Lifesavers

The experts are worried. Last week the Consumer Credit Counselling Service, which offers specialist advice to people falling behind with their mortgage payments, said it expected a 20 per cent rise in enquiries about mortgage arrears from homeowners in the next year. The charity had already seen the number of calls it receives from households behind with payments double to 1,160 in the first quarter of this year compared with the same period in 2009.

This is bad news for councils. We are living through what has been labelled the worst recession since the Great Depression of the 1930s - job losses are inevitable, leaving, as the CCCS figures suggest, debt problems and repossessions in their wake. Councils face increasing numbers of households seeking help to keep a roof over their heads. If you’re in work, it’s likely the slump won’t prove so bad. If you’re out of work, you could see your savings dwindle and will at some stage run out of relatives and friends to borrow from. If things reach the point where your mortgage lender is heading to the courts to claim back its money, you’ll be struggling to survive.

Last year my colleague Sara Bowrey, head of housing needs at Bromley Council, kept a diary for Inside Housing of Bromley’s experience as one of the first councils to use the government’s £285 million mortgage rescue scheme which has helped more than 600 households facing repossession (Inside Housing, 22 May 2009). One thing was clear: while it worked for some, the scheme wasn’t for everyone. So, as we face the likelihood of more families in need of help, what tools do councils such as Bromley have in their homeowners’ survival kit to help people avoid the life-changing threat of repossession?

The original scheme

The MRS, launched by the last government in 2009, hasn’t gone away. Bromley was one of the first two councils to complete an MRS application just over a year ago and since then has completed 13 out of 28 done in London. A further six are in the pipeline and we have employed an officer dedicated to progressing MRS.

But Bromley has always been very realistic about the limitations of the scheme. Among the problems are its strict criteria, which bar many households from applying. While we were prepared to fully embrace the scheme to help some, we recognised it might not be right for everyone.

With or without MRS, the problem of struggling homeowners was not going away - courts are required to inform councils of all mortgage repossession actions to give people the chance to get some help and support to avoid losing the roof over their heads, which can lead to a host of costly social and emotional problems. In 2009 we received 30 to 40 notifications from the court per quarter. In the first quarter of 2010 this rose to 170, although this dipped to 87 between April and June.

MRS Bromley-style

Early on we decided to develop an in-house approach to fill the gap left by the strict criteria of the national MRS by taking the innovative step of developing our own scheme as a way of preventing homelessness and saving money further down the line.

So how does it work? We will lend a household up to £20,000 as an equity loan secured against its property. Each applicant is considered on its merits, needs and particular circumstances - and how difficult it would be to re-house them in suitable property or within a suitable period of time. We also compare the cost of providing the loan with how much we would otherwise spend providing temporary accommodation. No household will be assisted if it has contributed to its situation or done nothing to prevent it. The loan is secured and indexed until the property sells or the owner pays off the loan. It’s a win-win approach.

In specific cases, such as for a resident with special needs, we may lend more than £20,000. Overall we have not limited the total pot set aside for this initiative - it forms part of our overall housing capital programme, which we keep under review. That said, we’ll probably review it when we’ve spent £200,000.

It was straightforward to set up our own scheme. We had great support from councillors, the legal powers exist to provide such support and we already had processes in place for loans for home repair and other grants that we transferred to this initiative.

And this is making a real difference - Bromley has already helped three households faced with losing the roof over their heads with its own scheme.

Cash call

But there are other ways to assist struggling homeowners. Using a £100,000 grant from the repossessions prevention fund provided by central government last year, we have helped 70 households with interest support - a form of loan to cushion the effect of high interest rates - and other small loans to avoid repossession. And we have supported more than 100 households with debt advice and by intervening to renegotiate terms

Other simple interventions include providing small cash loans to pay off arrears so households can negotiate an affordable payment plan and maintain future mortgage payments and have even helped a household find a lodger to help with payments.

What now?

Of course, just as homeowners have been feeling the pinch, so too are the public finances. But we will be sustaining our approach to helping homeowners - it is something that our council members want to see continue.

We will keep looking for other ‘survival’ tools to make sure people in Bromley faced with repossession know about all the options available to help them, know they have a voice on their side when the mortgage company comes calling and feel less alone when faced with what seems an insurmountable and frighteningly life-changing challenge.

David Gibson is assistant director of housing and residential services at Bromley Council