Repossession of a family’s home should be the last resort in a long line of action and negotiation. But in reality, it rarely is.
Two legal frameworks dictate how a lender should proceed when their borrower is in arrears: the mortgage conduct of business rules and the mortgage pre-action protocol. Both clearly state that repossession should only be pursued after all other alternatives have been explored.
There are 11 different things that a lender can in theory do for a borrower in difficulty. The problem in practice is that borrowers don’t know what thes things are and lenders won’t tell them unless asked. Even when they are asked, a refusal is often the standard response and borrowers don’t know what to do next.
For the ordinary mortgage holder, receiving legal letters from respected high street banks and their high-powered solicitors is intimidating at best, utterly demoralising at worst. Persistent phone calls wear people down.
The Council of Mortgage Lenders (CML) repeatedly says there has been a shakeup in the industry and lenders are more sympathetic to borrowers in difficulty. I would challenge anyone who defends people in mortgage arrears to find evidence of this.
After over 25 years in the property industry, I only very recently came across ‘The Norgan Figure‘.
When trying to negotiate away from repossession, the lender is looking for a monthly figure to be paid from the arrears. People often make an offer of £100 a month, only to have this rejected as unreasonable by the lender. But there is a formula to calculate a “reasonable” figure.
The 1996 case Cheltenham & Gloucester building society v Norgan established that, as long as the amount being offered will clear the arrears within the remaining life of the mortgage, it is a reasonable offer. If you have £10,000 in arrears and 10 years left on the mortgage that gives you a Norgan figure of £83.33 a month. Good enough to force a lender to accept it, and good enough to cause a judge to adjourn or suspend proceedings in court.
People under pressure and in a panic regularly offer an unsustainable £250-a-month off of the arrears. When you go on to work out the Norgan figure it can be as low as £10. Lenders will happily accept a higher figure because if the borrower can’t stick to the agreement they can still go to court for repossession, making the borrower look like they can’t cope.
Both the lenders and their solicitors know exactly what the Norgan figure is for each account. When the solicitors come to court, you can ask them what their Norgan figure is. Yet they don’t tell the borrower and the borrower doesn’t know to ask.
In their defence, some lenders can be very helpful, yet still far too many of them pressurise their customers, using smokescreens to coerce borrowers into throwing in the towel far too soon.
Borrowers need the confidence and the support to take on their lenders but the tactics employed against them is aimed at undermining such resolve.