Stephen Carter of Aylesbury lost his job as a plumber after a motorcycle accident three years ago and is now surviving on income support. But although his mortgage interest payments are being paid automatically from his benefit, Mr Carter is facing an uphill battle to save his house from repossession.
His case highlights the fact that lenders are proceeding with repossessions against borrowers on income support.
When the policy of 'mortgage direct' payments of interest by the Department of Social Security's Benefits Agency to mortgage companies was first announced in 1991, it was accompanied by a promise from the Council of Mortgage Lenders (which represents all leading mortgage lenders) that its members would not seek repossession 'in cases where mortgage interest payments are covered by income support'. However, interpretation of this pledge appears to vary widely.
Each month the National Association of Citizens' Advice Bureaux records a stream of reports about problems with the mortgage direct scheme, and the organisation has voiced its concern that the CML's promise is not being honured.
'Their attitude is that the guarantee refers only to cases where all the interest due is being paid through mortgage direct,' says Janet Allbeson, Nacab's social policy officer. This excludes many borrowers receiving income support, especially those having to pay interest on past arrears.
In Mr Carter's case, the Benefits Agency pays Abbey National the interest due on the pounds 68,800 mortgage he took out in 1989, but not the interest on arrears that built up during an earlier (short) period of unemployment and later capitalised.
With help from his mother Mr Carter is trying to pay a further pounds 30 a month, more than covering the interest shortfall of pounds 19 a month.
Abbey National agrees it is receiving interest payments for him through mortgage direct. However, it points to several months' missed payments on the mortgage after his accident - a period that coincided with his separation from his former girlfriend, who was a joint mortgage borrower.
Arrears built up further during his first 16 weeks on income support, when, under DSS rules, only half of the mortgage interest is payable in benefit. In total, Abbey National says, the arrears exceeded pounds 3,500. 'At the end of the day, there is no obvious way these arrears can be repaid over a reasonable period of time,' an Abbey National spokesman said.
Ms Allbeson says that the introduction by the Government of mortgage direct payments has led to borrowers having to cope with extra bureaucratic problems. Most serious has been the lack of direct communication between lenders and the Benefits Agency as interest rates have changed. 'Lots of claimants don't realise that they are supposed to inform the Benefits Agency when interest rates fall. Overpayments of interest then start occurring,' Ms Allbeson says.
When the Benefits Agency eventually realises this, it recoups the overpaid amount by stopping further payments to lenders. 'In our experience, in a number of cases they don't inform either the claimant or the lender that this is happening. The lender gets no payments, and the agency's computer system fires off a repossession letter. Lots of people have found themselves in difficulties from this.'
In Mr Carter's case, Benefits Agency overpayments continued for many months and totalled more than pounds 1,000. 'Abbey National said it was my duty to tell the DSS. But surely Abbey National should have realised that the DSS was overpaying it,' he says. However, Abbey National says that this problem has not been an important factor in its handling of the case.
The future of Mr Carter's home now seems likely to hang on a further court hearing. 'I've done everything by the book. Now they want me out,' he says. Unfortunately, if he is evicted, his debt is likely to increase substantially.
House prices have fallen, and he expects his house to be sold for about pounds 20,000 less than he paid for it. Abbey National took out a mortgage indemnity policy at his expense, and should be able to recoup most of its loss from its insurers.
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