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
- 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
- the council may arrange an assessment of
their home
- 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):
- A pregnant woman or a person with whom she resides or might
reasonably be expected to reside
- A person with whom dependant children reside or might
reasonably be expected to reside
- 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
