Warning on 'mortgage rescue' firms

Warning on 'mortgage rescue' firms

Homeowners struggling with spiralling mortgage costs have been warned to beware of companies which promise a quick way out of debt but could cost them their houses.

A new wave of 'mortgage rescue' firms is targeting financially stretched owners, promising to solve their debt problems by buying their homes quickly and free of fees. Although the companies typically pay as little as two-thirds of the property's market value, people are attracted to the deals because they believe they will be able to carry on living in their homes indefinitely. But according to the Citizen's Advice Bureaux and the housing charity Shelter, some homeowners have unknowingly signed up to unprotected, short-term tenancies, leaving them in danger of being made homeless with little notice. The Wolverhampton Citizen's Advice Bureau alone has advised on 17 cases of people losing their homes through such contracts in the last couple of months.

The warning comes as increasing numbers of homeowners struggle with their mortgages. The courts have seen a 98 per cent increase in the first quarter of the year of mortgage possession orders compared to the same period in 2004; and last week the Royal Institution of Chartered Surveyors reported that mortgage payments are swallowing the biggest share of take-home pay for 17 years.

Hayley Rowley, a specialist adviser with Citizen's Advice, said the mortgage rescue companies' activity has increased in line with mortgage arrears and repossessions,.....continued below

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and some are becoming increasingly aggressive.

Homeowners are often contacted by firms after their names are listed in court repossession actions. 'The more predatory companies trawl through possession actions in the county court and approach people on the day and, if there is enough equity in the property, offer to buy it from them and rent it back,' she explained.

Their tactics can be aggressive and one company representative had to be escorted off court premises for hounding potential clients. Some even parade outside courts with sandwich boards.

'With a growing number of people living in the shadow of rising debt and of mortgage arrears, companies offering a way out are increasingly attractive to those struggling to keep a roof over their heads,' said Adam Sampson, chief executive of Shelter. 'But in reality, some packages are misleading, pushing people into housing insecurity and leaving them financially worse off.'

Shelter has been advising Christopher Roberts, a 63-year-old retired civil servant who faces eviction from his home of 55 years after selling it to a company called Repossessions Stopped less than two years ago. The company paid him £95,000 for the house in Stourbridge, West Midlands, although he believes its market value was closer to £145,000.

'I sit here shaking sometimes, trying to think of what to do for the best,' he said. Although he said that the whole point of the deal as he understood it was that he could keep his home for the rest of his life, he signed up to an assured shorthold tenancy, and the agreement gave no indication that he would be allowed to remain in the property indefinitely.

The property was sold on to a partnership called Dewsbery and Welch which has since gone into administration. Although Mr Roberts is up to date with his rent, he has received a section 21 notice under the Housing Act requiring vacant possession of the property.