Mortgage Express Harsh Realities re Mortgage Arrears

by Mark Alexander

11:56 AM, 16th December 2013
About 7 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

Mark Alexander

14:59 PM, 16th December 2013
About 7 years ago

Reply to the comment left by "Adam Hosker" at "16/12/2013 - 14:25":

Hi Adam

Yes a receiver does technically work on your behalf, however, that's on the basis that they must get best consideration for your assets to set off against your liabilities within a specified time-scale. That's the reason most assets are sold by LPA receivers at a well known, well publicised public auction . It is, therefore, very difficult for anybody to argue that the receiver could have got a better price. It's also the reason why most LPA receivers sell in the big London auctions.
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Puzzler

16:27 PM, 16th December 2013
About 7 years ago

I can see that if a borrower is in default then they can call in the loan, but how can they call in them all just because one of a suite of properties is sold? Are they portfolio mortgages, or is there some other reason they can do this?

16:39 PM, 16th December 2013
About 7 years ago

@Puzzler

They have a clause in their T and C's that state that, if you sell an MX property, they can take any additional equity profits to pay down other mortgages that the landlord has with MX.

I think that is what you are referring to?

Mark Alexander

17:42 PM, 16th December 2013
About 7 years ago

Reply to the comment left by "Puzzler " at "16/12/2013 - 16:27":

That is a very good question Puzzler.

The condition which allows Mortgage Express the right to offset surplus proceeds from one account to another account with the same borrower (as referred to by Vanessa) is their "Right to Consolidate". Commercial Finance Broker and NACFB member Matthew Farrow wrote about this in February 2013 - see >>> http://www.property118.com/mortgage-express-right-to-consolidate/36168/

This doesn't answer your question though.

The legal advisers I have spoken to all agree that Mortgage Express have no cross collateraliseation rights. Unlike TMW who offer portfolio mortgages on a group of properties on a single account, Mortgage Express accounts are all separate accounts. Therefore, consensus from the legal professional I have spoken to about this is that a default on one account does not give Mortgage Express the right to call in loans on other accounts. To my knowledge this has never been tested in Court though. It could simply be the case that Mortgage Express have never tried to do this and that calling in unaffected loans based on one or more other loans being in default is an urban myth. If it has happened, and it may have done, then perhaps the affected borrowers simply haven't been able to raise the money to litigate? As with all things, the truth will eventually come out.

A question in my mind is what happens if there is a shortfall on a sale of a property where the mortgage account was in default and Mortgage Express were to issue a statutory demand for the shortfall?

What I really don't like is that Mortgage Express are using whatever leverage they can to persuade their borrowers to sign up to new T&C's which are incredibly disadvantageous and include LTV and interest cover covenants. For example, if a borrower has 20 mortgage accounts with them they may well use a blip on one mortgage account to persuade the borrower to sign their new T&C's on all accounts. For example, a borrower misses two mortgage payments on one account and then pays off the arrears, however, Mortgage Express have already called in the loan prior to the arrears being repaid and then offer the borrower a "Hobsons Choice" deal, i.e. sign the new T&C's on all account or we will appoint LPA receivership on the affected account. Frankly I am amazed at how many borrowers they are catching out with these terms, many of which are not even for arrears but for minor defaults discovered as a result of review meetings which their borrowers agree to in good faith. It's tough out there folks, watch you backs!
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Industry Observer

18:03 PM, 16th December 2013
About 7 years ago

As a lender can use your investments to pay off what they like also on loan with them, I'd say there is a very good chance of a clause bried in the mortgage deed that makes reference to their ability to do this. It may be in the actual mortgage deed, not the T&Cs.

Mark Alexander

18:08 PM, 16th December 2013
About 7 years ago

Reply to the comment left by "Industry Observer " at "16/12/2013 - 18:03":

Mortgage Deeds tend to be very short documents and refer back to T&C's for the purpose of legal incorporation. It would be very unusual to find conditions in a mortgage deed which cannot be found in T&C's of the main mortgage offer letter and and accompanying schedules thereto.
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Industry Observer

18:18 PM, 16th December 2013
About 7 years ago

Maybe - but the mortgage Deed was not a short document when I was dealing with them, but I take your point.

I would still be surprised if there was not some consolidation reference within the T&Cs relating to any other loans with the same lender. But if someone has gone over them in detail and it is not there, fair enough.

Anon

18:18 PM, 16th December 2013
About 7 years ago

It's hardly a HARSH reality, just a reality. If a tenant falls two months into arrears, regardless of the circumstances, a landlord is at liberty to seek possession. Why should it be any different if a landlord fails falls two months in arrears on his mortgage payments. Just because one landlord is a bit of a softie and doesn't seek possession when his tenants are two months in arrears doesn't mean the landlord who does seek possession when his tenant is two months in arrears is harsh does it? These are the rules, live by the sword, die by the sword.

Mark Alexander

18:21 PM, 16th December 2013
About 7 years ago

@Industry Observer - I have been through the T&C's in very fine detail, there are rights of consolidation but they are very limited, hence my comment and reference to the Guest Article written by Matthew Farrow for whom I have great respect. Before you say it, yes he does look about 12, he hasn't aged since I first trained him in 2000 - lucky sod!

@Anon - as always it's very hard to argue against your logic.
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Colin Childs

21:39 PM, 16th December 2013
About 7 years ago

From a detached viewpoint. If a Landlord is not in a position to fund 2 months mortgage payments. Then the question has to be raised as to the state of their personal finances, and the apparent lack of savings. So proactive foreclosure is the best interest of the lender.

In any other line of business failure to pay ones bills on time would result in supply being turned off. Letting property is no different.

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