Bridging Finance News

A scheme brought in at the beginning of 2009 to help homeowners facing repossession has had its funding cut under the new coalition government.

The Mortgage Rescue Scheme was devised under the previous Labour government to help tackle repossession problems worsened by the recession. It lets struggling homeowners sell their property to a council or housing association and remain living there as tenants.

Housing minister Grant Shapps confirmed that the government grant for each home bought under the scheme would be reduced, although the total kitty was unchanged.

The proportion of government funding for each home bought by a housing association will drop from 65% to 55%.

Mr Shapps defended the cuts, saying the scheme was being “refocused” and that the fall in funding for individual houses will enable more people to take part in the scheme.

He said: “The most effective thing the government can do for homeowners is to tackle the record deficit and avoid the need for rapid increases in interest rates.”

Figures show that since its launch a year and a half ago, the Mortgage Rescue Scheme has helped 629 households. Ministers originally projected that up to 6,000 homes could be helped by the scheme.

According to figures released at the end of March, a further 1,849 applications were “ongoing”.

Ben Smith, from sale and rent back firm DFB Housing Solutions, said that the difference in funding would have a “massive effect” on struggling homeowners.

He added: “With an LTV of 55%, many people won’t have the opportunity to get out of their situation. I think the reason why the scheme hasn’t been more successful is down to having the wrong LTV and not many people knowing about it.”

Government support schemes have been attributed for keeping the number of repossessions down, compared to the recession of the early 1990s.

Figures from the Council of Mortgage Lenders (CML) showed that the number of homes repossessed in the UK declined by 7.5% in the first quarter of 2010 to 9,300. 10,600 houses were repossessed in the last quarter of 2009.

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The Financial Services Authority (FSA) has secured £3.717 million in compensation for investors in an unauthorised collective investment scheme operated by Upton & Co. Accountants Limited.

A High Court ruling confirmed the immediate distribution of £3.717 million to investors on a pro rata basis. Upton has also agreed to make further monthly payments of £10,000 which will be returned to investors in due course.

The Wakefield based firm, which has never been authorised by the FSA, operated a collective investment scheme known as the “Currency Plan” promising investors high rates of return. The money was to be used to invest in foreign exchange markets. However, limited foreign exchange trading occurred and very little was ever returned in cash.

Darren Upton, a member of the Association of Chartered Certified Accountants, owned and controlled the firm.

Margaret Cole, director of Enforcement and Financial Crime, described the outcome as “fantastic”, saying: “It is so rare for victims of unauthorised businesses to get any money back because normally the money is misappropriated and victims of unauthorised firms are not protected by the Financial Services Compensation Scheme.

“But as we intervened early in the scheme’s life cycle we were able to recover a large proportion of the original amount invested. Normally the amount recovered – if any – is often just a few pence in the pound so securing this amount is a real coup.”

In February 2009 the FSA commenced an investigation into Upton and soon realised that the firm was carrying out unauthorised business. A month later, the FSA secured a High Court injunction to stop the activity and freeze the firm’s assets.

In March 2010 the FSA reached an agreement with Upton for the firm to pay compensation of £3.6 million immediately and a further £840,000 in monthly instalments.

Margaret Cole continued: “Operating a collective investment scheme is a serious business involving the management of a number of investments and requiring FSA authorisation. Upton had no business running one of these schemes and the firm risked millions of pounds of investors’ money – something you’d expect a firm of accountants to know better.”

A collective investment scheme enables a group of investors to pool their assets with a view to sharing the profits. Participants do not have day to day control over the management of the assets, something that is carried out by an FSA authorised operator. Upton was performing that function without approval.

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The Midlands Housing Association has collaborated with Martin Corbett to launch Derwent FM, a Facilities Management company. The new company plans to launch affordable housing schemes for the common man. Martin Corbett will own 25% in the new venture, while Centro Place investments and Derwent Living’s investment company will have 75%.

Martin Corbett has over 15 years of experience in this industry while Derwent Living has been managing and providing services to 11,000 homes. Derwent FM will function as a subsidiary company under the Derwent Living group of business and will be managed by Paul Wisher, Commercial Director of Derwent Living, Martin Corbett and Paul Casey, Director, Derwent Living Development.
Derwent FM will be focussing on the student accommodation market in the Midlands and the South.

Talking about this new venture, Paul Wisher said, “Our forecasts show that in six years, Derwent FM will be turning over £20 million to £25 million, which means there will be a large amount of profit to go back to support the core social housing part of the business.”

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