Executive Summary
1. As the Repossessions Group, set up by Scottish Ministers in response to the current economic downturn and consequent rise in repossessions, we were asked:
- to consider urgently whether the legal protection for homeowners in Scotland at risk of repossession provided through UK legislation and in Scotland through such vehicles as the Mortgage Rights (Scotland) Act 2001 and the Conveyancing and Feudal Reform (Scotland) Act 1970 is adequate and, if necessary, make specific recommendations on ways in which either reserved or devolved legislation should be strengthened; and
- to consider what else the Scottish Government, the UK Government and others such as lenders, advice agencies and legal services might do to help those at risk of repossession and reduce the risk of repossession.
2. We welcomed recent initiatives by the Scottish and UK governments. Recognising that some of these initiatives are new, it was felt that their efficacy should be kept under review and amended in the light of experience.
3. We identified four stages as being key when helping struggling home owners. Our recommendations sit within this context:
- preventing problems from emerging or accelerating, through advice and other forms of assistance;
- the provision of every reasonable opportunity for a home owner to sustain home ownership where problems have led to action being taken by creditors;
- the opportunity to retain the home through an alternative arrangement, either as a tenant or through shared equity, where continuing the mortgage is not sustainable; and
- the smooth transition to other forms of housing where the home has to be vacated.
4. In addition to these, a need for separate repossessions data for Scotland was considered necessary both to understand the extent of the issue and to fine tune policy responses. We recommend that the Financial Services Authority ( FSA) be asked to require lenders to provide regional data on a regular basis, preferably every quarter, but at least six monthly. Given the weakness in the historical data, efforts to improve the robustness of court data across Scotland were welcomed.
5. To prevent problems from emerging or accelerating, and in addition to the efforts already made by advice agencies and lenders, we recommend that a range of independent advice be provided for those facing financial difficulty.
6. This should include clear and easy to understand information from lenders and courts (at each stage of the repossessions process); clear warnings as to the risks of non-regulated 'sale and rent back schemes'; provision for those facing redundancy to be directed to relevant financial advice; encourage the fast-tracking of those at risk of repossession for face-to-face assistance; the prioritisation of increased capacity across the advice sector when allocating resources nationally and locally; and liaison in the identification and resolution of strategic gaps in advice provision by a range of bodies.
7. We welcomed assurances by lenders that they will show appropriate forbearance towards borrowers, and encourage such restraint to be shown to Scottish borrowers wherever possible and where this is in the borrower's best interest. We feel that monitoring the take-up of Homeowner Mortgage Support ( HMS) as run by the UK Government, consideration of options for rescheduling debt to make repayment more sustainable, and liaison between lenders and advice agencies as to policy could further assist those facing financial difficulties and avoid cases going to court.
8. We note that the intimidating nature of the court process can put people off action to resist repossession. To address this perception, we recommend changes to the Sheriff Court Ordinary Cause Rules which simplify procedures and make them easier to understand, improve accessibility, and develop court processes.
9. To address perceptions as to the bureaucracy involved in claiming legal aid, as well as the operation of clawback arrangements, we recommend that the Scottish Legal Aid Board ( SLAB), and where relevant the Scottish Government, consider a number of relevant issues. These include; the judicial rate of interest, liaison between SLAB and solicitors as to the impact of clawback arrangements, and clarification as to the sale of houses over which SLAB has standard securities.
10. We feel that a shortcoming of the existing legislation lies in the need to invoke a special application when seeking to order a temporary suspension of the lender's enforcement rights. We believe that (with the exception of such examples as a voluntarily surrendered or an abandoned property) all enforcement cases should be by application to the court and should be subject to a court hearing at which the court should be able to order a temporary suspension even where no application under the Mortgage Rights (Scotland) Act 2001 has been lodged.
11. We recommend a number of amendments to the Conveyancing and Feudal Reform (Scotland) Act 1970 and the Mortgage Rights (Scotland) Act 2001 to facilitate such change. We suggest that these amendments require lenders, through primary legislation, to provide evidence that they have complied with FSA regulatory requirements.
12. At the same time, we recognise that, for some householders, remaining in a property as a home owner will not be sustainable nor in their best interests. In such circumstances, we note the need to ensure that transition arrangements are as smooth as possible and urge the Scottish Government to keep such arrangements as the Mortgage to Rent ( MtR) and Mortgage to Shared Equity ( MtSE) schemes under review.
13. We believe that our recommendations, in addition to existing measures protecting home owners in Scotland, would ensure better protection, which is more easily accessed and more widely available. The recommendations are covered in greater detail and are defined more specifically in the main report.