Former owners of 188,000 repossessed properties could still owe money to their lender

Many repossessed Britons do not realise that they may still owe their former mortgage lender money if the property sold for less than their mortgage

This problem of mortgage shortfall debt has been highlighted by HML, a company which looks after the administration of mortgages on behalf of lenders.

There were around 227,500 repossessions between 2008 and 2013, and HML estimates that 188,501 of those cases will be in mortgage shortfall, representing 83 per cent of the total repossessions. The average shortfall owed by former mortgage holders is £43,000.

The problem is worst in Northern Ireland, where 97 per cent of repossessions resulted in the property selling for less than the mortgage value. In joint second place are the North and North-West, with 86 per cent of repossessions having a shortfall. The region least affected is the South East, where 75 per cent of repossessions are in shortfall.

Damian Riley, director of business intelligence at HML, said: “A borrower’s obligation towards their mortgage does not end with repossession, only when the debt has been repaid. Therefore, even though their home has been repossessed, they are still liable for any shortfall that exists.

“Providing lenders inform borrowers of their intentions to recover the debt within six years, the debt remains live on an open-ended basis.

HML says that lenders should take a targeted approach as it is not always the right course of action for an individual to be contacted for repayment.

Riley continued: “Some debt collection companies tasked with collecting mortgage shortfall debt often simply work their way through a borrower list and contact each individual one by one. At HML, we do not believe this is good practice, as contacting certain borrowers will be neither in their or the lender’s best interests and may be frowned upon by the regulator.”