Cable and Wright debate on repossession action

Wednesday, 14 January 2009 10:42 AM

By Sarah Garrod

Vince Cable MP led a debate at Westminster yesterday, questioning the government's response to the increase in home repossessions.

The Association of Mortgage Intermediaries (AMI) had prepared a parliamentary briefing for Mr Cable, the Liberal Democrat treasury spokesman, ahead of the debate, voicing their concerns for both the private and commercial property sectors.

Figures previously released by the Council of Mortgage Lenders (CML) had estimated the number of home repossessions at 75,000 in 2009, which Mr Cable noted was just "the tip of the iceberg". With further news yesterday of a 302 per cent increase in buy-to-let repossessions, Mr Cable also addressed how the issue would affect landlords and their tenants.

Parliamentary under secretary of state, Iain Wright MP, responded to Mr Cable's address saying that, with particular reference to buy-to-let, the government hoped to extend the notice which tenants were given when rental properties were repossessed.

Mr Cable was particularly interested in whether the government had accurate numbers for the measures brought in to help those with mortgages, most notably, the Homeowner Mortgage Support Scheme (HMSS) and changes to the Income Support for Mortgage Interest (ISMI) scheme.

He said: "Repossession is a tragedy for families because it usually involves not just the loss of a job but the loss of a home at the same time. It is a double tragedy.

"However, there are some less obvious reasons why repossession is a problem. It is a problem for society, particularly for local government, because of the pressure that it brings to bear on social housing. Over the past few weeks, there has been an upward revision in the number of people on waiting lists from 1.7 million to 2 million, so the pressure is clearly there."

Mr Cable also spoke of the "vulnerable position" of tenants, who could find themselves homeless with very little warning, if their landlord's property was repossessed.

He concluded his argument by saying: "If we add 9,000 and 6,000, which are the estimates so far in respect of the two main Government schemes, we are talking about 15,000 people, potentially, out of 75,000 people, which is an important figure but is still less than a quarter of those involved. That leads to the necessary conclusion that, even with these schemes in place, large numbers of people will be repossessed this year. That raises the question of where they will live.

"Repossession is taking place in an environment where the provision of social housing is deteriorating. How far do the Government's proposals match the severity and scale of the repossession crisis that we now face?"

Mr Wright responded to Mr Cable, explaining that families should not fear repossession. He said: "It is a major trauma that is, arguably, the biggest single difficulty that a person can face in their life. It affects people's relationships, their health-particularly their mental health-their well-being and quality of life. Children can be uprooted from their school and adults from neighbours, friends and family. In the current challenging economic climate, more people are understandably worrying that they could lose their home.

"I want to reassure the House, and families throughout the country, that we are determined to help as much as possible. No household that experiences a temporary drop in income through no fault of its own, and which is willing to pay back what it can, should fear repossession."

Mr Wright explained the necessity for the government to be flexible at this time, and also to receive feedback from their constituencies on how the new measures were working.

He added: "We are in the process of establishing a new scheme to help people who are having trouble making payments but are not eligible for ISMI-income support for mortgage interest. We have in mind families in which perhaps one person within a couple has lost their job or income or experienced a dramatic cut in overtime or payments. Applicants must have an outstanding mortgage of less than £400,000 and savings of less than £16,000. We estimate that this will take care of 98 per cent. of all mortgages."

Prior to the debate at Westminster Hall today, Chris Cummings, director general of the Association of Mortgage Intermediaries, had prepared a briefing for Mr Cable.

Mr Cummings said: "We think it is of crucial importance that Sir James Crosby's recommendations for temporary guaranteed securitisation are implemented as soon as possible by the government.

"We agree with his comments that 'unless and until banks get access to attractively priced sources of funding the shortage of mortgage finance will endure'. AAA mortgage backed securities are still relatively safe and could actually be profitable for the government, but the cost of funding these instruments would be attractive to all banks so there would be no stigma in using them."

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