A legal loophole that has allowed lenders to make repossessions without going to court will be closed by a new law, the government has announced.
Charities have campaigned against the loophole after a judge ruled in favour of lender GMAC-RFC in a case of repossession last year. The BBC reported that the ruling and the loophole meant that homeowners were vulnerable to immediate repossession after missing only two mortgage repayments.
The government said their move would prevent ?rogue lenders? from exploiting the loophole, and follows eight weeks of consultation.
Last year GMAC-RFC repossessed a property after the borrower got into arrears. The homeowner was living in the property he had initially taken a loan out for a buy-to-let property.
GMAC-RFC evicted the homeowner on the grounds of trespassing and managed to remove the owner and repossess the home without a court order. The borrower claimed the repossession was a violation of his human rights, but the judge rejected the claim.
Following this, in October 2009, the Financial Services Authority (FSA) fined GMAC-RFC for mistreating customers who had fallen into arrears, saying they made unfair charges and were too eager to repossess properties.
Justice Minister Bridget Prentice said: ?Under the existing law, lenders have the right to repossess and sell a property without seeking either the agreement of the owner, or of the Courts.?
?While there is no evidence that owner-occupiers are being treated in this way, the government proposals published today would close this loophole and prevent any future instances of ‘rogue lenders’ behaving this way.?
In addition, the government said that a scheme to give free advice to homeowners facing repossession had helped more than 33,000 people in England in the year to the end of September 2009.
