On 10th December 2008 the Government published a press release which confirms that the Homeowner Mortgage Support Scheme (HMSS) will be voluntary for borrowers and sets out :
- the criteria that borrowers will need to satisfy to qualify for the HMSS
- some details of how the HMSS will work
Eligibility Criteria for Borrowers
The Government has confirmed that to qualify for the HMSS borrowers must :
- have taken a mortgage of up to £400,000
- have savings below £16,000
- have suffered a loss of income from employment or self employment where the loss is not expected to be permanent but makes full mortgage payments difficult
- have been in dialogue with their Lender and have made regular mortgage payments
- be an owner occupier; the HMSS will not be available for second homes or buy to let properties; not be receiving Income Support for mortgage interest or other mortgage rescue assistance; have been assessed as being able to pay specified monthly instalments on an ongoing basis; have taken financial advice from a party other than their Lender to determine their eligibility for the HMSS. This must include the assessment of the suitability of the borrowers' long term finances and the borrowers' ability to resume full mortgage payments when their income increases
- have been in arrears for a number of months during which their Lender must have exercised forbearance
How the HMSS will operate
The Government has also confirmed the following outline details of how the HMSS will operate:
- the HMSS will be "open for a window of two years subject to review"
- the guarantee will last for a "maximum time period" and will expire when the borrower can resume normal payments
- if the borrower defaults during the guarantee period the Government will pay the Lender the amount of interest that is not recoverable from any equity in the borrowers' home.
Further information is not currently available about how each of these three points will work in practice as at the 1st January 2009.
Next stage in the process
As at the 1st January 2009 the Department for Communities and Local Government is still considering the precise details of the HMSS these include details of :
- when the HMSS will become available to borrowers
- whether the HMSS will definitely be available to a borrower for at least two years once they have taken it up or whether this will depend on an overall review of the HMSS two years after it becomes available to the public
- the Governments' guarantee to the Bank in respect of the deferred interest including the guarantee period
- whether the HMSS will be given forth by legislation or whether it will be embodied in a formal banking protocol.
The Government is consulting with Banks and Debt Advice Agencies and intends to make further details available in January 2009.
Comment
The UK's 8 largest lenders have only agreed in principal to support the HMSS and it remains to be seen whether those lenders will commit themselves to the HMSS once the details are finalised.
It also remains to be seen :
- how the HMSS will operate if a property is subject to a second charge
- whether there will be any limit to the loan to value ratio of the mortgage
- if the HMSS will make any provision for what will happen if the value of the property falls below a certain threshold
- whether the HMSS will be transferable if the borrower moves home and the mortgage is transferable