Repossession in the UK and the US

Elizabeth Brown, A Comparison of the Handling of the Financial Crisis in the United States, the United Kingdom, and Australia, 55 VILL. L. REV. 509 (2010);

“With updated and reorganized protections in place, the rate of repossession and foreclosure in the United Kingdom is now very low. The 42 MCOB, supra note 37, § 13.4.5 (2). 43 Mark Harrison, Repossession vs. Foreclosure in the UK-The Big Myths, EZINEARTICLES.COM, –The-Big-Myths&id=404151 (last visited Jan. 20, 2014); see also Hapgood, supra note 11, at 614. 44 Hapgood, supra note 11, at 614. 45 Id. 46 Jefferies, supra note 12, at 350. 47 Id. 48 Brown, supra note 6, at 563. 49 Id. 9 Chi.-Kent J. Int’l & Comp. L. Vol. XV

Is there any reason why two applications can’t be brought together, such as a defence against execution and an application to rescind the order on which it is based?

In summing up, factors that a court might consider, but to which a court is not limited, are: the circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court.[1]

The effects of the United Kingdom’s regulations are the result of one overarching policy decision: to prevent foreclosures and repossessions by creating significant statutory, regulatory, and judicial safeguards.[2]

In response, securing a mortgage in the United Kingdom has become increasingly difficult. Lenders require substantial down payments, significantly higher interest rates than those set by the government, and proof of income from mortgagors. Despite these significant obstacles, homeownership rates are similar to that of the United States.

The UK rate of repossession of all properties for the third quarter of 2013, was 0.06 percent of all homes[3] during the aftermath of the financial crisis.[4] There are around 11 million mortgages in the UK and an average of about 31,000 taken into possession every year over the last twenty years, an average of about 0.28% of all mortgages. This calculates to 0.11% of all homes.

In addition to an increased rate of foreclosure, the effect of foreclosure on the underlying property value is substantial. As of September 2013, the median sale price of foreclosed homes was $74,900 less than the median sale price of non-foreclosed homes during the same period.57



The discount at which the properties were sold has also widened, rising to 23pc since 2008, compared to 13pc in the years previous.[5]


Mortgage applications vary too. FNB’s monthly volume of home loan applications has fallen to 10 000 a month now, from between 30 000 and 35 000 a month in 2006/07.[6]

“Nedbank has been on a steady recovery since its retail unit was hit by soured home loans following a 2009 recession and its 120 billion rand ($11 billion) mortgage book now has a non-performing loan ratio of 5 percent.”[7]

In addition to an increased rate of foreclosure, the effect of foreclosure on the underlying property value is substantial. As of September 2013, the median sale price of foreclosed homes was $74,900 less than the median sale price of non-foreclosed homes during the same period.

Delays, in certain circumstances, can cause deterioration.[8]




The Mortgages and Home Finance: Conduct of Business sourcebook (“MCOB”) sets rules and regulations for lenders in their course of business with mortgagors. In particular, MCOB 13 regulates conduct for arrears and repossessions.38 This section of the 30 Id. at 609. 31 Id. 32 Id. at 611 (describing the duty as something less than “fiduciary.” The duty follows the ‘neighbor principle’ in English law). 33 Daniel Lamb, A Specter is Haunting the Financial Industry – The Specter of the Global Financial Crisis: A Comment on the Imminent Expansion of Consumer Financial Protection in the United States, United Kingdom, and the European Union, 31 J. NAT’L ASS’N ADMIN. L. JUDICIARY 213, 247 (2011). 34 Id. 35 Id. at 248. 36 Id. at 250. 37 See FINANCIAL CONDUCT AUTHORITY, HOW WE OPERATE (last visited Feb. 20, 2015),; see also FINANCIAL CONDUCT AUTHORITY, MORTGAGES AND HOME FINANCE: CONDUCT OF BUSINESS SOURCEBOOK (“MCOB”), (last visited Feb. 20, 2015). 38 MCOB, supra note 37 at 7 Chi.-Kent J. Int’l & Comp. L. Vol. XV 7 sourcebook provides clear instructions to financial institutions when dealing with defaulting borrowers. In particular, MCOB 13.3.2A provides “A firm must, when dealing with any customer in payment difficulties: (1) make reasonable efforts to reach an agreement with a customer over the method of repaying and payment shortfall or sale shortfall, in the case of the former having regard to the desirability of agreeing with the customer an alternative to taking possession of the property; (2) liaise, if the customer makes arrangements for this, with third party source of advice regarding payment of shortfall or sale shortfall; (3) allow a reasonable time over which the payment shortfall or sale shortfall 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; (4) grant, unless it has good reason not to do so, a customer’s request for a change to: (a) the date on which the payment is due (providing it is within the same payment period); or (b) the method by which payment is made; (5) where no reasonable payment arrangement can be made, allow the customer to remain in possession for a reasonable period to effect a sale; and (6) not repossess the property unless all other reasonable attempts to resolve the position have failed.”39 MCOB 13.3.2A represents many of the obligations placed on mortgagees from the duty arising from the power of sale. Moreover, failure to follow the rules set forth in the MCOB is punishable by fines, injunctions, and even criminal prosecutions. 40 The MCOB further regulates repossessions of mortgaged property. 41 This provision incorporates the previously mentioned requirements while also obliging the mortgagee to contact local authorities and establish whether the 39 Id. (Arrears and repossessions: regulated mortgage contracts and home purchase plans (emphasis added)). 40 See FINANCIAL CONDUCT AUTHORITY, HOW WE ENFORCE THE LAW, (last visited Feb. 20, 2015). 41 MCOB, supra note 37, § 13.4.5. 8 Chi.-Kent J. Int’l & Comp. L. Vol. XV 8 customer is eligible for local authority housing after eviction. 42 While these regulations may seem excessive, or even inconsequential, they do more than provide borrowers procedural protections: they define the relationship and the corresponding duty owed by mortgagors.

In response to the failed attempts by states to regulate foreclosure practice and the devastating effects of the financial crisis, lawmakers passed substantial federal reforms to foreclosure in the Dodd-Frank Act. The Consumer Finance Protection Bureau (the “Bureau”), an idea of Harvard Law School bankruptcy professor Elizabeth Warren and now Democratic Senator from Massachusetts, advocated for greater consumer protections in the wake of the 2008 financial crisis.80 After a struggling start to define its purpose and hire capable individuals, the Bureau began taking shape in 2011.81 It was not until the highly contentious January recess appointment of Richard Cordray that the Bureau began taking any substantive steps.82 Even then, leaders of the organization were slow to enforce the newly enacted rules and regulations delegated by Congress, waiting for “slam-dunk cases” before taking action.83 Today it boasts of several achievements: “a consumer complaint process that has already made banks more responsive. A data based method for assessing which institutions deserve the most scrutiny … A renewed onslaught of enforcement actions. And a record of hitting each rulemaking deadline set by Dodd-Frank as it fundamentally reshaped the mortgage market, while other agencies let theirs slide.” [9]

The Bureau can also refer matters to criminal proceedings if needed.88 These forms of relief are almost identical to the ones offered by the MCOB in the United Kingdom to the Financial Conduct Authority.[10]


[Recovery when deficiency eliminated or reduced.]

debtor whose deficiency is eliminated under Section 9-626 may recover damages for the loss of any surplus. However, a debtor or secondary obligor whose deficiency is eliminated or reduced under Section 9-626 may not otherwise recover under subsection (b) for noncompliance with the provisions of this part relating to collection, enforcement, disposition, or acceptance.



In 2008, RBS committed not to initiate repossession actions for a minimum of six months after a residential mortgage customer falls into arrears. To support this, RBS has a range of forbearance measures available to suit individual customer circumstances, including payment deferrals and reduced payments. In 2013, 3,349 customers benefited from one of these options, helping to keep them in their homes. Repossession remains a last resort and is only considered after forbearance options have been exhausted. In 2013, we repossessed 1,504 residential properties in the UK. This compares with 1,426 in 2012 and 1,671 in 2011.

UK figures on repossessions Comparative law of security


The Paradox of Judicial Foreclosure: Collateral Value Uncertainty and Mortgage Rates

Papers  to look at when I again have access.

Foreclosing on Opportunity: State Laws and Mortgage Credit

Karen M. Pence

Board of Governors of the Federal Reserve System

PDF (1,275.546 KB) | PDF Plus (242.256 KB)

Foreclosure laws govern the rights of borrowers and lenders when borrowers default on mortgages. In states with laws favoring the borrower, the supply of mortgage credit may decrease because lenders face higher costs. To examine the laws’ effects, I compare approved mortgage applications in census tracts that border each other but are located in different states. Using a regression-discontinuity design and semiparametric estimation methods, I find that loan sizes are 3% to 7% smaller in defaulter-friendly states; this result suggests that defaulter-friendly laws impose material costs on borrowers at the time of loan origination.

Cited by

The Dunne decision:

  1. The fact that the banks would have to recognise losses fully upon repossession is important. The imperative of keeping the banks technically solvent and meeting capital requirements is possibly dominant.


The US and Spain both moved quickly enough into foreclosures – or repossessions – with 15 per cent of mortgage accounts being foreclosed since 2007 in the US and more than 4 per cent in Spain. If we had foreclosures at even Spanish levels – and the crisis here was worse – some 30,000 houses would have been repossessed.

Instead the latest figures indicate fewer than 4,000 homes were repossessed by the end of last year: 1,100 via court-enforced orders and the rest via voluntary repossessions. Others will have sold under pressure from the banks.


  • Easy repossession US states have high repossession rates and low arrears rates
  • Difficult repossession US states have low repossession rates and high arears rates
  • Very difficult repossession Ireland has a very low repossession rate and a very high arrears rate[11]


Debtor protection vs Credit Access.


Using indicators to trigger policy decisions:

“The increase in household leverage prior to the most recent recession was stunning by any historical comparison. From 2001 to 2007, household debt doubled, from $7 trillion to $14 trillion. The household debt-to-income ratio increased by more during these six years than it had in the prior 45 years. In fact, the household debt-to-income ratio in 2007 was higher than at any point since 1929. Our research agenda explores the causes and consequences of this tremendous rise in household debt. Why did U.S. households borrow so much and in such a short span of time? What factors triggered the slowdown and collapse of the real economy? Did household leverage amplify macroeconomic shocks and make a quick recovery less likely? How do politics constrain policy responses to an economic crisis?

While the focus of our research is on the recent U.S. economic downturn, we believe the implications of our work are wider. For example, both the Great Depression and Japan’s Great Recession were preceded by sharp increases in leverage.1 We believe that understanding the impact of household debt on the economy is crucial to developing a better understanding of the linkages between finance and macroeconomics.”[12]  Extensive paper to read


Jaftha same kind of logic, the sheriff is now in the position of the clerk of the court.

The focus here is not really on evictions.

The availability of state resources is not an issue.


Horizontality established .

Jaftha says talks about apartheid era legislation. And refers to Port Elizabeth.

In Jaftha the Minister argued against the relief on the basis that judicial supervision meant more costs in terms of courts and magistrates. There was a cost to the state in that case. Not so here.

And that extra expense, now incurred, has not helped much, as court have not got clear enough rules about when to allow execution and when not, they therefore generally proceed much as before.

The Minister of Justice argued in Jaftha against measures that would make credit providers reluctant to lend to the market. She also discussed situations where the creditor was also poor. [13]

Importance of the purpose lessens when the debts are very small.[14]

Jaftha court also talks about the difference if the debt’s have been run up recklessly.

The interests of creditors must not be overlooked. There might be circumstances where, notwithstanding the relatively small amount of money owed, the creditor’s advantage in execution outweighs the harm caused to the debtor. In such circumstances, it may be justifiable to execute. It is in this sense that a consideration of the legitimacy of a sale in execution must be seen as a balancing process.

There will be many instances where execution will be unjustifiable because the advantage that attaches to a creditor who seeks execution will be far outweighed by the immense prejudice and hardship caused to the debtor

Sale in execution not appropriate if grossly disproportionate.

Another factors is whether they put it up willingly.

In summing up, factors that a court might consider, but to which a court is not limited, are: the circumstances in which the debt was incurred; any attempts made by the debtor to pay off the debt; the financial situation of the parties; the amount of the debt; whether the debtor is employed or has a source of income to pay off the debt and any other factor relevant to the particular facts of the case before the court.

[26]    (Jaftha)

The history of the legislative scheme under apartheid and the grave injustices perpetrated in the context of land have been dealt with in detail elsewhere.

See O’Regan “No More Forced Removals? An Historical Analysis of the Prevention of Illegal Squatting Act” (1989) 5 SA Journal on Human Rights 361; Van der Walt “Dancing with Codes – Protecting, Developing and Deconstructing Property Rights in a Constitutional State” (2001) 118 SA Law Journal 258; and Van der Walt “Exclusivity of Ownership, Security of Tenure and Eviction Orders: A Model to Evaluate South African Land-Reform Legislation” (2002) Tydskrif vir Suid-Afrikaanse Reg 254. See also the recent decision of this Court in PortElizabeth Municipality v Various Occupiers CCT 53/03, 1 October 2004, as yet unreported, where Sachs J discusses the various pieces of apartheid legislation which have dealt with the occupation of land at paras 8-10.

It is not necessary here to go into great detail on this subject. It is important to emphasise, however, that the need for the protection of security of tenure in section 26 must be viewed in the light of the injustices of forced removals from land and evictions from homes perpetrated in the past.

The reserve price (Rule 115) must on no account be opened until the biddings are closed. [15]

“Proclamation for people to come with a higher offer” [16]P491

Transformative effect — this would be a true transformation , from having the worst banking laws in the world and hence the nastiest banks , to the best and the least nasty.

It is trite that it is for the party relying on the legislation to prove that it is justified , not for the party challenging to show that it was not justified. De Lange vs Smuts 1998 (3) Sa 785  (CC) para 92.

“this Court has refused to uphold statutes and conduct whose justification was highly speculative and rationally unconvincing” and “not supported by any empirical evidence and research”.[17]

In Jaftha used the least instructive remedy correctly as Van Rooyen and Others vs the State and others 2002(5) SA 246 (CC) para 88 but it has proven ineffective[18]


The idea of an objective order of constitutional value seems connected to the South African doctrine of “objective invalidity.”

It is contended that the Rules 46: 10 and 12 are inconsistent with the constitution and Rule 46 invalid for failing to specify the property should be sold at market price and provide detailed regulations that will prevent it being sold for less unnecessarily.  It this is correct, then by the doctrine of objective validity, it has been so since the adoption of the constitution. [19]  Thus the damages would be retrospective going back until to that date, unless the court specifically made it not retrospective.

In our case damages are retrospective. May be limited to the parties in issues, or extended to everyone.

IN 2.22 of the Applicant’s submissions in Jaftha[20] the property was bought by the partner in the firm of the opposing attorneys for R500. This is not directly illegal but certainly leads potentially to an attorney having an incentive to not serve

papers and have the properties sold for as little as possible.

The situation of when reasonable offers are rejected was also brought up in the Applicants submissions in Jaftha[21]

Protection given to certain movables but not to the home? Section 3.51

Port Elizabeth

The blatant disregard manifested by racist statutes for property rights in the past makes it all the more important that property rights be fully respected in the new dispensation, both by the State and by private persons. Yet such rights have to be understood in the context of the need for the orderly opening-up or restoration of secure property rights for those denied access to or deprived of them in the past.[22]


Section 26(3) evinces special constitutional regard for a person’s place of abode. It acknowledges that a home is more than just a shelter from the elements. It is a zone of personal intimacy and family security. Often it will be the only relatively secure space of privacy and tranquillity in what (for poor people in particular) is a turbulent and hostile world. Forced removal is a shock for any family, the more so for one that has established itself on a site that has become its familiar habitat. As the United Nations Housing Rights Programme report points out:

“To live in a place, and to have established one’s own personal habitat with peace, security and dignity, should be considered neither a luxury, a privilege nor purely the good fortune of those who can afford a decent home. Rather, the requisite imperative of housing for personal security, privacy, health, safety, protection from the elements and many other attributes of a shared humanity, has led the international community to recognize adequate housing as a basic and fundamental human right.”15



In Canada, auctions appear to have obtained market value in the 18th and 19th centuries but by the 20th century have become like our own with 1 or 2 people bidding.[24] The bank was by that stage buying the property 85% of the time.  Ontario, therefore made new laws designed to make sure that market prices were achieved.[25]

“When CGA v Nixon was decided the Australian general law position was more unsettled as to whether the standard of care required of a mortgagee exercising a power of sale mirrored that in the UK – that is, whether the Australian general law imposed upon a mortgagee a duty of reasonable care akin to negligence (as in the UK), or rather a mere equitable obligation of good faith.”[26]


Other groups for whom this applies in Hungarian law include usufructuries, co owners who are not the debtor and the debtors lineal ascendants who have stayed there for more than 6 months.

Sub section 2 continues:

  • A mortgagee who exercises a power to sell mortgaged property may not become the purchaser of the mortgaged property except in accordance withsection 196 or an order of a court made under section 200.


2 2 4 Penalty Clauses The Credit Agreements Act and the Usury Act contained various provisions64 intended to protect the consumer against the harsh consequences of penalty clauses65 in the contract. The end result of this protection was that, irrespective of the amount of the penalty stipulation in the contract, the credit grantor was only entitled to claim the amount of the actual patrimonial loss suffered as a result of the breach of contract.66


[1] Jaftha paragraph 60

[2] Nicholas Krebs  British Cures for American Foreclosure Woes: A Comparative Analysis of Foreclosure Law in the United States and United Kingdom Chi.-Kent J. Int’l & Comp. L. Vol. XV


[3] There are around 26 million homes in the UK.

[4] COUNCIL OF MORTGAGE LENDERS, ARREARS AND REPOSSESSIONS CONTINUE TO FALL, SAYS CML (“CML Report”), Nov. 14, 2013, (last visited Jan. 20, 2014) (noting that this is the lowest recorded level since the organization began reporting the statistic in 2008)


[6] [6] According to the Center for Affordable Housing at



[9] Nicholas Krebs  British Cures for American Foreclosure Woes: A Comparative Analysis of Foreclosure Law in the United States and United Kingdom Chi.-Kent J. Int’l & Comp. L. Vol. XV p13

[10] Nicholas Krebs  British Cures for American Foreclosure Woes: A Comparative Analysis of Foreclosure Law in the United States and United Kingdom Chi.-Kent J. Int’l & Comp. L. Vol. XV p14



[13] Jaftha paragraph 38

[14] Jaftha paragraph 40

[15] Van Zyl “The Theory of the Judicial Practice of South Africa” p313

[16] Van Der Linden “Institutes of the Law of Holland:

[17] S v Makwanvane 1995(3) SA 391 (CC) para 287 (per Mahomed J).


[18] Fose v Minister of Safety and Security 1997 (3) SA 786 (CC) para 69.

[19] Minister of Health and Another v New Clicks South Africa (Pty) Ltd and Others (CCT 59/04, 30 September 2005)

[20] Not the judgment. The papers are available from the Constitutional Court in pdf.

[21] AT 3.37

[22] Para 15

[23] Para 17

[24] John McLaren, A. R. Buck, Nancy E. Wright Despotic Dominion: Property Rights in British Settler Societies p132

[25] John McLaren, A. R. Buck, Nancy E. Wright Despotic Dominion: Property Rights in British Settler Societies p134

[26] Wellard, Mark Norman (2012) Does section 420A impose ‘strict liability’ upon controllers for acts or omissions of agents and experts? Insolvency Law Journal, 20(2), pp3