Bullying the bereaved

Or, 'Should lenders be able to repossess when probate is outstanding?'

Redstone, a sub-prime mortgage lender which is open about the securitisation of their mortgages (one of the antecedents of the recent (indeed, ongoing) financial turmoil), were generous enough to offer my cash-strapped dad an interest-only mortgage of ~£220,000 on a property he bought for ~£250,000 in 2006. Unfortunately, daddy didn't insure himself or his mortgage and his pension died with him, so when he died in summer 2008, the mortgage interest was barely dented, the capital untouched, and no more money was due into his estate.

I was surprised the mortgage companies were even allowed to charge their hefty non-payment charges to estates awaiting probate; particularly since the financial watchdog put its foot down over the banks' unfair penalties a year or two back. It seems particularly unfair and really easy money to charge penalties for non-payment when probate* typically takes 6 months to obtain: we're sitting ducks. Where exactly are the repayment monies supposed to come from each month we await the grant of probate? Anyway, our solicitor informed us that this unethical practice is not illegal, and so we watched the debts rack up.

In October 2008, my father's two year fixed-rate deal ended and the mortgage reverted to Redstone's standard variable rate (SVR). Now, SVRs are typically pretty rubbish, which is why in the last decade or so many people scrambled at the end of their fixed rate deals to remortgage to another similarly good fix (prompting fierce competition between lenders, decent rates for most buyers and, during the really good times, free switches** as banks were so desperate to steal their competitors' customers). Interestingly, at exactly the same time, my own mortgage rate (a base-rate tracker from the still-mutual Nationwide Building Society, tracking the Bank of England rate +0.24%) was tumbling, as base rate was cut and cut by the Bank of England Monetary Policy Committee in attempts to stave off the impending recession. In October 2008, Redstone's SVR, to which my dad's mortgage reverted, was around 8 (yes, eight) per cent. At the same point, base rate was 4.5% and so my mortgage rate was 4.74%.

Currently (February 2008), base rate stands at 1.5% and our mortgage at 2.24% (because of the 'floor' imposed by Nationwide that means they don't pass on cuts to base rate below 2%). As far as I am aware - I have had no correspondence to the contrary - Redstone's SVR remains at 8.45%. The statement of arrears that arrived on Friday indicates that the monthly repayments (interest-only, remember) on the £220k borrowed are currently over £1,800. Ours (a capital repayment mortgage) on £210k borrowed are £927.

Because my dad died at the end of June 2008, we have now (February 2009) missed 7 monthly repayments. Redstone were informed of my dad's demise within weeks of his death. According the the blurb from their solicitors, Redstone take steps towards repossession after an account has been in arrears for two months. Damn straight. Despite the fact that they know the mortgage holder has died and that the estate cannot be administered until the grant of probate, by the autumn, they were being heavy-handed with their demands for repayment and threats of repossession. In November and December 2008, our solicitor made several overtures first to Redstone and then to their solicitors, informing them that probate had not yet been granted - due, in part, to Redstone's tardiness in supplying a redemption value for the probate application - but that our intention was to discharge the arrears as soon as possible thereafter. But there was no acknowledgment of this, just the mulish continuation of their action.

And so, when I went to collect the post from my dad's house on Friday, at the very end of January, there was a letter from the solicitors informing us that possession proceedings had indeed been commenced. And on Monday, another letter confirming the court date in a month's time. Our solicitor had written the same week to inform them that the grant of probate is anticipated in February and that we intend to discharge the arrears immediately. It is likely this crossed in the post with the letter informing us proceedings had commenced. Let's see whether they acknowledge these facts. On past evidence, it is unlikely.

It's unfortunate that just as these proceedings have commenced, potential tenants have been found for the house. If we can't get Redstone or their solicitors to accept that we intend to repay the arrears in all likelihood within the month, we are probably going to have to let them go. The rent would only cover half the mortgage repayments anyway.

I went to the inquest into my father's death more out of curiosity at what was involved than anything else. I shall attend the possession hearing similarly out of curiosity, but also because I really hope to witness a judge put a flea in their ear. And then I'll take this to the FSA and the financial ombudsman. I can totally understand a company wanting to recoup losses when a mortgage is defaulted, but issuing possession proceedings following a death, prior to probate and alongside assurances from a solicitor that the arrears - and the associated charges - can and will be covered in time is heavy-handed, to say the least.


*The grant of probate allows the executors to 'administer' the estate, i.e., get hold of the assets and distribute them to address the liabilities, with any leftovers going to the beneficiaries of the estate.

**Banks would pay the conveyancing fees (ours were around £800) and mortgage administration fees (anywhere between £500 and £1500 once the good times ended).