MCOB 13.6 Repossessions
A firm must ensure that, whenever a property is repossessed (whether voluntarily or through legal action) and it administers the regulated mortgage contract in respect of that property, steps are taken to:
- (1)
market the property for sale as soon as possible; and
- (2)
obtain the best price that might reasonably be paid, taking account of factors such as market conditions as well as the continuing increase in the amount owed by the customer under the regulated mortgage contract.
In MCOB 13.6.1 R it is recognised that a balance has to be struck between the need to sell the property as soon as possible, to reduce or remove the outstanding debt, and other factors which may prompt the delay of the sale. These might include market conditions (explicitly referred to in MCOB 13.6.1 R(2)) but there may be other legitimate reasons for deferring action. This could include the expiry of a period when a grant is repayable on re-sale, or the discovery of a title defect that needs to be remedied if the optimal selling price is to be achieved.
If the proceeds of sale are less than the debt
A firm must ensure that, as soon as possible after the sale of a repossessed property, if the proceeds of sale are less than the amount of the customer's debt, the customer is informed in a durable medium of:
- (1)
the mortgage shortfall debt; and
- (2)
where relevant, the fact that the mortgage shortfall debt may be pursued by another company (for example, a mortgage indemnity insurer).
- (1)
If the decision is made to recover the mortgage shortfall debt, the firm must ensure that the customer is notified of this intention.
- (2)
The notification referred to in (1) must take place within five years of the date of the sale (if the regulated mortgage contract is subject to Scottish law) or within six years (in all other cases).
MCOB 13.6.4 R does not require a firm to recover a mortgage shortfall debt. A firm may not wish to recover the mortgage shortfall debt in some situations, for example where the sums involved make action for recovery unviable.
If the proceeds of sale are more than the debt
A firm must ensure that, on the sale of a repossessed property, if the proceeds of sale are more than the amount of the customer's debt, reasonable steps are taken, as soon as possible after the sale, to inform the customer in a durable medium of the surplus and, subject to the rights of any subsequent mortgage or charge holders, to pay it to him.