The Government announced on 2ndSeptember 2008 a 200 million pound package of measures designed to prevent some of the most vulnerable families losing their homes. It is hoped that the scheme will avoid up to six thousand repossessions across England.
The package has three elements.
1. Shared Equity
This is designed to help householders who experience payment shocks and need some help in paying their mortgage.
2. Shared Ownership
This is designed to help those unable to meet their mortgage repayments but still able to make a contribution to monthly payments.
3. Sale and Rent Back
This is designed to help vulnerable households on low income who have little chance of sustaining a mortgage.
Mortgage rescue will operate by bringing together Local Authorities, Registered Social Landlords (RSL), Lenders and Debt Advice Agencies. The three elements will work in the following ways.
1. Shared Equity
RSL provides an equity loan enabling the householders mortgage payments to be reduced.
2. Shared Ownership
RSL buys a share enabling the purchasers to pay off some of their mortgage and convert the property to shared ownership by issuing a Shared Ownership Lease.
3. Sale and Rent Back
RSL clears the secured debt completely and the applicant pays rent to the RSL at a level that they can afford.
The level of grant to a RSL will be determined using the Housing Corporation Value for Money Assessment Criteria after a Money Advisor has advised on the most appropriate route after establishing a households affordable housing costs.
The scheme will not help those who have taken a second charge on their property or those who are in negative equity and it will be subject to a set of eligibility tests.