The Mortgage Rescue Scheme is a government initiative, which is run by local housing authorities, designed to prevent some of the most vulnerable families losing their homes. Mortgage Rescue Scheme operates by bringing together local authorities, Registered Social Landlords (RSL), lenders and debt advice agencies. The scheme works in two ways; eligible families can either get an equity loan to reduce their mortgage, or sell their home and remain as tenants.
The level of grant to a RSL will be determined using the Homes and Communities Agency's value for money assessment criteria after a Money Adviser has advised on the most appropriate route after establishing a household's affordable housing costs.
Lenders are encouraged to get involved in using the Mortgage Rescue Scheme as it keeps people in their homes and avoids repossession. In the current and regulatory climate, there is an increasing need for lenders and borrowers to work together to find solutions where loans may not be sustainable. It is also useful as it redeems poorly performing loans, potentially reduces shortfalls (as properties are redeemed at 97% of open market value) and avoids the costs associated with repossession.
Eligibility criteria
On referral to the local housing authority, an assessment of a household's eligibility will be made in the same way as for homelessness assistance. The household must include someone with priority needs as defined in the Housing Act 1996 (and Priority Needs Order 2001):
1. a pregnant woman or a person with whom she resides or might reasonably be expected to reside.
2. a person with whom dependant children reside or might reasonably be expected to reside.
3. a person who is vulnerable as a result of old age, mental illness or a handicap or physical disability or other special reason, or with whom such a person resides or might reasonably be expected to reside.
The following criteria will also apply:-
. living in the property must be sustainable after mortgage rescue
. the household must want to stay in their home and it must not be practical for them to trade down to another property in the area
. the property must be suitable for the needs of the household (eg it is not severely overcrowded)
. the owners must have sought debt counselling and advice, agreed to debt rescheduling and discussed alternative options with mortgage lenders before admission to the scheme
. applicants must not have a second home (including abroad)
. caps have been set on the value of the property (at regional level) and on the household's income level
The Scheme so far
The scheme was announced in September 2008 and launched on 16 January 2009. During May, 150 households applied for the scheme. Twenty-six of these applications were accepted, but only four households signed up. By July 2009 only 6 families were helped by the scheme. The figures released in November 2009, showed that out of 11,000 requests for assistance from borrowers since January 2009 only 92 families accepted help offered through the mortgage rescue scheme.
Fast Track Process
Many lenders have experienced frustrations with the mainstream Mortgage Rescue Scheme. Therefore, following discussions between Government, individual lenders and the Council of Mortgage Lenders (CML), a new Fast Track Team was established. The Fast Track procedure complements the mainstream Mortgage Rescue Scheme, which remains in place for applicants who approach their local authority for assistance.
Under the Fast Track, lenders are able to make referrals directly to a new Fast Track Team, who will then manage the case throughout. The Fast Track Team will ensure that there is a much more improved service for lenders and households in mortgage difficulties. The Team have a strict timescale of within 6-8 weeks from referral to complete the sale by the purchasing RSL.
The Team is now fully operational and is able to receive and process over 250 new cases a week. There is clear evidence to indicate that the Fast Track Mortgage Rescue Scheme works well and will provide confidence to the Lender industry that the new approach can be trusted to deliver.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
