Hope for repossessed

Cases starting to trundle through the legal system could stymie mortgage lenders' rights to chase repossessed borrowers for 12 years after losing their home.

Tens of thousands of former homebuyers could find themselves freed from debt claims that are often more than the value of the former property.

The moves come as the Council of Mortgage Lenders congratulates itself in its annual report this week on the fall in repossessions. The CML forecasts "reductions in interest rates are likely to improve the situation for many borrowers in arrears".

But the report ignores the growing headcount of repossession victims being chased for debts years after giving up their property.

Last week Jobs & Money featured Essex resident Dot Cook who lost her home in 1992. With legal help, she managed to beat off the demands of Abbey Life Homeloans, which had claimed more than ?11,000.

Since then, a number of repossessed borrowers have contacted Jobs & Money with details of how lenders have suddenly started to pursue old debts.

Ray de Vere from North-West London handed in the keys to his house eight years ago. In January 1998, with his finances recovered, he bought a house with a mortgage.

Earlier this year, he received a bill for ?8,000 to cover the shortfall on the sale of his former property, interest and other charges.

Just as he was recovering from that shock, he was hit with a further bill - for nearly ?60,000.

Jewant Singh, from Birmingham, gave in her keys to a manager of the West Bromwich Building Society, the lender on her former home, in 1992. Late last month, she received a demand for ?57,000. She claims that in the presence of a witness, she was told by building society manager that repossession was the best option. "He said insurance would cover any shortfall and that I could make a fresh start."

The West Bromwich says it intends investigating the allegations but that staff were not trained to give the message Ms Singh claims.

Peter Madge of the National Association of Citizens Advice Bureaux (NACAB) Specialist Support Unit has similar cases cross his desk every day. He says: "The 12 years which the lenders claim they have to chase a debt is a major problem. Many who lost their homes in the early 1990s due to marital troubles have entered new relationships, are back on a financial even keel. But seeking them out after all this time can easily wreck new marriages."

Mr Madge says that a Court of Appeal decision last year in the case of Hopkinson vs Tupper could mean that lenders have only six years to chase a debt. "It's a grey area. It revolves around whether the outstanding loan is still a mortgage after the property has been sold and there is no longer security. If it is, then 12 years still applies. But if the loan then becomes a standard debt, it would only be six years."

A six-year limitation would prevent many lenders from chasing borrowers who lost their homes before 1993 and would provide an escape route for many caught in the worst years for repossession and negative equity.

Madge says that while most former borrowers are too afraid of potential legal costs, some who have nothing to lose or who can obtain legal aid are now taking banks and building societies to court.

"The lenders argue there is no case to answer but if any of the district judges finds against them, the matter could go all the way to the House of Lords," says Mr Madge.

Lenders may be wary of going to court despite their protestations that the 12-year rule is sacrosanct.

Lenders count the 12 years in different ways. Abbey National starts the clock when the property is sold, others from the date of repossession.

NACAB advises that whatever you do, "never admit to debt. Just send an acknowledgement and ask for clarifications of their claim. "