HML, a company administrating mortgages on behalf of their lenders, uncovered numerous cases of mortgage shortfall debt in the last seven years. This is because many former owners of repossessed houses do not realise that they might still have to pay up their lenders if the house was sold for less than the mortgage.
According to HML figures, 227,500 houses were repossessed between 2008 and 2013, of which 188,501 cases were in mortgage shortfall, making up 83% of the total repossessions. Former mortgage holders owe an average shortfall of £43,000, HML said.
The worst situation was recorded in Northern Ireland, with 97% of repossessed properties having sold for less than their mortgage value.
The North and North-West of England came in second place, with shortfall in 86% of repossessed houses. The South East was proved to be the least affected area, even though its figures were still over 50%, with the repossessions in shortfall being 75%.
“A borrower’s obligation towards their mortgage does not end with repossession, only when the debt has been repaid. Therefore, even though their home has been repossessed, they are still liable for any shortfall that exists.
Providing lenders inform borrowers of their intentions to recover the debt within six years, the debt remains live on an open-ended basis” said the director of business intelligence at HML, Damian Riley.
“Some debt collection companies tasked with collecting mortgage shortfall debt often simply work their way through a borrower list and contact each individual one by one. At HML, we do not believe this is good practice, as contacting certain borrowers will be neither in their or the lender’s best interests and may be frowned upon by the regulator” he continued.
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