Mortgage Express Harsh Realities re Mortgage Arrears

by Mark Alexander

11:56 AM, 16th December 2013
About 5 years ago

Mortgage Express Harsh Realities re Mortgage Arrears

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Mortgage Express Harsh Realities re Mortgage Arrears

It would appear that Mortgage Express are now operating a zero tolerance policy on buy to let mortgage accounts which fall two or months into arrears.

In recent months I have heard of several landlords who feel hard done by.

After just two months of mortgage arrears have accumulated Mortgage Express have called in their loans. Repayment of arrears does not appear to save people at this point. It’s too late! Mortgage Express have called their loan in and that’s their right to do so. Mortgage Express will happily accept payment for the mortgage arrears but they are not legally compelled to reverse their decision on calling in their mortgages. Some lenders are more tolerant but tot Mortgage Express it would seem. They have their instructions and they are sticking to them. Their objective is to recover as much money as possible – END OF STORY!

In the examples I have seen Mortgage Express has called in LPA Receivers to collect rents until such a point as tenants can be evicted and the property is then sold. Any surplus of sale proceeds over and above the mortgage and accumulated costs is then offset against any other Mortgage Express accounts which are also called in under their rights to consolidate. Once all Mortgage Express accounts are cleared any surplus balance is then returned to the borrower. However, in all of the cases I have seen to date there has been a deficit and Mortgage Express have then pursued this too, in many cases leaving their former borrower with little if any choice other than to consider personal bankruptcy.

Mortgage Express Harsh Realities

I have been asked by several borrowers whether I would be prepared to fight this for them. Whilst I think the situation is particularly harsh on both borrowers and tenants, now that I understand what is actually happening here I cannot see that anything illegal is being done by Mortgage Express.

It’s harsh but apparently it’s what all Mortgage Express buy to let borrowers signed up to.

The message therefore is do not fall into arrears on your Mortgage Express accounts.

It seems clear to me that Mortgage Express are now coming under massive pressure to call in mortgages which are in default. In my cynical opinion, that is the only reason they want to meet with their borrowers. It’s a fact finding exercise whereby they present opportunities for their borrowers to admit to being in default, other than for mortgage arrears.

My advice to all Mortgage Express borrowers is to read your terms and conditions very carefully and to follow them to the letter. If Mortgage Express want a meeting then ask them to confirm in writing what gives them the their rights to insist on a meeting and immediately seek professional advice. Also remember that if your tenants don’t pay you that’s not an acceptable excuse for not paying your mortgage. In fact, there is NO acceptable excuse I can think of other than Mortgage Express not taking payment. Therefore, if you haven’t got a decent liquidity fund I strongly recommend that you fully reference your tenants and purchase insurance against the risk of your tenants not paying your rent.

If it makes you feel any better the latest take on the word Gangsters in Banksters!



Comments

Adam Alexander

12:06 PM, 16th December 2013
About 5 years ago

OK, so if the reality is that mortgage arrears will not be tolerated under any circumstances then Mortgage Express borrowers need to make sure their rent will be paid on the due date whether a tenant pays or not. We can help with this and it costs just 5% of rental income. Please see http://lettingagentsonline.co.uk/rent-on-time-every-time/
.

Industry Observer

12:47 PM, 16th December 2013
About 5 years ago

A lender can appoint a Receiver of Rents, an LPA Receiver under the Law of Property Act 1925 at any time and for any reason virtually including just feeling like it. Or to tidy up all their admin of one type or another under the same roof.

Mark Alexander

13:13 PM, 16th December 2013
About 5 years ago

Reply to the comment left by "Industry Observer " at "16/12/2013 - 12:47":

What on earth gives you that impression and what do you mean by "for any reason virtually including just feeling like it"?

Unless a lender has the right to call in a loan, usually on grounds of default but not always, what do you think gives them the right to appoint an LPA receiver?
.

Industry Observer

13:24 PM, 16th December 2013
About 5 years ago

Previous research on a case I was involved in, and it came as a great surprise to me. The other big benefit of appointing a LPA Receiver is you can take possession without a Court Order.

The whole key is your comment "usually on the grounds of default, but not always"

The case I dealt with was generated by the loan to value outstanding - there were no arrears. Just that post 2008 the lender had changed their lending terms and the existing loan fell outside them.

It was the fact they could possess without a Court Order that really threw me though.

By virtually any reason I probably meant as you are implying, but if the lender is twitchy it could even be something as minor as not paying the mortgage on the actual date due. All of Nationwide's mortgage payments used to be due, for example on the first Monday in every month. So if a borrower didn't pay until the second Monday in theory they were in breach of their mortgage terms.

Lenders have tremendously wide ranging benefits from appointing LPA Receivers that borrowers just don't realise.

Mark Alexander

13:53 PM, 16th December 2013
About 5 years ago

Reply to the comment left by "Industry Observer " at "16/12/2013 - 13:24":

Ah I see, in other words your clients were in default due to having breached financial covenants. On that basis the lender had the right to call in the loan and the LPA receiver would have been appointed when the required period to repay the loan in full was exceeded.

Fortunately, most BTL landlords will never experience LTV or interest cover covenants in their mortgage facilities as these tend to be synonymous with full blown commercial loan facilities as opposed to BTL mortgages which are hybrids of residential mortgages. As you will be aware, commercial finance is very much my domain having been a founder of the NACFB, the professional body for commercial finance brokers.

I can only assume that your clients biggest mistake was not employing an NACFB member firm to advise him in the first place or that he took a flyer and accepted the facility with these covenants in the hope that he would never be caught in breach.
.

Romain Garcin

13:55 PM, 16th December 2013
About 5 years ago

My limited knowledge of this is that a receiver can only be appointed if statutory conditions of LPA 1925 are met, which basically breach of conditions or arrears, or under further conditions defined in the mortgage deed.

Mark Alexander

14:15 PM, 16th December 2013
About 5 years ago

Reply to the comment left by "Romain " at "16/12/2013 - 13:55":

I concur
.

Adam Hosker

14:25 PM, 16th December 2013
About 5 years ago

Did I read somewhere that an LPA receiver is required to work on your behalf and not on behalf of the lender?
A court can give a receiver directions, if found working on their behalf.

Fact or Fiction?

14:34 PM, 16th December 2013
About 5 years ago

Hi Adam,

You read that on Property Tribes where we have some good advice given to a PT member who has had his properties repossessed by MX.

http://www.propertytribes.com/mortgage-express-forcing-new-terms-t-9768.html

We also have the sad and salutary tale of Chris and Denise Tudor Whelan who went from being property millionaires to living on benefits thanks to bully banks who destroyed their healthy property business by enforcing terms:

http://www.propertytribes.com/bullied-ruined-by-four-banks-chris-denises-story-t-9801.html

The fact is that the banks can call in the loan for multiple reasons, which is why anyone thinking of getting into a legal wrangle with a bank should think very carefully on this point.

Industry Observer

14:36 PM, 16th December 2013
About 5 years ago

Let's all start with the Statute

Note (iii) below under section 103 would include letting without consent. The Receiver works for the appointor, the lender.

http://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/109

103 Regulation of exercise of power of sale.E+W
A mortgagee shall not exercise the power of sale conferred by this Act unless and until—

(i)Notice requiring payment of the mortgage money has been served on the mortgagor or one of two or more mortgagors, and default has been made in payment of the mortgage money, or of part thereof, for three months after such service; or

(ii)Some interest under the mortgage is in arrear and unpaid for two months after becoming due; or

(iii)There has been a breach of some provision contained in the mortgage deed or in this Act, or in an enactment replaced by this Act, and on the part of the mortgagor, or of some person concurring in making the mortgage, to be observed or performed, other than and besides a covenant for payment of the mortgage money or interest thereon.

109 Appointment, powers, remuneration and duties of receiver.E+W

(1)A mortgagee entitled to appoint a receiver under the power in that behalf conferred by this Act shall not appoint a receiver until he has become entitled to exercise the power of sale conferred by this Act, but may then, by writing under his hand, appoint such person as he thinks fit to be receiver.

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