2,000 risk losing ‘sale and rent back’ houses

Mar 31 2009 by Adrian Pearson, The Journal

THE Government was warned of potential problems with “sale and rent back” mortgage firms two years ago.

Up to 2,000 people could lose their homes amid a police investigation into North East Property Buyers.

And housing groups last night said they first warned ministers back in 2007 that companies working on the same “sale and rent back” business model used by the firm were dangerously unregulated.

The company is currently at the centre of a police investigation into alleged widespread mortgage fraud, a problem predicted by housing experts such as the Council of Mortgage Lenders and the Citizens Advice Bureau.

The Office of Fair Trading finally looked into the problem late last year, and told the Government it must act to prevent companies defaulting on mortgages.

Ministers were urged to order the Financial Services Authority to quickly take charge of the unregulated sale and rent back market.

But despite strong recommendations and predictions that the FSA could move “relatively quickly” to safeguard against dodgy practices, the authority is still consulting on what to do.

Last night Bill Shepherd, executive member for housing at Newcastle Council, said the Government should have acted earlier to prevent families having to wait and see if they will lose their home

He said: “We have seen the effects of poor regulations over the last few months and we know that the Government has previously been very proud of what now appears to be a flawed system.