If you want to save your house from repossession, you need to stay calm

Think clearly and act logically when you face court, writes Jon Robins

It didn't take long for the credit crunch to make its way to the courts. The latest statistics from the Ministry of Justice show that repossession actions in the last quarter rose by a huge 24 per cent as banks and building societies pursued struggling homeowners through the legal process. And the National Debtline reports a 30 per cent increase over the last 12 months in callers seeking help because they fear they will fall into arrears. So what can you do if your mortgage lender tries to take your home away?

Sort out urgent debts

If you're having problems paying your mortgage, the first thing you need to do is complete a budget sheet looking at what your income and expenditure is, advises Beccy Boden Wilks from the National Debtline. The aim is to sort priority debts, such as your mortgage, from non-priority ones.

'If you don't pay non-priority debts, such as bank loans and overdrafts, then all they are going to initially affect is your credit rating,' she says. Often it's creditors with non-priority debts who bombard you with phone calls and deluge you with red-letter demands: the reason for that is precisely because their money isn't secured against your property, or anything else. So keep a cool head.

'If you do your budget sheet and you can afford your contractual payment plus something towards arrears then the lender will suspend repossession action,' Boden Wilks adds.

If you haven't paid your mortgage for two months and haven't contacted your mortgage company, then the lender is entitled to apply to the county court for a possession claim. You cannot be evicted without a court order.

But receiving court papers doesn't mean that you are automatically going to lose your home. Lenders are also required by Financial Services Authority rules to deal fairly with any customer in arrears. The lender should consider a repayment plan, if appropriate, and keep you up-to-date with information about your arrears, but it should not harass you.

Talk to your mortgage lender

'Some of the mortgage lenders are appallingly difficult to deal with, even the big ones,' says Jacqui O'Carroll, an adviser with Shepway Citizens Advice who runs a helpdesk in Dover magistrates court on 'possession days'.

It is a point echoed by the homelessness charity Shelter, which recently condemned 'merciless mortgage lenders' for failing to consider borrowers' circumstances and being too quick off the mark to use repossession proceedings.

O'Carroll urges borrowers to be more active and present lenders with a repayment plan rather than expecting them to come up with a solution. 'When people receive a possession summons, they just panic,' she says. 'The thing to do is not to panic but to get in touch and negotiate.'

She suggests that you ask for an interest-only mortgage for six months to take the pressure off, possibly adding the arrears on to the mortgage.

'As soon as you get the first letter from your lender you need advice, and it's also important to talk to your lender,' says Boden Wilks.

'Lenders don't have to offer another cheaper mortgage product - but within the [FSA] code they are supposed to do everything they can to try and deal with the matter sympathetically.'

Be realistic

Whatever you do, don't commit yourself to a repayment plan that you won't be able to stick to, advises O'Carroll. It is not uncommon for a mortgage company's 'agents' (usually solicitors) to strike deals with homeowners in a court waiting room which then commit them to unrealistic repayment schedules.

'I get so frustrated when people tell me that the building society insists they have to pay £150 a month. It isn't up to the building society. It's up to the district judge to decide what is reasonable,' she says. 'I don't think there is a district judge in the country who wants to make someone homeless.'

Last Wednesday in Dover, 22 mortgage possession cases were listed in court plus another five 'interim charging order' hearings, in which lenders seek charges over people's homes for other kinds of debt. O'Carroll reports that eight homeowners didn't even attend court; in such cases, the lender automatically receives the possession order it is seeking.

'Always turn up,' she says. 'When some clients ring their mortgage company, they are told "It's too late and in the hands of our litigation department". So they don't bother.'

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