Sunday, 26 October 2008

Repossessions and prestidigitation

Some people have found themselves overwhelmed with the genius of Gordon Brown and his cunning plan to protect mortgage defaulters from repossession through the simple means of amending the pre-action protocol in England to ensure that every lender acts decently towards borrowers.

Two problems - firstly, it wasn't Gordon Brown that changed the protocol; and secondly, changing the protocol doesn't change a single thing for any borrower or lender.
Let's have a wee look then. Remember that this protocol is not actually enforceable, it's not law, it's not even rules of court, it's guidance offered by the Civil Justice Council
It is designed to encourage parties to exchange information at an early stage, to encourage early settlement of cases or where that cannot be avoided, more efficient case management. It does not alter parties existing rights and obligations.
Keep that sentence about existing rights and obligations in mind - apart from the obvious question about whether the protocol will change anything, it gives the lie to Brown's insinuations that he was creating new powers for judges to halt repossessions (quite apart from the observation that this guidance isn't actually for judges).

Here's another bit to ponder:
There has been extensive consultation since February this year
Gordon Brown dealing with a crisis? Nope, just the Civil Justice Council getting on with its business.
OK, so nothing to do with Gordon Brown, but a good thing it's happening, yes? Well, it doesn't matter, really, because it isn't enforceable and it won't change anything.

Pardon? Well, let's take a look at the shiny new protocol and compare it to, well, just for a laugh, let's try Chapter 13 of the Financial Services Authority's Handbook. Why? Well, because that's what actually regulates lenders when borrowers get into arrears and it's already in force ...
From the protocol:
5.1 Where the borrower falls into arrears the lender should provide the borrower with—
(1) where appropriate, the required regulatory information sheet or the National Homelessness Advice Service booklet on mortgage arrears; and
(2) information concerning the amount of arrears which should include—
(a) the total amount of the arrears;
(b) the total outstanding of the mortgage or the home purchase plan; and
(c) whether interest or charges will be added, and if so and where appropriate, details or an estimate of the interest or charges that may be payable.
So, the lender will be expected to abide by its statutory duty to provide information and also to tell the debtor about the debt. Radical, radical stuff.
5.2 asks the two sides to talk to each other.
5.3 suggests that the lender advises the borrower to get in touch with the local authority housing department and debt advisors.
5.4 says the lender should consider a request for a change of regular payment date.

That should have those lenders quaking in their boots, eh? It's noticeable that it always says "the lender should", never "the lender must" - probably because none of this is statutory.

5.5 respond promptly to a proposal for payment, non-agreement to be explained in writing.
5.6 the borrower should be given a reasonable period of time to consider a payment proposal.
5.7 borrower to get a warning of any moves to repossess

Section 6 asks the lender not to proceed with action if there's an insurance claim under way or where the property is being sold. Highly exciting. Not as exciting as the olden days, though:
Now, then, Chapter 13 of the Handbook, the stuff that is enforceable:
(1) A firm should ensure that its written policy and procedures include:
(a) using reasonable efforts to reach an agreement with a customer over the method of repaying any payment shortfall or1 sale shortfall1 , in the case of the former having regard to the desirability of agreeing with the customer an alternative to taking possession of the property;
(b) liaising, if the customer makes arrangements for this, with a third party source of advice regarding the payment shortfall or1 sale shortfall1 ;
(c) adopting a reasonable approach to the time over which the payment shortfall or 1 sale shortfall1 should be repaid, having particular regard to the need to establish, where feasible, a payment plan which is practical in terms of the circumstances of the customer;
(d) granting, unless it has good reason not to do so, a customer's request for a change to:
(i) the date on which the payment is due (providing it is within the same payment period); or
(ii) the method by which payment is made; and giving the customer a written explanation of its reasons if it refuses the request;
(e) giving consideration, where no reasonable payment arrangement can be made, to the customer being allowed to remain in possession to effect a sale; and
(f) repossessing the property only where all other reasonable attempts to resolve the position have failed.
(2) Contravention of 1(1) may be relied on as tending to show contravention of MCOB 13.3.1 R(2).
The bang-whizz new protocol will merely repeat as advice part of what is already there as regulation. Can someone tell Gordon Brown he can change out of the Superman pyjamas now?
Why would a Prime Minister think it appropriate to tell lies to the people who elected him? Surely an international phenomenon, a global economic superstar, a colossus like Gordon Brown wouldn't feel the need to dissemble? Surely this isn't political prestidigitation on a grand scale?
I am afraid it is, let's think about it for a moment - here you have a man who is a self-proclaimed genius in the job he held for a decade who is quite clearly struggling to have any idea about what to do in his new job. On top of that he finds the artifice of his former achievements dissolving before his eyes, inflation soaring, unemployment rocketing, banks struggling, boom turned to bust, and so on and so on.
When you've got so much ego propped up by so much hubris, disinformation and misdirection seem like such small indulgences. The order to Brown's Special Advisers would be "find me something to announce". Some bright spark will have spotted the protocol update in the grid for announcement and thought "ya dancer" and passed it along. Brown, in desperate straits, seizes upon it as a way of getting him out of a hole before anyone spots that he's been digging the hole all along.
It's the political equivalent of saying "look, a unicorn" before scuttling off in the other direction. I find it incredible that some people were suggesting that the Scottish Government should follow that lead.

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