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November 11, 2008    

High Court ruling increases risk of repossession

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by Gill Montia
High Court ruling increases risk of repossession

A recent High Court ruling means that lenders can, in theory, repossess a home without a court order once only two mortgage payments have been missed.

The ruling has led to an outcry among legal professionals and politicians, who are demanding better protection for homeowners.

The case involved a buy-to-let mortgage provided by GMAC-RFC and was heard by Mr Justice Briggs, who based his ruling on legislation dating from 1925.

Last month, Prime Minister Gordon Brown instructed mortgage lenders to use repossession only as a last resort.

The protocol intended that all other means of resolving mortgage debt should first be explored, including extending the term of the loan and switching mortgages.

However, the court ruling may encourage nervous lenders to ignore their responsibilities, leaving homeowners to cope with the trauma and cost of being evicted, before they are even three months in arrears with their mortgage payments.

While mainstream lenders are likely to comply with the latest official guidance on repossession, there are fears that sub-prime lenders may be temped to make a quick recovery.

According to the Financial Services Authority, repossessions rose by 71% in the three months to June to 11,050.

The figure compares with 6,476 during the same three months of 2007.

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