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Shortfall claims

What is the limitation period for a lender wishing to recover mortgage debt shortfall? Adrian Iles explains

13 December 2002

Mortgagors who default on their mortgage payments, so their homes are repossessed, often mistakenly believe they can start afresh to rebuild their shattered lives, and the worst is behind them once they have lost their homes. The reality, of course, is very different. If the mortgage debt exceeds the value of the home, there will be a shortfall between the debt and the proceeds of sale when the mortgagee sells the repossessed home. That shortfall can be significant, especially in the circumstances of a forced sale. Over time the shortfall can increase substantially in size with the addition of interest, either contractual interest depending on the terms of the mortgage deed, or statutory interest accruing on the shortfall debt. The bank or building society which faces a shortfall may decide not to pursue the mortgagor until his circumstances improve, which could take years. It may come as a complete shock to the former mortgagor when years later he has to face a crippling claim for the...

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