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Busy lenders' monthly round-up - April 2020

The latest news and developments in retail mortgage lending and regulation.

This month in summary:

News

Focus on Scotland

Focus on Northern Ireland

News

Government updates on the pandemic

There have been a number of updates that will affect lenders in respect of the pandemic. The key stories are:

  • On 17 March 2020, the government announced that it had agreed with the mortgage industry to offer three-month payment holidays for people who are struggling financially because of the coronavirus. You can read our guidance on this topic here.
  • On 18 March 2020, the government announced that it would bring in legislation to suspend evictions and possession proceedings against borrowers and renters.
  • Also on 18 March 2020, UK Finance announced a three-month moratorium on starting new action on residential and buy to let mortgages.
  • On 27 March 2020, the Court rules were updated so that all possession claims and enforcement of possession orders in England and Wales would be paused for 90 days. This applies to action by both landlords and mortgage lenders.
  • Also on 27 March 2020, UK Finance pledged to support buyers who have exchanged contracts but delayed completion due to coronavirus. This includes finding ways to extend mortgage offers for three months and working with customers whose situation has changed due to the pandemic. 

In respect of renters, the Coronavirus Act also provides a temporary amendment (Until 30 September 2020) to both s.8 and s.21 notices, which means landlords now need to give three months’ notice before evicting tenants. The Act also gives government ministers wide discretion to extend these periods further if they believe that renters need additional time. 

We are closely monitoring this fast-evolving situation.

Effect of the coronavirus stay of proceedings in practice

In a recent decision in the Central London County Court the judge stated that the practice direction pausing all possession claims applied to a multitrack claim where directions had already been given.

In Arkin v Marshall 2020 F00HF362 (unreported), proceedings to enforce possession under a mortgage, the court  had set the trial for between October 2020 and January 2021. The parties were due to complete disclosure during the 90 day period imposed by the practice direction and had a deadline for the submission of witness statements two days after it ended. This raised the question of whether these were affected by the stay. The judge ruled that the stay does apply and that adjustments should be made to the timetable after it is lifted.

See the Gough Square Chambers website for more details and a copy of the decision.

FCA complementary measures to provide support and financial relief to customers under certain regulated credit agreements

The FCA has consulted on and implemented a collection of measures to complement those announced by the government. The consultation ran until 6 April, and the measures came into force on 14 April.

Key measures for customers of certain regulated credit agreements experiencing coronavirus related financial difficulties:

  • Temporary payment breaks for loans and credit cards on request
  • For those with an existing overdraft, up to £500 will be interest free for up to three months
  • Firms must not allow overdraft prices to be worse than before the recent overdraft changes came into force
  • Firms must ensure that the temporary measures do not affect customers’ credit ratings

These measures will last for up to three months. Individual providers can also offer their own relief schemes to customers.

FCA and PRA coronavirus related guidance

The FCA has issued a series of guidance and information publications for firms in the light of the coronavirus pandemic. This includes:

  • Guidance for lenders around mortgage holidays and repossessions in response to the emergency government measures. The guidance advises firms to ensure that the measures do not affect customers’ credit ratings and that repossessions should only be carried out if it is clear that it is in the customer’s best interests.
  • Guidance for small business lenders participating in the government’s coronavirus loan scheme. The information covers affordability assessments and suitable evidence, as well as whether it may be appropriate to suspend payments where income streams are not as predicted.
  • Guidance about key workers in Financial Services, including how firms should determine which staff members are key. It recommends that responsibility for this process should lie with the CEO Senior Management function.
  • Guidance about SMCR for solo regulated firms. This acknowledges that firms will need to make temporary changes to their Statements of Responsibility, however, they will not need to submit these to the regulator. It also includes a number of other measures designed to make it easier for firms to make the temporary changes.
  • Joint guidance with the PRA about SMCR for jointly regulated firms. This states that the regulators do expect firms to submit amended Statements of Responsibility until it is practical.
  • Guidance around the effect of the pandemic on the LIBOR transition. The FCA, Bank of England and the Working Group on Sterling Risk-Free Reference Rates are monitoring the situation and will provide further updates as soon as possible. They are currently advising that LIBOR is still on track to cease publication at the end of 2021 but coronavirus may affect some of the interim transition timelines.

See the FCA information for firms on coronavirus (Covid-19) response page for full details and updates. There is also a page with information for customers.

Court changes and moving to telephone hearings

The administration of justice will continue during the coronavirus outbreak.

The Lord Chief Justice, The Lord Burnett of Maldon, said: “COVID-19 will clearly have an impact on the operation of all courts in every jurisdiction. It is not realistic to suppose that it will be business as usual in any jurisdiction, but it is of vital importance that the administration of justice does not grind to a halt.”

Flexibility and technology are key to minimising disruption during the coronavirus pandemic. Modern technology allows courts and tribunals to proceed efficiently and maximise capacity. Video and audio technology have been available to the Judiciary for many years but they are now vitally important.

The majority of hearings will proceed as planned and the Judiciary will consider whether technology is appropriate on a case-by-case basis. The drive for flexible solutions is important, so procedural matters may be deliberated on the papers and adjournments may be sought. Those affected by changes will receive direct information about any planned arrangements.

That being said, with significant steps taken to reduce risk, it is possible for physical hearings to proceed in line with the strong government guidance on social distancing. In circumstances where individuals are still required to physically attend courts and tribunals, they will be directed to medical information surrounding prevention and treatment.

As an essential service, the courts and tribunals of England and Wales will continue to adapt to these extraordinary circumstances.

Focus on Scotland

Scottish courts’ approach to coronavirus

The Crown Office has announced contingency arrangements for court business, which is designed to significantly reduce demand on the justice system and minimise unnecessary social contact.

The Scottish Courts have taken the following steps in the wake of the outbreak:

Only ‘urgent and necessary’ civil business will go through the Scottish courts until at least 20 April. This applies to all Sheriff, Court of Session and High Court business and is subject to ongoing review.

In order to reduce the risk of coronavirus spreading, the public has been asked not to enter court buildings if they are not directly involved in proceedings. This measure will help the courts to protect their environment and reduce the risk for those who need to attend court or tribunal hearings.

In line with this, the Scottish Courts have closed the public court counters. There will be a drop box for documents in the reception area, but they have asked that documents are emailed to the generic email address of the Sheriff court where possible.

The courts have been working on developing virtual court facilities, with the Sherriff courts making use of telephone hearings, and from the 21 April the Court of Session Inner House appeals will be conducted over Cisco Webex.

Please visit the scotcourts.gov.uk website for updates and further information.

Focus on Northern Ireland

The impact of coronavirus in Northern Ireland – key developments in the courts

The Lord Chief Justice has stated that judges should not ask people to attend court if they do not need to be there. The courts are working towards dealing with more court business by video-link, skype or teleconference.

The court has produced forms for all cases for the week commencing 30 March 2020, which all parties involved should complete and submit to the court. The forms provide a way to inform the court of the current position in the case including any issues in dispute.

The Chancery Master in the High Court confirmed that there will be no oral hearings at the court with the parties present until further notice. However, the court is accepting written submissions. The Master will only make final orders in cases where he is satisfied that it is right to do so, and if he has any concerns about the process then he will adjourn the case. No new business should be issued unless it is urgent.

Likewise, the EJO and Bankruptcy Masters have also said that there will be no further oral hearings and cases currently in the list will be adjourned generally until further notice. The EJO has also advised that there will be no repossessions of occupied premises.

These are unprecedented times and the courts will continue to publish further guidelines as developments unfold. We will continue to update you, however, if you have any specific queries, please do not hesitate to contact us

Contributors:

Patrick McGirr

Bethany Hargreaves

Ben Hanham

Sahira Rafiq

Sophie Bradford

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at April 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions

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