A reader, Mr D, asked:
I had a mortgage shortfall from 2006 after my house was repossessed by Natwest. As a mortgage shortfall stays on file for 12 years, I decided to make a Full and Final settlement offer in January this year which they accepted and which has now been paid.
Now with both Equifax and Experian, the account has disappeared, it doesn’t appear in my open or closed accounts. However, in my Credit Karma (TransUnion) it is on my file as closed with a code status of PS – partially settled.
I raised a dispute with Credit Karma stating that the account doesn’t appear with Equifax or Experian, so they need to remove the account.
So my question is, should they close it, as I’m guessing it will be Natwest who have reported the account to the Credit Reference Agencies (CRAs) as settled and not partially settled. I’m confused why the status would be different with one of the three CRAs?
How a repossession should be recorded
A house is only repossessed if you have defaulted on the mortgage payments. So there should be a default recorded on the mortgage account at the CRAs.
When the lender sells the house, if the price has covered the mortgage (including the lender’s costs and interest added), the mortgage should be marked as “satisfied” at the CRAs, with no balance owing.
But often after repossession, the house is sold for less than the outstanding mortgage. This mortgage shortfall is a debt that the borrower still owes and the mortgage account at the CRA should show this as the balance owing.
It is no longer a secured debt, as the house has been sold. But because it used to be secured, the Limitation Act says that the lender has twelve years to take you to court for the part of the debt that was the capital owed, not the usual six years. National Debtline’s Mortgage Shortfall factsheet covers this in detail, including when the time starts running and the fact that if the lender does not contact you for six years, you may not be asked to pay the shortfall.
Because it has defaulted, the mortgage debt will be deleted from the CRAs’ records after six years, just like any other defaulted debt. There are no special rules at the CRAs saying they keep mortgage shortfall debts for twelve years. And partially settled debts also disappear six years after the default date.
So what has happened with Mr D’s credit records?
But this hasn’t happened correctly for Mr D!
I asked him if there had been a default and he said:
The debt was always showing as 6 months late never a default.
That is wrong… but it explains the rest of what happened. The mortgage debt continued to show on his credit records after 2012 because no default had been added back in 2006.
After Mr D settled the shortfall, Natwest have gone in to update his credit record and it looks as though they realised that the Experian and Equifax’s records were wrong. So as well as updating the balance to zero, they added a default date that was more than 6 years ago so all trace of the mortgage has disappeared from Mr D’s records.
But, for some reason, Natwest didn’t add a default date to his record with TransUnion, so Mr D’s Credit Karma report shows the mortgage debt as being partially settled and with a zero balance. If Mr D doesn’t get this sorted, this mortgage will continue to show as a closed account for six more years and hurt his credit score.
How can he get this put right?
Mr D has asked Credit Karma to sort this out. But now it is clear what the mistake is, I think it may be quicker if Mr D complains directly to NatWest, asking them to add a default date back in 2006 to his TransUnion record.
Finally, if your house has just been repossessed…
This is too late for Mr D. But if you know your house will be repossessed soon, or it has recently been sold, it is good to think how you will deal with the resulting mortgage shortfall.
Many people are stressed and exhausted after losing their house. If the lender isn’t being pushy about getting a payment arrangement in place, they just ignore a shortfall that it is clearly too large to repay in a few years.
This is very often a mistake. You may then be contacted in a few years, just when you are back on your feet and faced with either starting large repayments or getting a CCJ which will wreck your credit record for another six years. It is a millstone around your neck.
With a large mortgage shortfall, it is very often better to look at bankruptcy to get rid of it, and your other debts, and have a clean start.
Bankruptcy – the big questions
What should the default date be?
How much will my credit score change if…
Chris Bone says
RE SHORTFALLS – Sometimes it is worth looking further into the shortfall debt figure, in particular the actual sale price figure, repossessed properties are supposed to have 2 independent valuations to help ensure a fair sale price is obtained. These should be available to view if a query arises, rather than the lender stating for example “the sale price reflected market demand”. The sale price obviously influences the shortfall figure and it can make a difference between saY a DRO and bankruptcy. The FOS can intervene if a complaint is raised and the lender either cannot or refuses to provide valuations.
Leah says
I have an outstanding debt in joint names from an old norther rock ‘together’ mortgage. The house was repossessed and sold massively under market value in 2011. Northern Rock Or Landmark Mortgages as they are now say there is an outstanding amount of approx 50k ( Not sure of exact amount as they don’t write to me!) My ex partner pays them an amount each month and currently I pay them nothing. If i was to get another mortgage in the near future as my credit rating has improved could Northern Rock apply to the courts to put a claim on my new property?
Sara (Debt Camel) says
Yes, in theory they could do this, they would have to take you to court for a CCJ first, i don’t know if that is likely whilst your ex is making payments. This debt will never become statute barred as your ex has been making payments to it.
I will say what won’t help you now but may help someone else if they read this – it is great pity you did not go bankrupt when the house was repossessed in 2011. All this by now would have been behind you.
Also double check that your credit record is actually good with all three credit reference agencies before applying for a mortgage.
Sonia says
Hi I had a secured loan attached to a house that was repossessed back in 2007 which is still on my credit file showing 6 months late payments with Idem. I have no clue what to do with it. It’s 11 years old and still going. No payments have been made in 6 years. Any help would be appreciated.
Sara (Debt Camel) says
I think you should talk to National Debtline on 0808 808 4000 about when this mortgage shortfall is likely to be statute barred. You could get a default added now back in 2007 and the debt would disappear from your credit record. But if the debt isn’t yet statute barred, this may be a mistake as it may prompt Idem to start chasing you to repay it.
kev says
I have 30k debt with NRAM from 2007. The mortgage was in joint names with ex partner.
I’m eager to get back on track with credit references etc however it isn’t actually showing on Noodle or Clearscore.
I have offered a F&F which NRAM are considering however I want to make sure I actually owe this before making a payment.
I suppose what I’m asking is……am i still liable even although its not on my credit file
Any help is appreciated
Sara (Debt Camel) says
Do you still own the property? If not when was it sold/repossessed? Have you made any payments to this debt?
Have you looked at your Experian credit record? See https://www.moneysavingexpert.com/creditclub for how to check that?
The fact that a debt doesn’t show on your credit record says nothing about whether it is legally enforceable.
Gem says
Hi, I have an 18k debt from a shortfall when our house was repossessed in December 2013. I am paying a small amount off this each month within a debt management plan. Each month it shows are VR (Voluntary repossession) on my credit file. Should this be removed from my credit file after 6 years – ie December 2020, even though I am paying off the debt monthly? Thanks
Sara (Debt Camel) says
How much are you paying each month and do you have other debts in the DMP as well?
Gem says
Hi, Yes I have other debts within the debt management plan. I am paying £29 per month at the moment towards the Chelsea debt, £60 per month in total to my debt management plan. The first default on the mortgage was December 2013. As I am paying monthly will it still be removed from my credit file after 6 or 7 years? Thanks
Sara (Debt Camel) says
It sounds as though this DMP will go on forever? I suggest you talk to National Debtline about your options such as bankruptcy. It is a shame you did not go for that in 2014, but don’t let that stop you taking the right decision now.
Re the mortgage debt on your credit record – is there a default date on it?
Gem says
Hi
It doesn`t say a default date. Each month on my Experian record just says VR right the way through?
Dave says
I Had a mortgage with a ex nearly 30 years ago, we split, I went to work away and she kept house, it got repossessed 28 years ago, I am now about to apply for a new mortgage with my wife, do I say I had a previous mortgage and had it repossessed or say I havent had a mortgage before
Sara (Debt Camel) says
You tell the truth – you have had a mortgage before and the house was repossessed. But this is ancient history, you shouldn’t have a problem getting a mortgage at a good rate. I always suggest going through a good broker though.
Dan says
Hi,
I had a house (joint mortgage) with an ex partner repossessed roughly 2008/2009. I received some letters a year or so after, stating I had a circa 50k debt for a shortfall. I couldn’t pay this and basically ignored them!
I had subsequent letters on and off for a while, sometimes years in between.
I have no contact with my ex partner and I’m not sure if he was/is paying anything on the shortfall.
This caused major credit issues for me, including 2 CCJs being added to my file. I have worked hard to build my credit up, I now have no CCJs and a good status with all 3 major CRAs, aswell as a personal CC and a personal loan with my bank (both low and managed well).
However, I recently received a letter, after years, from a company stating they are acting on behalf of the creditor for the shortfall and asking for payment. I dont know the exact date the house fell into the ”12 year countdown” but I’m worried I could receive a CCJ for this when I’m about to apply to be added to my current partners mortgage. Would this affect me, and could they still apply for a CCJ afterall this time?
Sara (Debt Camel) says
I will start by saying what won’t help you at all but may help someone else reading this – it is a great shame you did not go bankrupt in 2009. You would have saved yourself a great deal of stress and pain.
Some general points:
– The 12 years doesn’t apply if your ex has paid any money during that time.
– It also doesn’t apply to any debt where there has been a CCJ. CCJs never get statute barred. But the creditor cannot enforce then after 6 years without getting permission from the court, which is very rarely given.
– You cannot get a second CCJ for the same debt – although you seem to have… you could have defended that CCJ and it should never have happened.
I suggest you talk to National Debtline on 0808 808 4000 about what sounds like a complicated situation and what you should reply to this letter.
Jane says
Hello, I’m in a similar situation. My last payment on my mortgage was June 2008, my ex ran away overseas so I know no payments have been made and the house got repossessed. I have had no credit since then and have been flying under the radar. I received a letter from a debt recovery agency saying I owe a shortfall of the mortgage. I tried to see how much the repossessed house sold for but there are no records of this online, it just shows when we bought the property in 2006 and as far as I know land registry does not include repossessed sale details. I want to firstly find out how much the bank sold it for to ensure this figure is correct, how can I do this without acknowledging the debt? Secondly as its coming up to 12 years and I have no intention of paying this mortgage shortfall, can I just ignore this letter and sit tight until June and then tell them about the 12 year rule?
Sara (Debt Camel) says
Talk to National Debtline on 0808 808 4000. These are difficult and often large debts, you need a good debt adviser to talk through your situation in detail so you know what your options are.
Jane says
Thank you Sara. The shortfall is £21k so will speak to them about the 12 year rule. Do you know how I could find details of the repossessed sale price as the likes of zoopla and nethouseprices only show when we bought the property in 2006?
Sara (Debt Camel) says
I’m sorry, talk to National Debtline about all of this.
June says
Hi there,
I had a joint mortgage with my son but sadly we both lost our jobs and the house was repossessed in 2013 followed by a CCJ each in January 2014.
The sale of the house covered the full mortgage but the company have issued the CCJ for Solicitors, Estate Agents, Gardening fees ect, a total of £10,000.
Neither myself or son have paid anything towards this and the CCJ has now gone from my CRA files as it’s been over 6 years.
We’ve recently been sent letters from the lender with an income and expenditure form and asking for proof of our income. Can the mortgage company still chase us for this debt seeing as it’s been over 6 years and no payments have been made towards the debt?
Many thanks, J.
Sara (Debt Camel) says
The statute of limitations for debts after a mortgage repossession is 12 years not 6 years. But talk to National Debtline about this as it’s complicated – see there factsheet https://www.nationaldebtline.org/EW/factsheets/Pages/mortgage-shortfalls/mortgage-debt.aspx and call them on 0808 808 4000.
MR Maygoo says
I had a Northern Rock Mortagage in 2006 and I throw the key back and told them to send me a bill for the outstanding which I cleared 6 years and 2 months ago. Now so I have to tell the next mortgage company that I did a volunteer surrender? If does not appear on my credit ratings at any of the 3 credit agnecies?
Sara (Debt Camel) says
if you are asked as part of a mortgage application, then yes, you should. I suggest you talk to a broker, don’t apply direct to a bank.
John C says
I badly need urgent advice please as I am now disabled and have genuinely lost everything that I had worked very hard for all of my life. I did not lose it through my own fault I sadly contradicted Guilain Barre’ Syndrome which nearly killed me and has permanently disabled me.If you could get back in touch with me it would be very very helpful
Sara (Debt Camel) says
I’m sorry to here of your health problem. Have you had a house repossessed?
Mary McNeill says
Hi All
When offering a final settlement what is the going rate?
Do you have to fill in a form to show all income or would they just take the settlement?
Or does anyone know what is the process?
Many Thanks
Sara (Debt Camel) says
Is this to a mortgage shortfall? When was the house repossessed? how large is it and have you been making payments to it?
David L says
Hi Sara,
I went bankrupt with my ex wife in 2008, discharged in 2009 and have never been notified or chased by anyone for any of the previous debts since. We handed the keys back to our property at the time.
My credit record is now squeaky clean and I am in a relationship with another person, planning on buying our own home with a substantial deposit (50%).
Would the previous history be registered anywhere that would flag in a new lenders background search?
Sara (Debt Camel) says
Not if you avoid applying to any mortgage lender that is part of the same banking group as anyone you owed debts to you in your bankruptcy.
But you should answer any question on the application about previous bankruptcy or insolvency honestly. The lender is unlikely to mins about such ancient history. I always encourage people to apply through a broker and tell the broker your full history. there should be plenty of lenders who won’t mins and will offer you a mortgage at a normal rate.
David L says
Thank you 😊
Mike says
I had a joint Mortgage with my ex. The house was repossessed in 2018 and was sold leaving a £35k shortfall. This is mentioned on my credit score report but not hers. Do you know of any reason why this would be?
Sara (Debt Camel) says
She could be looking at a different report? But most of the big mortgage lenders report to all three credit reference agencies.
Does this matter to you?
What is your plan for dealing with the shortfall? Often bankruptcy is much the best approach.
Jane says
Hi there, I wanted to see if you could clarify. I had a property that was repossessed in 2012. Last payment I made was 2011 so I’m not sure if it is actually counted as a 2011 repossession. Since then I have been in a private let. I would like to own my own home and have had a good credit score since then. I have a credit card and a loan and all payments made so my credit score is just about as high as it can be. What I would like to know is, given the repossession was 9 or maybe even 10’years ago, is there anyway a mortgage lender can check this to see my previous home was repossessed during any point of the mortgage application process? Everything I have read online suggests that, as it will no longer be on my credit file, there is no way for a lender to check this unless I tell them. I’m at a bit of a loss about what to do for sure.
Thanks
Sara (Debt Camel) says
On a mortgage application you will normally be asked if you have ever had a property repossessed. It is fraud to lie.
Have you repaid the mortgage shortfall?
Jane says
Thanks for your response. The shortfall and other debts were included in bankruptcy which happened in 2012. This is no longer recorded on my credit file. Do you know if there is a repossession register of some kind or since it is no longer recorded on my credit file does that mean it cannot be found?
Thanks
Jane
Sara (Debt Camel) says
A mortgage lender may have access to their own old records and any for associated companies.
The Council for Mortgage Lenders used to have a Possessions register – this ended in 2010.
But seriously, do not lie on a mortgage application. Talk to a broker – there will be lenders that will give you a mortgage, you just need to avoid ones that may not.
Dave says
Hi Sara,
If a CCJ is only on on your credit file for 6 years and you’re not sure if you have a CCJ at all, what’s the best way to check if you do actually have one if it’s been longer than 6 years?
Thank you.
Sara (Debt Camel) says
It isn’t possible. Well except by contacting all your previous creditors and asking them.
Is this a theoretical concern or has a debt collector said they have a debt where there was a CCJ?
Dale s says
Hi
I had my property repossessed in 2019 and had shortfall payment of 25K. I have been paying small payments every month which the mortgage company agreed with but will take years to pay off. My question is do mortgage companies accept offers to clear balances? I recently applied for mortgage and passed initial checks but underwriter said i would need to increase monthly payment or settlement balance on shortfall before offering new mortgage
Sara (Debt Camel) says
I doubt they will accept a low offer. How much can you afford?