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Bath & North East Somerset Council | ||||||
MEETING: |
RESOURCES CO-ORDINATION COMMITEEE |
AGENDA ITEM NUMBER |
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MEETING DATE: |
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REPORT AUTHOR: |
Ian Savigar, Revenue Services Manager | |||||
RESPONSIBLE OFFICER: |
Paul Emanuelli, Head of Corporate Business and Financial Services | |||||
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TITLE: |
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WARD: |
ALL | |||||
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BACKGROUND PAPERS: ‘The Mortgage Code’ – Council of mortgage lenders | ||||||
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AN OPEN PUBLIC ITEM | ||||||
1. SUMMARY
1.1 This report details a proposed policy for dealing with mortgage arrears which outlines the way in which the arrears owed to the Council should be pursued.
1.2 The policy is intended to show that the council is seeking to help those in genuine difficulty, who are willing to communicate, but that it will use all available powers to collect the arrears from those who have no wish or intention to pay off such arrears.
2. RECOMMENDATION
2.1 That the policy for dealing with mortgage arrears as set out in Section 5 of this report be approved as a policy for dealing with Council mortgage arrears.
2.2 The necessary Officer delegations are approved to enable the Policy to be implemented. Accordingly that the Head of Corporate Business and Financial Services and Revenue Services Manager be authorised to undertake all necessary proceedings and procedures and the Property Law Manager and Corporate Law Manager be authorised to institute and conduct legal proceedings to enforce the policy of the Council for dealing with Council mortgage arrears.
3. RESOURCE AND CORPORATE POLICY IMPLICATIONS (Where necessary, the views of the Council's Statutory Officers are reflected in the comments below)
3.1 Financial:
3.2 Staffing: None
3.3 Equalities: There are issues where mortgagees are in arrears because they have a low income or are on benefits because they are disabled or are a lone parent. These are addressed at paragraph 5.10.
3.4 Economic: None
3.5 Environment: None
3.6 Council Wide Impacts:
4. BACKGROUND AND LEGAL FRAMEWORK
4.1 This Authority, like all organisations chasing debts, faces the dilemma of how far to pursue, and for how long to maintain any arrears within its accounts.
4.2 Whatever kind of debt is being collected, be it Council Tax, NNDR or a Council Mortgage, it should always be remembered that it is public money that is being collected and it must be ensured that this is done in a cost effective manner. However there are some cases where the cost and distress of Court action need to be considered against the cost and benefit to the Authority and the community in general.
4.3 There is therefore a need to be able to identify between those people who ‘can’t pay’ for whatever reason, and those who ‘won’t pay’. This document sets out a set of proposed guidelines for identifying and dealing with these situations.
4.4 The Authority’s portfolio of Council mortgages (ie those granted by the former Bath City Council and Wansdyke District Council) is reducing as many of the borrowers redeem their loans. Although the vast majority of borrowers keep up-to-date with their payments there are several who have fallen into arrears and it is felt that action needs to be taken in order to prevent the situation becoming unsatisfactory
5. PROPOSED ACTION FOR ARREARS
5.1 If a borrower falls into arrears there are already procedures carried out by the agents who administer the Councils mortgages. Usually these procedures lead to the borrower catching up with the payments in an agreed period of time and no further action needs to be taken. However, if the borrower remains in arrears the account is passed to Legal Services for necessary action.
5.2 Cases of financial difficulty should be treated sympathetically and positively. The first step will be to contact the borrower to discuss the matter. Endeavour to find out as much as possible about the full financial circumstances in order to offer as much help as possible.
5.3 Ask what proposals the borrower can make to pay off the arrears.
5.4 If no suitable arrangement can be agreed conduct a means enquiry to ascertain the borrower’s ability to pay.
5.5 The various advice and options available to be fully explained and offered to the borrower. These options to include:
· Amending payment dates so as to be more convenient to the borrower.
· At the request and with the consent of the borrower, liase, wherever possible, with debt counselling organisations, eg Citizen’s Advice Bureaux, Housing Advice Centre, Money Advice Centres or The Consumer Credit Counselling Service. This would include advice on entitlement to all types of financial assistance including benefits.
· With the borrower’s co-operation, develop a financial plan for dealing with the financial difficulties of the borrower and clearing the arrears, consistent with the interests of both the borrower and the Authority.
· In extreme cases, it may be appropriate to draw up a ‘deed of amendment’. This will extend the term of the loan and have the effect of transferring all arrears onto the capital element of the loan. This option may only be appropriate when the financial difficulties of the borrower are not likely to be long term.
5.6 In most circumstances, a combination of the above is successful and allows a plan to be drawn up to repay the normal monthly instalment due plus a contribution towards the arrears. In this way the arrears are paid off within the agreed period of time.
5.7 In cases where the borrower refuses to reply or refuses to co-operate, further letters to be sent via recorded delivery. If there is still no success in achieving a suitable repayment plan then the option of Possession Proceedings to be considered.
5.8 The two options available when taking Possession Proceedings are the following:
· Possession proceedings taken with the intention of obtaining a ‘suspended possession order’. This would be sought with the intention of ‘persuading’ the borrower to make payments once this order had been obtained. This would allow the Authority the advantage of having the order to fall back on in the event the borrower defaults again in the future, and would help to formalise any agreement reached with the borrower.
· Possession proceedings sought with the intention of eviction of the borrower and ultimate sale of the property. This would be sought only when it is felt that the borrower has no intention of making any further repayments or refuses to co-operate in attempts to reduce the arrears. If possession proceedings are taken with the intention of eviction of the borrower then the Homelessness team within Social Services and Housing will be notified. The Homelessness team will then write to the borrower offering an interview to discuss the borrower’s future housing options.
5.9 It should be noted that it is already stated within each borrower’s deeds that the Authority can take Possession Proceedings in the event of arrears reaching an unsatisfactory level. However it should be stressed that this action will only be sought as a last resort when attempts to reach alternative arrangements have been unsuccessful.
5.10 In some cases it is not possible for a borrower to make the full mortgage payment, instead either only the interest or part of the payment is met by benefits or from an insurance policy. It may be appropriate in these individual cases to take no action, even though there is an unsatisfactory level of arrears, for example, if a borrower is suffering long term sickness or disability, a borrower is elderly or a borrower has vulnerable dependants living in the property. These cases would be closely monitored and decisions reviewed if, for example a borrowers situation changed.
5.11 It should be noted that it would not be a realistic option for the Authority to buy back occupied properties where the borrower has fallen into arrears, and it is financially unsustainable to encourage the Authority’s Housing Association partners to do so due to the rules for Social Housing Grant. However if there are vacant properties which were subject to Council mortgages the Authority could consider purchasing them as Existing Satisfactory Properties for re-let by one of the Housing Association partners. If properties do become vacant following repossession, details can be forwarded to Head of Housing Strategy to consider this option.
6. CONSULTATION
Income Manager, Legal Services, Loans and Mortgage Administration Centre, Group Manager Housing Needs, Head of Housing Strategy.
6.1 This report was sent to the Trades Unions for comment on 18/11/99. No comments received.
