Mortgage Rescue Schemes

Information regarding the mortgage rescue schemes in Northumberland


Mortgage Rescue Schemes

Mortgage Rescue Scheme Leaflet

Mortgage Rescue Scheme Poster  Mortgage rescue

Frequently asked questions

Useful Documents

Mortgage Rescue Scheme

The Mortgage Rescue Scheme is a £200m package of measures designed by Government to prevent some of the most vulnerable families losing their homes and experiencing the trauma of repossession. This scheme, run in each area by the local housing authority, aims to help up to 6,000 vulnerable households across the country over two years and is targeted at those who would be eligible for homelessness assistance and who meet the required eligibility criteria of the scheme. If eligible, the homeowner could get financial help to stay in their home.

 

The application for help from the scheme is made to the local council. In addition, a homeowner can be referred to the scheme by:

 

To be eligible for the scheme the household must include someone in priority need, in line with the homelessness assessment criteria.

They must also need to meet the following criteria:

  • The household must earn less than £60,000 a year
  • The value of their home cannot be higher than the level set for Northumberland which is £125,000
  • Everyone named on the mortgage must agree to be considered for the Mortgage Rescue scheme
  • The homeowner must have received debt counselling and advice from a  free independent debt adviser at an organisation like the Citizens Advice Bureau or Shelter
  • The homeowner should have made arrangements to repay any debts
  • The homeowner should have discussed all other options to meet the repayments with their bank or mortgage lender
  • The homeowner must have a clear need to stay in your home, which means it’s not practical or reasonable to move somewhere smaller or cheaper
  • The home must be suitable for the homeowner’s needs - for example, there’s not too many people sharing the same space making it unsafe and unhealthy
  • The homeowner must not own a second home, including a home abroad

 

When a homeowner applies for help from the scheme:

the council will arrange for the homeowner to meet with the money advisers

  1. the homeowner will receive advice and a plan to help them manage their debt or some other way that they can meet their housing costs
  2. the council may arrange an assessment of their home
  3. the homeowner may get financial help, either with a ‘shared equity loan’ or through a ‘Government mortgage to rent’, depending on their circumstances

 

It was announced as part of the 2009 Budget that the scheme was being expanded to help people in negative equity from 1 May 2009. The homeowner can apply for the scheme if:

  • they meet all the other eligibility criteria
  • the value of their mortgage (and any loans taken out against their home) is less than 120 per cent of the value of their home

The mortgage rescue package has two elements:

Shared equity  - designed to help householders who have experienced payment shocks and need some help in paying their mortgage.

Government Mortgage to Rent - designed to help the most vulnerable households on low incomes with little chance of sustaining a mortgage.

Registered Social Landlord ISOS has been appointed as the local Homebuy agent, with the ability to acquire either an option or to purchase the mortgaged property outright.

Shared Equity – ISOS could provide a shared equity loan, paying off a proportion of the mortgage. In return the homeowner will pay a subsidised rent on the share ISOS buy, which could be between 25% & 75% of the mortgage.

Mortgage to Rent – ISOS could pay off the mortgage completely by buying the property outright. The homeowner will then stay in their home and pay rent to ISOS. The rent will be an intermediate rent (currently defined as 80% of the likely market rent for the property).

 

Further information is available at the following sites;

Citizens Advice Bureau

Direct Gov

 

 

Frequently asked questions

 

When will the scheme be operational?

Is there a simple message for worried owners?

How do people apply?

What are the eligibility criteria?

What actually happens to eligible applicants?

What have you announced in the 2009 Budget for homeowners facing repossession?

Why have you expanded the Mortgage Rescue Scheme in this way?

This scheme is a waste of money, it won't help many people

I was found ineligible due to negative equity before 1 May 2009, can I reapply?

How does the new Negative Equity part of the scheme work?

Aren't you just bailing out less responsible households?

What happens if people still end up being repossessed - aren't you just wasting money?

Does the scheme apply to the whole of the UK?

Does this include people in Freehold and Leasehold?

Why aren't you helping hard working families? Isn't this yet another disincentive for work?

Why aren't you making irresponsible lenders pay for this rather than the tax payer?

Are these people still eligible for other benefits?

Who can access the Repossessions Prevention Fund, and what is it likely to be used for?

 

When will the scheme be operational?

The scheme was launched on 16 January 2009 across the country and is now available in Northumberland.

 

Is there a simple message for worried owners?

Yes. If you are worried about meeting your mortgage payments talk to your lender. If you are still worried talk to your CAB or for initial enquires call the  Northumberland County Council contact centre on 0845 600 6400 where an advisor will be able to assist you, alternatively contact local Homeless and Housing Advice Service directly for assistance, they will advise you on your finances and also help you make a MRS application.

 

How do people apply?

You must make your application for Mortgage Rescue through your local Homeless and Housing Advice Service.

Households in financial difficulty, at risk of repossession and threatened with homelessness should seek advice from their lender in the first instance.  Further advice and support will be available from your Homeless and Housing Advice Service, local Citizens Advice Bureaux or other advice agencies.

Referrals to a local housing authority can also be made by advice agencies, courts or lenders.

households can also self-refer.

 

What are the eligibility criteria?

On referral to the homeless and housing advice service, 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:

  • All owners of the property must agree to being considered for the mortgage rescue scheme
  • 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.

 

What actually happens to eligible applicants?

The process is as follows:

On referral to the local authority, the household's homelessness eligibility is assessed.

If eligible, the lender is alerted.

  • Money Advisors (MAs) are engaged.
  • Money Advisors draw up and agree with the household a debt management plan or other financial solution setting out their realistic affordable housing costs.
  • Registered Social Landlord (RSL) or HomeBuy agency is engaged.
  • The property is visited to ensure it is structurally sound.
  • Decision is taken on the suitability of a shared equity option or mortgage to rent.
  • Local Authorities to agree with Lender to freeze all further action and interest.

 

What have you announced in the 2009 Budget for homeowners facing repossession?

Changes to the Mortgage Rescue Scheme
Households previously excluded due to Negative Equity will now, in certain circumstances, be eligible to apply for the scheme. This change will come into effect from the 1 May 2009.

Repossession Prevention Fund
A fund to allow local authorities to help homeowners facing repossessions through small loans.

 

Why have you expanded the Mortgage Rescue Scheme in this way?

We have always made clear that MRS would be kept under review so as to maintain flexibility in order to respond to market pressures and scheme demand.

We recognise that a number of people who bought their homes recently will be adversely impacted by the fall in house prices and will now find themselves in negative equity. In order to help those at risk we decided to expand the scheme in this way.

 

This scheme is a waste of money, it won't help many people

This scheme is one of a range of support schemes we are putting in place to help people through the downturn. MRS is aimed at helping up to 6,000 of the most vulnerable households over two years. The scheme went live just over three months ago. We always made clear that the application process would take around three and half months to complete to ensure that all the rescues are sustainable.

 

I was found ineligible due to negative equity before 1 May 2009, can I reapply?

Yes. These changes can be applied retrospectively, which means that anyone who has fallen out of the scheme because of this criterion and has not found an alternative option can reapply to the local authority.

 

How does the new Negative Equity part of the scheme work?

These changes will go into effect from 1 May 2009. Detail on how these changes to the scheme will be implemented will be provided to local authorities and Registered Social Landlords in due course. Concerned homeowners should continue to talk to their lenders, and should approach their local authorities if they feel they may be eligible for the Mortgage Rescue Scheme.

 

Aren't you just bailing out less responsible households?

No. We are targeting support at vulnerable households at risk of repossession to help them sustain home ownership and/or remain in their homes. Our mortgage rescue scheme is designed to support those who cannot pay, not those who won't pay their mortgages. That is why households will need to meet strict eligibility criteria and agree to a debt management plan or other financial solution to qualify.

 

What happens if people still end up being repossessed - aren't you just wasting money?

The involvement of money advisers and the agreement with households of a debt management plan or other financial solution and appropriate restructuring of mortgage payments should ensure repossession does not occur.

The scheme involves a thorough application process to ensure the rescue is affordable and sustainable and that the household will be able to manage any future payments. The process is expected to take an average household around three months to complete.

 

Does the scheme apply to the whole of the UK?

The scheme applies to England. Separate schemes are either in place or being developed in Scotland, Wales and Northern Ireland.

 

Does this include people in Freehold and Leasehold?

Yes, both homeowners of freehold and leasehold properties are eligible for the scheme.

 

Why aren't you helping hard working families? Isn't this yet another disincentive for work?

Many of the households eligible for support will be hardworking families who face difficulties in meeting mortgage payments as a result of current market conditions. This is not a disincentive to work. Separate benefits - such as Support for Mortgage Interest (SMI) assist out of work homeowners in meeting their mortgage payments.  

 

Why aren't you making irresponsible lenders pay for this rather than the tax payer?

The Government has made a strong effort to support the market. The scheme represents good value for money for the tax payer through the avoided costs of expensive Bed and Breakfast and temporary accommodation. Lenders are looking at further options to assist households in the coming months, and we are working closely with the CML and partners to achieve this.

 

Are these people still eligible for other benefits?

The Mortgage Rescue scheme does not affect a household's eligibility for other benefits. There is no double counting, however entitlement to Support for Mortgage Interest (SMI) will be reduced to reflect the size of the new loan.

 

Who can access the Repossessions Prevention Fund, and what is it likely to be used for?

The Fund will be available to anyone threatened with homelessness either through repossession or eviction. For example, it could be used to clear mortgage or second charge arrears in appropriate cases, where this would prevent repossessions.

The maximum loan is £5,000 and is conditional on the household seeking money advice with CAB or other money advice agencies that are used by the Council. The principle would be that these loans are not made available unless the home-owner or tenant had acted on money advice and were able to meet any existing or newly negotiated monthly repayments.     

 

Useful Documents

 

National Homelessness Advice Leaflet

Mortgage Rescue Scheme Leaflet

Mortgage Rescue Poster

Repossession Prevention Fund