are extended to 12 years to become SB'ed does this apply ? please?

[cerberusalert]

The CML statement

Shortfalls arising from the last recession (1989-1993ish) started being pursued in earnest by lenders and mortgage indemnity insurers in the late 90's and understandably resulted in much negative reaction and litigation. To try and improve the industry's image and offer some comfort to borrowers, the CML updated its statement of practice on arrears and possessions in 2000. At the time it was widely accepted that a mortgage shortfall could legally be pursued for 12 years although the issue had not been tested in the higher courts. The CML's statement at point 29 was as follows:-

'In addition, from 11 February 2000, lenders who are members of the Council of Mortgage Lenders have agreed voluntarily that they will begin all recovery action for

the shortfall within the first six years following the sale of a property in possession. Anyone whose property was taken into possession and sold more than six years ago, and who has not been contacted by their lender for recovery of any outstanding debt will not now be asked to pay the shortfall. The Association of British Insurers supports this approach on behalf of the mortgage indemnity insurers. In Scotland, lenders will begin recovery action within five years.'

The CML's statement was further clarified at points 30 and 31 to specify when this new voluntary 6 year limit would apply. In this case 'just writing' is sufficient for the lender's purposes to be able to comply with the voluntary CML statement. There is no requirement for the lender to have any acknowledgement from the borrower to then continue pursuing the shortfall for the 12 years provided for in law.

'Does this time limit apply to every case?

The new time limit does not affect anyone who is already adhering to alternative payment arrangements for the shortfall debt or who has already been contacted by the lender, even if the initial contact was made with them by the lender after six years from the date of the sale of the property in possession. The six year limit only refers to beginning recovery action and does not affect a lender’s ability to recover the shortfall debt over a longer period. If there is evidence of mortgage fraud, the new time limit will not apply.

Following the sale of a property in possession, lenders often find it difficult to contact the former borrower to advise them of any surplus monies or shortfall debt. Lenders use a variety of measures to identify where the individual is now living. This might include using tracing agents. Situations can arise where a lender or its third party agent is trying to contact the individual (for example, by letter or telephone) to discuss repayment of the shortfall, but the individual simply chooses to ignore such contact. This is despite the fact that the contact is being made at the individual’s new address. In these cases, lenders will consider that contact has been made for the purposes of the new six year limit. Lenders will also consider that contact has been made where the borrower has responded to the lender’s correspondence. Simply sending the borrower a final statement of the mortgage account alone will not constitute contact. If an individual is unclear whether contact has been made within the six year period, the lender will be able to confirm the position. '

Since 2004 this voluntary agreement has been included in the FSA's Mortgage Conduct of Business rules. MCOB 13.6.4 states:-

'(1) If the decision is made to recover the 1sale shortfall,1 the firm must ensure that the customer is notified of this intention.

(2) The notification referred to in (1) must take place within five years of the date of the sale (if the regulated mortgage contract or home purchase plan 1 is subject to Scottish law) or within six years (in all other cases). '

This does not change the legal position and is not legally binding but if a lender was to fail to comply in relation to an FSA regulated mortgage (i.e. a residential 1st charge mortgage taken out since 31 October 2004) a complaint might be made to FOS. Again, a lender would not require an acknowledgement of the debt to satisfy this rule and it would be sufficient for them to demonstrate that the notification had been sent to the borrower at an address at which they were reasonably believed to be resident.

The legal position

As I have said it was generally assumed that mortgagees had 12 years to pursue a shortfall from the date of the sale of the property. This assumption has been tested in the last 10 years and the legal position clarified.

In the case of Bristol & West Plc v Bartlett & Anor [2002] EWCA Civ 1181 (31 July 2002) it was established that a mortgagee has 12 years to pursue payment of the principle debt under section 20 (1) of the Limitation Act 1980:-

(1) No action shall be brought to recover—

(a) any principal sum of money secured by a mortgage or other charge on property (whether real or personal); or

(b)proceeds of the sale of land;

after the expiration of twelve years from the date on which the right to receive the money accrued.

And 6 years to pursue payment of interest under section 20 (5) of the Limitation Act 1980:-

(5) Subject to subsections (6) and (7) below, no action to recover arrears of interest payable in respect of any sum of money secured by a mortgage or other charge or payable in respect of proceeds of the sale of land, or to recover damages in respect of such arrears shall be brought after the expiration of six years from the date on which the interest became due.

At this point it was a commonly held belief that a mortgage shortfall could be pursued for 12 years from the date of the sale of the property. This aspect of the law was also to be tested in the case of West Bromwich Building Society v. Wilkinson & Anor [2005] UKHL 44 (30 June 2005). This case established that the 12 years runs from the date of the last payment not the date of sale and the case of Bradford & Bingley Plc v. Rashid [2006] UKHL 37 (12 July 2006) established that correspondence acknowledging a debt also starts time afresh.

Conclusion

I hope this makes it clear I am not labouring under the misapprehension that correspondence sent by a lender starts time afresh for them to pursue a legal claim. My intention was to illustrate the fact that lenders are not supposed to pursue a shortfall for the maximum legal period of 12 years if they have not taken some action within the first 6 years. I wholeheartedly agree that a payment or written acknowledgement is required to start the 12 year legal limitation period afresh and hope I have illustrated the legal framework for this.

Lordsugar says he surrendered his property 3 years ago so (assuming no subsequent contact or payment from him) Santander therefore legally have a further 9 years to pursue him for the principle element of the shortfall.

I would be very interested to know the case law in relation to challenging the amount of the shortfall and the where the requirement for an annual statement comes from. I know there is a requirement in relation to FSA regulated mortgages for annual statements under MCOB 7.5 but didn't realise this continued after possession in relation to shortfalls. I also understand that MCOB 13.5.1 provides a requirement for statements a minimum of quarterly even on shortfalls if charges are being applied to the account.

KC

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?290234-Am-I-Liable-for-mortgage-losses&p=3264940&viewfull=1#post3264940

 

See also Council of Mortgage Lenders

[cerberusalert]

See also; http://www.consumeractiongroup.co.uk/forum/showthread.php?169002-Mortgage-Shortfall-important-new-decision&highlight

[perplexedofdorset]

gulp! ermm, thanks!!!

[rdm2006]

Update Update Update...is anyone still out there???

 

It was a very thin letter and basically stated that they have referred my 'queries' (i think they mean request for evidence of their allegations) to their 'Client' the Halifax and will be back shortly with the requested information.

 

Translated into english

 

Oh sh1t - we hadn't thought about the CPUTR 2008 and the CML code of practice, we had better refer back to Halifax see what they want to do

 

Hopefully, they will now drop it

[perplexedofdorset]

[perplexedofdorset]

hi guys............I'm back!!!!!!

 

Shoosmiths have got back to us and I'm going to need all the help and advice you good people can give to me!

 

the covering letter advises that the Halifax (their client) intend to resolve the matter amicably with my OH's co-operation and require

an ongoing commitment from him to reduce the balance outstanding ( £26 1/2 K ).

 

they suggest a one off lump sum agreed by both parties....this would obviously be £26.50p in our case and £26,500.00 in theirs! hahahah)

 

or monthly repayments taking into account our financial circs. Yeah right! added to the child maintenance he still pays for the 18 year old son he never sees.

 

They attached copies of their proofs ....

which do seem to be genuine, I'm afraid to say

they are...

 

1) a facsimile of a letter dated 29 June 2004 (stamped received sometime ?0 July 2004) the fax is dated 27 October 2004

in this letter my OH offers £1000 as full & final settlement

but states he is happy to go to court as he considers he was mis-sold the mortgage and asks how the Halifax accrued a loss of £26 1/2 k on a flat worth £41k.

 

2)a series of emails dated 27 Feb 2002,(from my OH)

11 Feb 2002 [/b](from the debt collection agency, CIS online ??????????) and

26 Nov 2001....(from my OH)

 

in the last one (27 Feb 2002) my OH states....

he will not fill in forms from Halifax or CIS online.

States if his employers are contacted he will leave his employment..(in response to the threat of an attachment of earnings order)

he wants them to stop threatening him with court proceedings..and that in fact he would welcome that as he considers the mortgage was mis-sold

he disagrees with the amount owing...........

that he has already offered £1k..........

 

in the one dated 26 Nov 2001 my OH asks

how the debt accrued £5 1/2K since the last statement, from another debt collection agency Direct Legal collections,

showed an outstanding balance of £21k..........

Again states he considers the mortgage was mis-sold to him by a Halifax agent who should have realised he could not afford it

He considers they were irresponsible selling him a 100% mortgage and used questionable sales techniques.

That some of the debt agencies correspondence borders on threatening......

Again he states that if his employers are contacted, he will leave.....

That their pursuit of this debt has contributed to the breakdown of his marriage and his dependence on anti depressants and their threats of court action doesnt scare him.

that he is prepared to offer £1k in full and final.

 

i recognise that a lot of what he wrote,and as typical of how he deals with stuff like this, is bluff and bravado

 

the next document is a list of debtor payments.

the first one 31 Dec 1996 entitled conversion98 (??????) for £350

the last 30 June 2000 entitled DL&C (?????) for £200

there are a lot of columns and different headings (???)

 

so guys there we have it. It seems my OH hasn't been as truthful regarding this debt as i had hoped and Im scared we are right back to the beginning and in an awful lot of the brown stuff!

 

I was going to paint the hall today .........but find my enthusiasm has dwindled.

Hopefully some of you good guys are still following this thread and will come to my aid, please, pretty please?????

i'm thinking of changing my moniker to Panicked of Dorset, Desperate of Dorset, Terrified of Dorset?????

 

Over to you, Guys.............

[sillygirl1]

Just because they have this so called proof in the letter dated 2004 where he states he is not paying they still would have one heck of a time explaining to a judge why they didn't chase betweeen 2004 and now, and IMHO as he hasn't paid since the repossession (the charges are more likely THEIR writeoffs rather than payments from him) it is still statute barred, which in mortgage terms is 12 years after the last payment.

 

They need to be reported to the Solicitors Regulatory Authority for misusing their powers in chasing this alleged debt and putting unreasonable pressure on your husband to repay something that he is probably still not legally liable for.

 

I'd write back and ask one simple question - when was the last payment and can we have proof it came from your husband.

 

Tell them that the Mortgage Lenders Code of Conduct has been breached several times here.

 

Most (IMHO) judges do not like these mortgage shortfall cases being brought up so long after the event.

 

I'd wait for others to come up with more advice.

[perplexedofdorset]

thanks silly girl, i certainly will see what the general opinion on here is

i'm feeling quite sick about all of this again.

the charges are more likely THEIR writeoffs rather than payments from him

huh??????????

[sillygirl1]

What I mean by that is each time the details are 'sold' onto a debt collector an amount is added to the account for this 'service' and as it is not paid by your husband it cannot count towards 'restarting the statute barred clock' in any way, shape or form. It is payment FROM your husband which can do that, and if the payment can be proved to be made under pressure, as it would seem to be, then even that is not counted and it is the date of the payment

 

which caused the breach of contract and started the action leading to repossession

 

that counts in a court of law, subsequent payments WILL have been made under duress and could be discounted.

 

Hope this is clear (and correct?)

[perplexedofdorset]

????????? aaagghhh!

 

not your fault in explaining merely my problem with a kefuddled brain!!!!

[perplexedofdorset]

????????? aaagghhh!

 

not a problem with your powers of explanation, silly girl,

merely my problem with a completely kefuddled brain!!!!

 

ooops double post...see how i am!

[unclebulgaria67]

I agree with Sillygirl. I can't see them pursuing this beyond writing letters.

 

But I think you need to obtain appropriate legal advice if this is affordable. A relative of mine was in this position with a shortfall after the house was sold at auction. They settled a £30k debt, with a £2k full & final settlement, about 8 years after the event and never heard any more. I think they made the F&F offer via a solicitor which I think did the trick.

 

If your OH's letter making the F&F offer was headed 'without prejudice' my understanding is that it could not be used in any court action. Being that we are now in 2011, I just cannot see Halifax instructing solicitors to take this to court, as it would not be seen in a favourable light, particularly in view of some of the issues contained in the correspondence i.e health, marriage breakup.

[BRIGADIER2JCS]

You a right uncleb, With out prejudice letter are no allowed

in court.

I agree also that Halifax could come unstuck in litigation.

[perplexedofdorset]

solicitors aren't really an option in our current financial position and to be honest i cant see how he could have paid £1k in full and final at that time (2004) as he had just started to rebuild his life after the disastrous toxic marriage, redundancy and nervous breakdown was retraining in a new career as an, extremely lowly paid, apprentice and living in the cheapest, most disgusting studio flat in the whole of the Midlands!!! yuk!

It was before he came home to me too (i was curious to find out exactly when he did write to them)

If your OH's letter making the F&F offer was headed 'without prejudice' 'fraid not ! that is something you would only know if you had advice isn't it????

but as people have said this letter, (curiously unsigned although the spacing suggests a signature????) was sent in June 2004 which is 7 years ago???

[perplexedofdorset]

what does worry me, having read the letter/emails is that the agency might go digging around to find his current employer...

that really scares me,

what do you think??????

[BRIGADIER2JCS]

If that letter is the LAST written acknowledgement of

the debt and no payment or offer has been made since

then the debt is Statute Barred IMHO.

Brig.

[BRIGADIER2JCS]

They might have a problem making a link to

a new employer I think.

[perplexedofdorset]

If that letter is the LAST written acknowledgement of

the debt and no payment or offer has been made since

then the debt is statute barred

 

so a letter to them stating that...would finish things???????

 

They might have a problem making a link to

a new employer I think.

 

the power of Google??? my OH has quite an unusual surname...

or is there some legislation to prevent them going down that route??? (please, please pretty please)

[sillygirl1]

It wouldn't serve any purpose, they can't just 'go for an attachment of earnings' like that, there would have to be a court hearing and as your husband is paying maintenance the most they could take would be about 10% of his residual income - so possibly it would not be worth their while, its just another idle threat in their weak armour.

[perplexedofdorset]

their weak, but scary armour!!!!

 

i am just a mere mortal you know, respectful toward the authorities, like the good girl i was brought up to be....

[BRIGADIER2JCS]

? why is he still paying maintenance for an 18 year old?

As SG says they is a long procedure to go through before

any ''enforcement'' action can be taken, and if that

letter is the last acknowledgement and no payment

has been made for 6 clear years the debt is statute barred'

as the council of Mortgage Lenders say that mortgage debt

should not be chased after 6 years, this guidance was made

because a mortgage under seal has a 12 year limitation

which is considered ''unfair''.

[perplexedofdorset]

i dont know about the maintenance...he says he has to pay until the boy is 19???????

 

one question that has baffled me since i started on here...

a debt is statute barred after 6 yearsbut regarding a mortgage l has a 12 year limitation

but then people say it is cut to six?????????

 

why?????????/

[perplexedofdorset]

i dont know about the maintenance...he says he has to pay until the boy is 19??????? i too thought it was 16 unless the child is in higher education which would make it 18...

 

one question that has baffled me since i started on here...

a debt is statute barred after 6 yearsbut regarding a mortgage l has a 12 year limitation

but then people say it is cut to six?????????

 

why?????????

 

oops double post!!! im stressed or.....