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When a repossession isn’t a repossession

John Fitzsimons
by Lovemoney Staff John Fitzsimons on 14 August 2009  |  Comments 4 comments

The lenders can gloss it up however they like, but appointing a receiver is just repossession by another name.

The Council of Mortgage Lenders put out some very interesting figures on the state of the buy-to-let market today.

The trade body was at pains to point out that the troubled sector is through the worst of its troubles, and hopefully now on an upward trajectory. New buy-to-let mortgages in the second quarter 'only' fell by 4% from quarter one, with a further improvement in the arrears levels.

There were 29,400 mortgages in arrears of three months or more (representing 2.49% of all buy-to-let mortgages), down 17% from 35,600 (3.06%) in the previous quarter.

However, the stat that caught my eye was on the repossession side. According to the CML, just 1,400 buy-to-let properties were taken into possession in the second quarter, the same as the first quarter.

The trade body was also happy to point out that rather than repossess, those cuddly lenders often prefer to appoint a 'receiver' when there are paying tenants in the property. This receiver collects the rent from the tenant and then passes it on to the lender.

Funnily enough, while official repossession figures stayed the same, the number of properties with a 'receiver' appointed jumped from 9,200 in quarter one, to 10,800. That's compared to just 1,000 this time last year.

Indeed there were 2,500 receivers newly appointed in the quarter.

Now I completely understand the arguments for going down this route for the lenders. It costs less than a full repossession, and it doesn't disrupt the existing tenant. All fine with me.

But let's be honest, it's still repossessing the property isn't it? Ok, it has a different name, but the end result is really the same - the landlord is kicked out.

I have no doubt that in most cases that is absolutely the right thing to do. But with the Government engaged in a very public battle to keep repossession figures as low as possible, I can't help but fear that going down the 'receiver' route might just be the easy option for some of the less scrupulous lenders.

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Comments (4)

  • billyboy121
    Love rating 18
    billyboy121 said

    An interesting article and angle on the repossessions figures being broadcast. As you say, in some ways this is a step up from the previous situation where tenants lose their home as a result of a forced repossession, so hopefully in that sense at least the tenants are better off.

    It may not be a coincidence that the housing market is not in a great position from a seller's point of view. The cynic in me thinks that banks are trying to have their cake and eat it - if there's an income stream in there, the bank can reduce the outstanding debt from that stream (minus receivers expenses of course) and keep around the same level of cash coming in (rather than an expensive provision or write off in the books) in relation to that debt whilst awaiting an upturn in the market, at which point the repossession can go ahead or alternatively the landlord can pay off the debt.

    If they go straight for the repossession now, you'd think in many cases the crash price that they would need to market the property at to guarantee a sale would be substantially less the debt, given the approach to gearing that many borrowers appear to have had over recent years so again a high likelihood of a write off or a costly process of chasing the borrower for the remainder, possibly into insolvency (bearing in mind the change in the bankruptcy laws) as an unsecured creditor in the absence of any other security. 

    Report on 19 August 2009  |  Love thisLove  0 loves
  • SiGl26
    Love rating 22
    SiGl26 said

    Correct me if I'm wrong, but surely when a receiver is appointed he is working on behalf of the asset owner, not the creditor. Thus title to the property still belongs to the landlord. In what way is this 'repossession'? All that has happened is a lien has been put on the income from the asset.

    Report on 19 August 2009  |  Love thisLove  0 loves

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