A systematic approach to mortgage arrears advice

Brendan Burgess

Brendan Burgess

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I am trying to do a step-by-step guide to mortgage arrears advice.

It is very, very complicated, so to get a basic model going, I have made a few hugely simplifying assumptions. I will make the model more complicated later.

Allowing for these assumptions, does the model collect all the situations and options? I will be fleshing these out in much more detail.

simplifying assumptions

  • No unsecured creditors – or just ignore them
  • No investment properties
  • A Standard Variable Rate mortgage
  • Negative Equity
  • The house is suitable for the borrower’s needs and the borrower wants to keep it if possible
  • single person or couple working together - not suitable for non-cooperating couple


Your situation|What you should do
[FONT=&quot]If you have enough disposable income to pay your mortgage repayments in full…|[/FONT]Then you should pay your repayments in full
[FONT=&quot]If you can meet your mortgage repayments in full,{br} but you have built up arrears which you can’t clear…|[/FONT][FONT=&quot]Apply to capitalise the arrears[/FONT]
[FONT=&quot]If the problem is temporary… |[/FONT] As[FONT=&quot]k for r[/FONT][FONT=&quot]educed repayments{br} or{br}ask for [/FONT][FONT=&quot]interest-only[/FONT][FONT=&quot][FONT=&quot]{br}[/FONT] or[/FONT][FONT=&quot]{br}ask for [/FONT][FONT=&quot]a repayment holiday[/FONT][FONT=&quot]{br}[/FONT][FONT=&quot][FONT=&quot]{br}[/FONT]until you can afford the full repayments again[/FONT]

[FONT=&quot]If the problem is medium to long term…|[/FONT][FONT=&quot]First, extend the term of your mortgage[/FONT]
[FONT=&quot]If extending the term does not bridge the gap…|[/FONT] [FONT=&quot]Apply for a split mortgage{br}[/FONT][FONT=&quot]Or[/FONT][FONT=&quot]{br}[/FONT][FONT=&quot]Apply for a long-term interest only period[/FONT][FONT=&quot]{br}[/FONT][FONT=&quot]Or [/FONT][FONT=&quot]{br}[/FONT][FONT=&quot]Sell your house and buy a cheaper one (a trade-down mortgage) [/FONT][FONT=&quot]{br}[/FONT][FONT=&quot]Or[/FONT][FONT=&quot]{br}[/FONT][FONT=&quot]Apply for a Personal Insolvency Arrangement [/FONT]
[FONT=&quot]If the lender refuses these solutions,but you can pay 66% of the interest…|[/FONT] [FONT=&quot]Apply for the Deferred Interest Scheme[/FONT]

[FONT=&quot]If you can’t pay 66% of the interest[/FONT][FONT=&quot][FONT=&quot]{br}[/FONT] or if you[/FONT][FONT=&quot] can’t pay the repayments on the current [/FONT][FONT=&quot]value, [/FONT][FONT=&quot][FONT=&quot]{br}[/FONT]then your mortgage is unsustainable|[/FONT] [FONT=&quot]You should agree to sell your house{br}You may qualify for the Mortgage to Rent scheme[/FONT][FONT=&quot]{br}or you can fight the repossession in the courts[/FONT]
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At this stage, I am just trying to set out all the options. I will do a comparison of the pros and cons later.


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I seem to recall coming across a similar flowchart/decision table based approach to mortgage and other debt/arrears situations but can't recall the details offhand. Was it perhaps in some document about the Personal Insolvency model or something like that? My recollection is that it was a summary Q&A table at the end of the relevant document. If somebody can identify it then perhaps it might be useful in this context.

Seems to me that there would be a LOT of Q&A steps involved in covering all possible - or even the most common - scenarios. And ideally the Q&A steps involved should be based on quantitative rather than qualitative info as far as possible - e.g. "is the problem temporary" seems a bit vague. "Is it likely that you can increase your earning capacity by x% within y years" is more concrete.
 
Thanks

I have looked around and could not find anything like this apart from the Central Bank waterfall? They are doinig a pilot study for a multi-debt framework. I started off by trying to incorporate this, but it was just too difficult.

Is this what you are thinking about? If there is something else, I would be very interested in seeing it.

Even ignoring the unsecured debt, it is still very complicated. And by its nature, we are making forecasts. "Is the problem temporary?" catches situations where people are unemployed or on maternity but expect to get back to work. Not sure if there would be much benefit in quantifying it.
 
Agree with your response flow chart but what about separated couples ? Where one party is fully co-operating and the other is complete denial ? In my situation bank had agreed to capitalise the arrears but partner refused to sign the arrears capitalisation form or acknowledge it. So back to square one.
 
Hi CouldBe

I have added this to the assumptions.

single person or couple working together - not suitable for non-cooperating couple
Click to expand...

I will try to adapt a later version for your situation
 
I am still working on this project.

Anyone have any ideas on it?

There are so many questions on askaboutmoney that I think it would be really useful to develop a systematic approach.
 
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