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Debt Management Plan or Sale and Rent Back Schemes? |
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Debt Management Plan Forum is delighted to report that the FSA regulator has taken action versus the “Sale and Rent Back” industry. The FSA has unearthed widespread problems with the industry after an investigation that began in March 2011. “Sale and Rent Back” was a way for a homeowner, who often was getting close to eviction, to sell their home to a landlord that would then allow them to stay there as a tenant. There have been widespread difficulties with these sale and rent back schemes. The sale was usually pushed through at a level substantially below the market value of the home, promises of long tenancies were often broken, and in the most serious cases the purchasers failed to pay the mortgage on the property leaving the ex-owner facing an eviction over which they had little control. Debt management plan providers will point to other fundamental flaws with the way these schemes have operated. When setting up a debt management plan, or most other types of debt solution, the payment of a mortgage (and any mortgage arrears that might exist) would be the first priority when looking into whether a debt management plan makes sense. This is important, as the reason for the mortgage arrears in the first place will often be that other debts were also causing financial pressures. By contrast to the process used to set up a debt management plan, sale and rent back would typically exclude examination of the wider financial circumstances. This greatly reduces the potential for a positive outcome as the retention of other debts problems (not dealt with by a DMP or other similar measures) makes it likely that rent arrears that jeopardise a tenancy could arise in the future. It is the FSA that has dealt a blow to the sale and rent back industry. They took over regulating this business in 2009 and in 2011 launched a substantial investigation into the industry. The results in some way echo the OFT’s findings when they looked into the debt management plan sector; too many firms were failing to act fairly in accordance with the vulnerable position in which their clients found themselves. The resulting pressure has seen most firms withdraw from the business altogether though one has been put in the hands of the FSA’s enforcement team. According to debt management plan professionals, sale and rent back may no longer be an available option if you wish to stay in your home but face eviction for mortgage arrears. First and foremost it’s important to come to an affordable arrangement with your mortgage lender, or to seek external assistance from a housing or legal professional if such an agreement cannot be reached. Once that’s done it may become appropriate to look to deal with any other unsecured debts that may exist. A debt management plan is just one of the potential options to accomplish this so advice and guidance should be sought. One possible place to do that is our debt management plan forum where experts are available to answer your debt management plan questions online. |
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