Appendix 1

Local Authority Repossessions Prevention Fund: Loans to Prevent Repossessions & Evictions

Procedure for Administering the Fund in Middlesbrough

Contents

Objective of the fund …………………………………………… / 1
Background ……………………………………………………… / 1
Principals of the loan fund ……………………………………... / 1
What the fund can be used for ………………………………... / 2
Eligibility criteria for the fund …………………………...……... / 3
Assessment procedure ………………………………………… / 3
Loans process flow chart ……..……………………………….. / 6
Organisation’s roles and responsibilities …………………….. / 7
Monitoring and evaluation / 8
Key contacts …………………………………………………….. / 9

Objective of the fund

  1. The primary objective of the Repossessions Prevention Fund is to prevent homelessness arising from repossessions and evictions across all tenures. The fund should be used as a tool for working with the lender or landlord in order to remove the risk of repossession or eviction by making a payment which they are prepared to accept in return for compromising the overall debt owed by the household.

Background

  1. In May 2009, the Chancellor announced in the Budget that £20 million would be made available to enable local authorities to extend small loans to families at risk of homelessness through repossession or eviction.
  1. Communities and Local Government (CLG) informed all local authorities that funding for this purpose was being issued, in addition to the Homelessness Grant, at the end of June 2009. Middlesbrough Council has been allocated £47,500, which is a one off payment for 2009/10. Although the funding is not ring-fenced, it is important to ensure that it supports the maximum number of households in need of financial assistance, enabling them to stay in their homes.

Principles of the loan fund

  1. The funding is intended to assist homeowners struggling with their mortgage costs, as well as tenants in the social or private rented sectors who, through no fault of their own, are struggling with their rental payments in the current climate and face eviction.
  1. It is anticipated that the loans should range from £1,000 to £3,000 per household, any loan should be capped to a maximum of £5,000 available at 0% interest.
  1. The loans should only be issued to households at risk of becoming homeless through repossession or eviction. The loan is not intended to be used to fully clear rent or mortgage arrears, it should be made to ‘recover’ the position, where all other options

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  1. have failed. Negotiations may take place with the mortgage lender or landlord to write down or write off any remaining arrears.

What the fund can be used for

  1. The following examples demonstrate what the loans may cover, as per CLG’s guidance:

a)to assist with Mortgage Rescue cases by ‘topping up’ lender write downs, where the household is in negative equity. For example, a customer has a property worth £100,000 and a mortgage of £115,000, and the Mortgage Rescue HomeBuy agent, makes an offer of £97,000 for the property. If the lender will not agree to this amount as a full and final settlement, a negotiation could take place whereby the local authority pays a £3,000 to the lender, and the lender may then agree to write off the remaining £15,000;

b)reduce mortgage arrears where lenders cannot apply forbearance measures due to the level of arrears. The range of forbearance measure which should be considered by the lender are:

  1. change or lengthen the term of a homeowner’s loan;
  2. reduce payments for a homeowner in the short term;
  3. add a homeowner’s arrears to the amount borrowed;
  4. reduce a homeowner’s monthly mortgage payments for a certain period;
  5. cut the charges it makes to a homeowner for being in debt with their mortgage;
  6. spread repayment of the total amount a homeowner owes;
  7. offer a homeowner a better loan rate; and
  8. allow a homeowner time to sell their home if that’s their preferred option.

Should the above measure not be an option for the lender due to the level of arrears, a loan may be issued to bring the arrears down to a more manageable level. The principle would be that these loans are not made unless the homeowner had acted on money advice and is able to meet any existing or newly negotiated monthly payments;

c)in regard to tenants in the private or social rented sectors, a loan can be used to reduce the level of debt for those who are in rent arrears due to income shock as a result of loss of earnings, and where there is no previous history of high rent arrears;

d)a loan or guarantee up to a capped level payable to the lender or landlord to pay part of the arrears for a household due to be imminently evicted or repossessed. The household may then be given a ‘last chance’ by their landlord or lender after the direct intervention of the Housing Options Team, and the tenant agrees to keep to a repayment schedule; and

e)making a joint agreement with a lender, landlord and household to resolve arrears e.g. a third of the arrears paid off through a hardship payment which the household can apply for if in receipt of relevant benefits; a third through a loan from the fund; and a third written off by the landlord or lender.

  1. This list is not exhaustive. The fund should be used in any cases where prevention officers feel that they could negotiate with the landlord or lender to keep the household in their current home and prevent repossession or eviction. Each case will be considered on its own merits and a final decision will be made by Erimus’ Housing Needs and Lettings Manager.

Eligibility criteria for the fund

  1. Based on the CLG Guidance the Repossessions Prevention Fund should only be administered to those households who meet the following criteria:

a)Households who genuinely cannot pay their rent or mortgage (not those who choose not to). For example assistance could be provided to a tenant who had accumulated rent arrears as a result of loss of earnings or reduced hours and who has no history of high arrears.

b) A payment should only be made to those households who are willing to act on money and debt advice from Middlesbrough’s Money Advice team or Citizens Advice Bureau.

c)A payment should only be made in circumstances where households can demonstrate (with the aid of money advice) that their rent or mortgage repayments will be affordable following the receipt of a payment from the fund, and will be sustainable in the longer term.

d)Where possible, payments should be made based on the fact that all parties are prepared to compromise on the debt in order to avoid repossession or eviction. For example a small loan could be provided to clear a proportion of rent arrears, and an agreement reached with the social or private sector landlord to write down or write off the remaining arrears owed.

e)A payment should not be made where there is another way to resolve the problem, for example, where arrears can be cleared by backdating a Housing Benefit claim.

f)In cases of housing association tenants with arrears all other options should be considered by landlords through their existing rent recovery process before a payment is made through the Repossessions Prevention Fund.

g)Where a payment is agreed households should be asked to agree that a payment is made directly to a creditor on their behalf. No cash payments will be made.

h)Only one payment can be made per household.

Assessment procedure

General Principles

  1. A request for assistance form (Appendix A) must be completed in all cases. All payments must be approved by the Housing Needs and Lettings Manager. The client must be notified in writing of the outcome of the loan decision.
  1. A detailed financial statement must be completed by a Money Advice agency in all cases. Based on the information in the financial statement the money adviser should make a recommendation as to whether a loan should be provided. This assessment should be based on whether or not the client can afford to make regular repayments. Appendix B shows a sample Income and Expenditure form.
  1. The client must engage with money and debt advice services in order to be eligible for a payment from the RPF.
  1. Copies of all paperwork must be held on the applicant’s individual file.
  1. Copies of the following must be given to applicant:
  2. completed request for assistance from the RPF form;
  3. financial statement and debt management plan; and
  4. where a loan has been provided the applicant should receive a copy of the credit agreement from Five Lamps.
  1. Where loans are provided the repayment period will be dependent on the total amount and its purpose as well as on the client’s individual circumstances.
  1. The repayment period and schedule of payments must be agreed before any loan is made.
  1. All payments should be made directly to creditors. No cash payments will be made.

Erimus Housing

  1. At the initial enquiry stage and during the housing options interview, consideration must be given as to whether the applicants needs can be met through the fund.
  1. The Homeless Prevention Officer will:
  • invite client for a Housing Options Interview;
  • determine if the applicant is homeless or potentially homeless;
  • determine if the applicant is in Priority Need;
  • consider whether use of the fund can be made in maintaining the applicants existing accommodation;
  • verify all information provided by the applicant;
  • establish whether use of the Fund is appropriate or whether there is another way to resolve the problem;
  • establish whether use of the fund is the most suitable option for the applicant or whether another prevention initiative would better suit their needs;
  • where applicants are tenants, obtain a written undertaking from the landlord that the applicant can remain for 6 months;
  • refer applicants to money advice to obtain a financial statement and liaise with the money advisor regarding whether the payment should be made as a grant or a loan; and
  • where applicants meet all the criteria and engage with money advice, the Request for Assistance Form (Appendix A) should be completed.

Money advice agency

  1. Clients in arrears, must engage with money advice agencies, in order for a loan to be deemed an affordable option. The Money Advisor will:
  • check the client’s income and expenditure to ensure a loan is a viable option;
  • identify the client’s current debts;
  • ensure client is eligible for loan through the prevention fund e.g. in debt due to current hardship, rather than choosing not to pay;
  • will carry out a benefit check to ensure the client is receiving full benefit entitlement;
  • check other grant options;
  • provide budgeting advice to the client; and
  • refer the client to specialist advice agencies where necessary; and if the client is eligible, for a loan through the prevention fund.

Loan approved

22. The Homeless Prevention Officer will:

a)ensure all the necessary information has been collated, and it is confirmed that the landlord or lender will stop any possession proceedings on receipt of a payment through the RPF;

b)will inform all other parties involved, e.g. landlord, mortgage lender, money advisor; and

c)get the Request for Assistance form signed by the Housing Needs and Lettings Manager for approval, and once signed send to Five Lamps to enable a loan to be issued.

  1. Five Lamps will:

a)arrange an appointment with the client;

b)issue the loan to the client’s landlord or mortgage lender;

c)set up a repayment plan with the client and monitor payments;

d)will contact the client to ascertain reasons for non-payment and take remedial action. Before any escalation of action beyond this point, the case would be reviewed with the Erimus’ Homelessness and Housing Advice Service;

e)in the case of non-payment two reminder letters will be sent to the client;

f)where there is no response after the second letter, a telephone call will be made and a visit to the client; where there is no response Five Lamps will advise the Housing Needs and Lettings Manager;

g)the Homelessness Prevention Officer will re-establish contact with the household and look to provide additional money advice or meet other support needs;

h)where the household does not engage at this stage Five Lamps write-off the loan and report this to the Council on the monthly monitoring form.

Loan not approved

  1. Where the client has not been approved for a loan, as their circumstances do not meet the eligibility criteria, the Homeless Prevention Officer will advise the applicant and other interested parties of the decision and the reasons for it in writing, and explore other homelessness prevention options for the client.

Loans process flow chart

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ORGANISATION’S ROLES AND RESPONSIBILITES

  1. The role and responsibility for each organisations is set out in the table below:

Organisation / Role/responsibility
Middlesbrough Council /
  • Has the statutory duty to tackle as well as prevent homelessness.
  • Will issue the fund to the relevant organisation/s to administer the loans.
  • Will be responsible for reporting back to Communities and Local Government on progress on the fund.

Erimus Housing /
  • Delivers the Homelessness and Housing Advice services on behalf of Middlesbrough Council.
  • Housing Options team will carry out homelessness investigation on clients presenting with mortgage difficulties.
  • Will sign post to relevant organisations for assistance and advice where necessary.
  • Will assess whether the client may be eligible for Mortgage Rescue, a loan, or both.
  • Where a loan is a potential option, Erimus Housing will refer the client for Money Advice.
  • Will complete the Request for Assistance form, and send a signed copy to the loan administrator.
  • Contact the client when informed of non-payment of loan by the loan administrator.
  • Provide further housing advice to clients where loans have not been approved.

Money Advice Agency /
  • Clients in arrears, must engage with Money Advice agencies, in order for a loan to be deemed an affordable option. The Money Advisor will:
  • check the client’s income and expenditure to ensure a loan is a viable option;
  • identify the client’s current debts;
  • ensure the client is eligible for a loan through the prevention fund e.g. in debt due to current hardship, rather than choosing not to pay;
  • will carry out a benefit check to ensure the client is receiving full benefit entitlement;
  • check other grant options;
  • provide budgeting advice to the client; and
  • refer the client to specialist advice agencies where necessary.

Loan administrator /
  • Will manage the budget on behalf of the Council;
  • Will carry out a credit check on the client;
  • Will issue the loan to the client;
  • Will set up a repayment plan with the client and monitor payments;
  • Will contact client to ascertain reasons for non-payment and take remedial action. Before any escalation of action beyond this point, the case would be reviewed with the Homelessness and Housing Advice Service;
  • Will report to the Council on a monthly basis with the following information:
  • Number of loans issued;
  • Household type;
  • Tenure type e.g. private or social rented sector, owner occupier.
  • Amount of loan issued.
  • Updates on repayments/non-payments.
  • In the case of non-payment, will issue 2 x reminder letters to the client, if no response telephone the client, if no response visit the client.

Monitoring and evaluation

Erimus Housing

  1. The Homelessness Prevention Officer will monitor progress of the applicant’s housing situation on a quarterly basis and will re-establish contact where informed by the loan administrator that they have missed loan repayments. Any further information or action will be noted on the applicants file.

Five Lamps

  1. Five Lamps will report to the Council on a monthly basis on the number of loans issued, household type, tenure type, amounts of loans issued, and updates on repayment/non-payments and budget information (Appendix C). Case studies where clients have been assisted through the loan fund will also be provided.

Middlesbrough Council

  1. Monthly monitoring returns will be sent to CLG.
  1. On a six-monthly basis, the implementation, use and effectiveness of the fund will be reported to the Executive Member for Regeneration and Economic Development on progress with the fund.

Key contacts

Name / Organisation / Telephone number / Email
Sarah Brannen / Middlesbrough Council / 01642 729172 /
Julie McNaughton / Erimus Housing / 01642 233790 /
John Garner / CAB / 01642 802290 /
Janet Meikle / Money Advice / 01642 728251 /
Graeme Oram / Five Lamps / 01642 608316 /

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