HM TREASURY News
Release (PN/135/08) issued by COI News Distribution Service. 10
December 2008
The Government
today announced further details of the Homeowner Mortgage Support
Scheme, intended to provide greater assurance to homeowners that
they will be able to remain in their homes if they suffer a
temporary fall in income, but are expected to recover at a later date.
The new scheme will provide a bridge, giving homeowners who are
experiencing financial problems sufficient time to find new
employment or recover income, without the added concern and stress
of potentially losing their home in the interim.
This complements our current framework of support, including the
Support for Mortgage Interest (SMI) scheme, which is aimed
primarily at households where no one is in work.
The scheme will allow lenders to reduce a borrower's current
monthly mortgage payments, with the deferred payments rolled up,
added to the principle, and paid at a later date when the
borrower's financial circumstances have improved. The
Government will guarantee the lender against a proportion of any
loss incurred on the deferred interest payments in case the
borrower defaults.
The scheme will be voluntary and subject to eligibility criteria
to ensure that there is proper risk sharing between Government,
lenders and borrowers and the scheme is sustainable for those that
participate. To qualify, borrowers will:
* have suffered a loss of income from employment or
self-employment of a scale which now makes full mortgage payments
difficult, but which is not expected to be a permanent loss of income;
* have been in dialogue with their lender, including over the use
of existing forbearance policies, and have been making some level
of regular payment;
* have taken out a mortgage of up to £400k;
* have savings below £16,000, (which is the same as for the
existing Support for Mortgage Interest scheme (SMI));
* apply for assistance as owner-occupier - the programme will not
apply to people with second homes or buy-to-let properties;
* not be in receipt of SMI or mortgage rescue assistance;
* have been assessed as being able to pay a certain monthly
amount on an ongoing basis;
* have received financial advice from a party other than their
lender to determine their eligibility for the scheme, including
testing the long-term sustainability of their financial position,
and their ability to resume full payments once their income
increases; and
* have fallen into arrears for a number of months during which
the lender has exercised forbearance.
The scheme itself will be open for a window of two years, subject
to review. The guarantee will last for a maximum time period and
will expire once the customer is able to commence normal payments.
If, during the period of guarantee, the customer defaults, the
Government will pay the lender the equivalent sum of the total
amount of the interest guaranteed that is not recoverable from
equity in the property.
The Department for Communities and Local Government and HM
Treasury continue to work closely with industry and consumer
groups on some of the practical aspects of implementation.
Notes for Editors
1. The Homeowner Mortgage Support Scheme was announced on 3
December and is one of a number of measures the Government has announced
2. The 8 largest lenders covering 70% of the mortgage market -
HBOS, Nationwide, Abbey, Lloyds TSB, Northern Rock, Barclays, RBS,
HSBC - have agreed in principle to support the new scheme.
3. This scheme is in addition to recent measures announced in the
PBR to help homeowners which include:
* Agreement with major lenders to wait at least three months
before initiating repossession proceedings, in order to explore
all other alternatives.
* Bringing forward the Government's £200 million Mortgage
Rescue scheme to start early in over 50 local authority areas.
* Enhancing the Mortgage Rescue scheme to cover vulnerable
families at risk of repossession because of additional loans
secured on their home.
* Announcing a further £15.85 million to extend free debt advice
to be made available to all consumers across the country.
* Increasing the support available for those eligible households
paying the interest on their mortgages.
4. This follows action Government has taken to support households
in recent months, including:
* A new mortgage pre-action protocol, introduced by the Civil
Justice Council, which came into effect last week. The new
protocol makes clear that repossessions should be a last resort.
* The DWP is reforming Income Support for Mortgage Interest
(SMI), by shortening the waiting period before SMI is paid from 39
weeks to 13 weeks for new working age claims. This will come into
effect from 5 January 2009.
* Expanded free legal representation in county courts for
households at risk of repossession.
* A £10 million package to increase the provision of legal and
debt services already in place to offer advice to households in
difficult financial circumstances.
Non-media enquiries should be addressed to the Treasury
Correspondence and Enquiry Unit on 020 7270 4558 or by e-mail to public.enquiries@hm-treasury.gov.uk
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