The Civil Justice Council has issued a new pre-action protocol for mortgage possession cases following extensive consultation during the course of this year with stakeholders, regulators, other Government departments and the Civil Procedure Rules Committee. The protocol will take effect from the 19th November 2008 and will be effective immediately.
The Protocol sets out clear guidance on the steps that lenders are expected to take before commencing a claim in the courts to ensure that re-possession actions are a last resort. However, it is not intended to alter the parties' rights and obligations. The key provisions of the protocol are as follows:
- The lender and borrower must act fairly and reasonably and all communications must be clear, fair and not misleading.
- The parties must discuss the cause of any arrears, the borrower's financial circumstances and proposals for repayment. The lender must give reasons if payment proposals are rejected.
- The lender must consider postponing commencing possession proceedings in which case the borrower must take reasonable steps to actively market the property.
- The court takes the view that starting a possession claim is "usually a last resort" and should not normally be started when settlement is actively being explored.
At the same time the Council of Mortgage Lenders have published new guidance on mortgage arrears and possessions to help Lenders ensure that their arrears management policy fulfil the objective of making repossession a last resort. It provides examples of practice against which Lenders can benchmark their own policies and procedures.
Finally the Government has welcomed the OFT's recent report on the sale and rent back sector which proposes regulation of this practice by the FSA. The Government will make a final decision on the OFT's proposal after it has considered a consultation and impact assessment.