Social Homebuy 14
1 INTRODUCTION
1.1 The shared ownership programme has given rise to various issues. This section sets out guidance on some of them, as they relate to SHB.
2 Mortgage Difficulties
2.1 As a last resort option when a purchaser has got, or is about to get, into mortgage arrears and potentially lose their home, an RSL may use its Recycled Capital Grant Fund to act as a ‘safety net’ and offer flexible tenure. Flexible tenure is designed to enable a shared owner, but not an outright purchaser, to remain in their home. For further information of how RCGF may be used in these circumstances please refer to REC-5.
2.2 Where the SHB purchaser reduces, but still retains part of the equity in the property no repayment of the discount is required. However, should the SHB purchaser revert to being a tenant within the designated repayment period, the discount is repayable.
3 Mortgage Default
3.1 If a purchaser defaults on his/her mortgage payments, the commercial mortgage lender may apply to the courts for a ‘judgement’ or ‘order’ seeking to secure the arrears. If the arrears are still not forthcoming, the commercial mortgage lender may apply to a court for an Interim Charging Order (ICO). The ICO enables the commercial mortgage lender to impose a charge on the interest in the property as detailed in the Land Registry Title document. Court rules specify that all known parties with an interest in the property should be served with a copy of the ICO after it is made but before the full Charging Order is made.
3.2 As the terms of a purchaser’s lease cannot be varied without the Corporation’s consent, the Corporation’s details are required to be entered on the Land Registry Title document at Section B: Proprietorship Register. Due to these details being recorded on the document, the Corporation, on occasions, is sent a copy of an ICO.
3.3 Commercial mortgage lenders are not legally obliged to seek the Corporation’s consent when applying for an ICO to be made. This is because the Corporation has no legal interest in the property, which is to be the subject of the order. However should an ICO addressed to the Corporation received in a Field Office it should be forwarded with any accompanying correspondence to the Investment Policy Team at the Corporation’s Maple House office.
3.4 Legal advice has been sought, and Maple House will inform the lender’s solicitor that as the Corporation has no legal interest in the property that is subject to the ICO, there is no objection to the full Charging Order being made. Maple House will monitor any trends for future consideration.
3.5 A copy of the ICO should also be received by the RSL who has a legal interest in the property. The RSL should seek its own legal advice before replying to the lenders’ solicitor.
3.6 Where there are insufficient monies to repay the outstanding loans, charges and /or discount repayment as a result of a forced sale/re-possession action in cases of mortgage default, it is anticipated that RSLs would consider pursuing the ex-shared owner to recover any shortfall, as appropriate.
3.7 The mortgagee in possession has first call on any receipts and is able to recover their monies and the associated costs of the action, together with up to 12 months capitalised interest. These would normally be deducted from the proceeds of sale before any balance is forwarded to the RSL and/or the defaulting owner.
