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Struggling homeowners facing mortgage arrears and repossession are being tempted to consider a “mortgage rescue” scheme from independent companies. This typically involves a sale-and-leaseback deal which offers mortgage payers a financial lifeline by buying their property off them and allowing them to lease it back as tenants.
It enables former owners to stay in their home and have a chance of buying it back when they are in better financial shape to do so. Scores of organisations have sprung up in the last year, preying on the vulnerable. With no regulation of the sector, the risk to consumers is very high.
In London, a mortgage payer with arrears had resorted to a sale and rent-back organisation. Although her home was worth £350,000, she was given just £200,000. She also received a six-month/£750 per month tenancy agreement with another independent company acting as landlord. The landlord then increased the monthly rent up to £1,300 per month, beyond her ability to pay. Shortly afterwards the woman was back in court facing possession for rent arrears.
These organisations who exploit people in this way should not be allowed to repeatedly market themselves as having a solution to a traumatic situation. Furthermore, operating without any reprimand, these individuals must now be exposed and closed down, not only to safeguard the livelihoods of innocent hardworking people, but also to bring honesty and trust back into an already subdued mortgage market.
In theory, a sale-and-leaseback arrangement could be a good solution for borrowers facing mortgage repayment problems. However, the Council of Mortgage Lenders (CML) Citizens Advice and Shelter are concerned about some aspects of these schemes. They have jointly written to the Government asking for the Financial Services Authority (FSA) to be given suitable power to regulate this rapidly growing sector and to clamp down on exploitation and misleading adverts.
There were 27,100 repossessions in 2007 following rising interest rates and the credit crunch towards the end. Irresponsible lending at very high multiples of income and to high risk groups have economists predicting increasing mortgage arrears and possessions in 2008, especially when thousands more of mortgage payers will find their fixed-rate periods coming to an end. With inflation and other issues in the British economy, along with concerns regarding mortgage funding, these factors will also help increase the risk of mortgage payers defaulting on loans.
Home owners are advised to seek independent financial assistance at the earliest stage of difficulty. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Editor: Simon Weston-www.myfirsthomeltd.co.uk
Email: simon.weston@myfirsthomeltd.com.
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