Support for Mortgage Interest Relief (SMI)

Important

If you have had your Support for Mortgage Interest (SMI) benefit converted to
or have declined the loan, then read on, as this is for you.

This is the Government’s reason for changing yet another benefit into a loan. They state:

“To protect taxpayers we have converted SMI into a loan as previous recipients have benefited from house price gains whilst receiving public support for their housing, which is not fair to the taxpayer.
Converting SMI into an interest-bearing loan means that the benefit will be financed in a more sustainable and equitable way.
People acquire equity in their house at the expenses of the taxpayer.
They do not want to assist people, in paying to buy their homes”

Let’s look at this from an intelligent point of view.

The government’s reason has a number of faults, these are things they do not tell you, and never likely to, but we do.

The statements the Government have made as shown above are false, and the following are the reasons why.

1. What is the reason society exists?
Children are conceived and born, these children then become the adults in society and the process starts again. If people were not conceived and born they would not exist.
Most parents look on their children as the best thing they have accomplished in their lives, they purchase a house for them and their children to live and to provide somewhere, safe for the children to grow up.
To buy most houses requires a mortgage., but unfortunately, during this period, events can happen in peoples lives that result in them having to receive help from the state; a safety net. Most people claim benefits in times of need and despite the misconception, not everyone on benefits wants to live that way.
Most parents want their children to progress in life better than they did, and wish to leave them and or their Grandchildren a legacy on their demise, for most this would be in the form of their house.

2.  No doubt we would all agree, houses do rise in value. According to the government the owner benefits from the equity. These facts are true, but there is something they have missed, but are aware of.  The rise in the value of a house is based on a number of things; supply and demand, location, etc.. The factor that is also common with all houses is that the rise is relative. If house prices increase, they increase for most houses. So if someone wants to move, the cost of their new house will normally have increased in value at the same rate as the house they are moving from.
Despite what the government states People do not gain equity in their house.

We have to make a slight correction here, about gaining equity.

Some people do gain equity in their house and lots of it.
Not only does the renter and or Government pay the mortgage interest, (with the Government paying, so SMI loan required), but they pay the whole mortgage as well. If the Government pays they are providing the house owner (Landlord) with non-income based benefits, with no limit on how much capital or money they have, or having to make a benefit claim.
Want to know how?

If a person cannot buy, they rent
Renting is available from many sources. The main thing to remember is that paying rent on a property, owned by another, there is normally no return. There are however benefits from renting; for most little or no repairs to pay for and other expenses, there is also no mortgage payments and associated interest.

Buying a house does come with benefits, even with a mortgage which is quite significant. Unlike renting, for every mortgage payment made, more of the house is purchased. The cost of most rents are normally greater than what it costs in mortgage payments, this includes the associated interest payments. Mortgage interest payments also decrease over time as more of the capital is paid off, (the amount borrowed). The mortgage payments do not reduce as a result, but more capital is paid off. There is also one side effect to mortgages, which can be good or bad. Mortgage interest payments are set by the mortgage provider, interest can either increase or decrease. An increase results in the mortgage payments being more, or a decrease resulting in the mortgage payments being cheaper.
Paying interest is something that has to be paid with any mortgage or loan (unless it is interest-free).
Interest Explained; if you are unaware.
When
The advantage about having and paying a mortgage is that rather than getting no return, as is the case with renting, it is being used to buy a property, and for every payment, they obtain more of their house.

Renting does, however, have its benefits, for the owner of the rented house. The rent charged provides the house owner with an income, an income they can use for whatever purpose they decide. They can use the rental income to pay off any mortgage(s) or loan(s) they may have on the house, assist in buying another house, or use it to pay towards their living expenses. 

If the person renting needs government benefits to pay the rent or part of it, they can apply for and most of the time get it. There is no mortgage or associated interest, so no SMI loan required. 

The owner of the property is happy as they can see their equity increasing and in the majority of cases the rent still being paid. The Government is paying them to buy the property and all the above in red. all or most paid for again by HM government, courtesy of the Tax-Payer.

The Government state “it is not fair for the taxpayer to fund people on benefits to obtain equity in their house”, which as we said they do not. The Government are however OK with paying someone to buy their house outright (Landlord) and to increase their wealth, all thanks to the generous Tax-Payers.

Not a fair return for Tax-Payers money, making someone rich, now is it. But hey all governments make some people wealthy, using Tax-Payers money.

4. Another option for people who cannot afford their mortgage is to swap it for a shared ownership scheme. The other person with shared ownership charges rent. The rent which is paid or part paid by the Government. You have no mortgage so no interest to pay, so no SMI loan, and no capital to pay. The capital you do not pay could be put into an account and when it reaches the threshold, you can use it to buy back some of your property. You would have eventually bought back the shared ownership, you will then have no mortgage, and no SMI loan and interest charge on your house, thanks to HM Government.  Is this fair to the taxpayer?


So you want to downsize?
Good idea? Yes. Can you downsize? NO

You have or had an SMI loan, so you have the noose around your neck, as a charge has been registered on your house, and is increasing daily.
You find that your current house is too big, so you think it might be best to downsize.
You determine what you would need to downsize, and the government has said you will have substantial equity in your house, as we said no one gains equity in their house, apart from Landlords.
You have the house valued, ready to sell. You look at the valuation and work out the proceeds from the sale of your house, will be enough to buy a decent smaller home, one easier and cheaper to manage.

money you will be left with after any outstanding mortgage you may have and determine you can buy a smaller the huge amount of the SMI accumulated charge, the amount you receive from the sale, will not be enough to buy a smaller home. You are therefore stuck in a house larger than you need. A house, which someone with a family could have bought and lived in. You are stuck, the SMI noose gets tighter, as interest after interest is added for every month you are there.

Mortgage Interest

Mortgage interest is normally calculated daily and added monthly, the day before the payment is due.
In normal circumstances, you make a normal mortgage payment, which pays the monthly interest due and the rest to pay off some of the capital. (The amount you borrowed).  The mortgage company does not charge you interest on the interest.

SMI loan Interest

For SMI Interest this is calculated differently, as the interest payments decrease on a mortgage, the SMI interest increases. SMI can be classed as taking out a payday loan.

The interest does not stop just because a person stops claiming SMI. Interest is charged on the amount of the SMI payments and is also charged on the prior interest. So a person will not just pay interest on what SMI they claimed for, but will also be paying interest on previously charged interest.
The Government might sell it as a low-interest loan, but when you add all the factors in, if this type of loan transaction was being carried out by a company, the company would be shut down and legislation brought in to stop it from happening. There is only one word for SMI and Student Loans and that is Loan Sharking.

Despite what any politician tells you
UNIVERSAL CREDIT
will change from a benefit to a loan


What if a person lacks mental capacity?

Anyone who lacks mental capacity cannot enter into contracts/agreements, and cannot be forced to.

Where a person/organisation makes or demands someone who lacks mental capacity to sign a contract/agreement, and they are aware of such. They are not only breaking the law, but the contract/agreement is void.
The contract/agreement is not enforceable without a court order. Where a person/organisation responsible for making or demanding the contract/agreement takes this to court, that person/organisation will have substantial damages and costs to pay.

Moving onto SMI

Where a person has SMI benefit and lacks mental capacity, the following applies.
There is a piece of legislation called “The Loans for Mortgage Interest Regulations 2017”
Section 20 of the regulations include:
Transitional provision: lack of capacity
20.—(1) Paragraph (2) applies where the following conditions are met in relation to an existing claimant—
(a) the Secretary of State is satisfied on or before 5th April 2018, or later than that date but within 6 weeks beginning with the loan payments offer date, that the claimant is a person who lacks capacity to make some or all decisions about entering into the loan agreement;
(b) an application for a decision as referred to in paragraph (6) is made on or before 5th April 2018, or later than that date but within 6 weeks beginning with the loan payments offer date; andAccording to what is written if you have not agreed to the loan agreement, and have not stated you wish the payments to cease, the SMI benefit continues for a further 6 weeks.(c) at the time the Secretary of State is satisfied as referred to in sub-paragraph (a), he has not received the loan agreement and the documents referred to in regulation 5 and has not received a notification from the claimant that the claimant does not wish to accept the
offer of loan payments.
(2) Where this paragraph applies, the amendments made by Schedule 5 shall be treated as though they were not in force until the day that is the earlier of (“the transitional end day”)—]According to the regulations, if a person lacks mental capacity, SMI will continue as a benefit until such time, there is an appropriate person to act on their behalf.Unfortunately, all Department for Work and Pensions (DWP) staff are unaware of this. They have stated if the person does not agree to the loan then their SMI will stop.

The policy can be viewed and downloaded here. The Loans for Mortgage Interest Regulations 2017
It is a sorry indictment of the Department for Work and Pension that they do not train their staff. If the staff are not aware of this policy what else have they not been trained for? Is it any wonder that millions of pounds are not claimed for benefits people are entitled to.

Further on this page is proof that the Department of Work and Pensions are not aware of the legislation they are legally obligated to follow.

A person who cannot work due to unforeseen circumstances and they have a mortgage, they need SMI to assist by paying the interest.
As stated above, due to the debt now set against their house, they are not able to move to a cheaper property, or similar. as the proceeds from the sale of their current house will not be enough to allow for this. What if someone cannot manage the stairs? They have to pay for a stair lift, they may be able to get a grant, but this does not cover all the cost. It is likely they cannot afford it, so has their bed moved downstairs, but in most cases this is impractical. The toilet and bathroom are upstairs so they have to spend most of their time upstairs, mostly eating snacks as they cannot easily get to the kitchen to make proper meals. They are also faced with daily struggles in managing the stairs. As they are not able to manage the house it is left to deteriorate. They are left with no alternative.

Our Action and the shocking information discovered

To show we do not just inform, we take action as well. We fight, so you do not have to.

There is a current matter concerning Mr P and SMI benefit.
The whole Department of Work and Pensions are not aware of a piece of legislation called: “The Loans for Mortgage Interest Regulations 2017 ”
This matter is so difficult to try and resolve, we had to escalate this to the Cabinet Secretary, Sir Jeremy Heywood. Jeremy is the head of the civil service. We were given the telephone number of the DWP permanent secretary (The highest level of Civil Servant in the DWP), we also copied him on an email. As you can see in the emails below, one person took issue with this. An extract of the email (2) is as follows:
“Here is the case I discussed with you, and attached is the email where (a member of our team) managed to get the Perm Sec’s number”
Why was this person so concerned that we obtained the telephone number of the DWP Permanent Secretary?

Mr P was called by a person, who we cannot name, requested Mr P send her “The Loans for Mortgage Interest Regulations 2017” as shockingly like the most in the DWP, she was not aware of it. An extract of the email (1) is as follows:
“Following on from our telephone conversation can you please send me the legislation so I can forward to the Benefit Centre in order to get your issue resolved”
We informed her that if the DWP were not aware of this piece of legislation then how many thousands have likely been affected and that all SMI claims and people who have not signed; are contacted to see if they have a lack of mental capacity.

Correspondence

(1)

(2)
From our email chain, we also noticed the following from a member of staff from the DWP’s Operation Directors Office.

Subsequent to this emails we received the following:

A surprising thing is that we have found this on their website.

The location is http://instantarticles.dwp.gov.uk/2018/01/20/1139/

But you can get to it from this link Support for Mortgage Interest is changing
There is also a briefing document produced by the House of Commons which can be viewed or downloaded from here, the document is called
Support for Mortgage Interest (SMI) scheme.
The document states on page 3
SMI changes to a loan from 6 April 2018.
In the Summer Budget 2015, the Government announced plans to increase the waiting
period for SMI to 39 weeks from 1 April 2016, to keep the loan cap at £200,000, and to
change SMI from a benefit to an interest-bearing loan, secured against the
mortgaged property
, from April 2018. Provisions to implement this scheme
were included in the Welfare Reform and Work Act 2016. Reguations to implement the loan
system were brought into force for most purposes on 27 July 2017: Loans for Mortgage
Interest Regulations 2017 (SI.No.725/2017). Existing claimants have been contacted by
Serco on behalf of the Department for Work and Pensions (DWP) and advised that if they
wish to continue to receive assistance they must apply for a loan.

You will note it states the document the DWP do not know about, as shown above
“Loans for Mortgage Interest Regulations 2017 (SI.No.725/2017).”An email has been sent to an MP, who has been asked to raise this in parliament, whether they do or not, remains to be seen. This matter is too important not to be raised and dealt with.
If this matter is not raised, it will mean Parliament does not care for people in the UK. This page will be updated with further developments.

Further emails have been sent and received, the contents of which we find surprising.

As you can read, they were given a deadline, of 3 pm, 17th April 2018, for a satisfactory response; as expected, none was received.
As well as sending Sir Jeremy Heywood, the head of the civil service, a copy of the above email, a copy was also sent to the Chief Executive of the Civil Service and Cabinet Office Permanent Secretary, who responded with the following letter.

We take issue with the letter as it is factually incorrect, this is as follows:
Several remarks he has made are addressed as follows:
“I understand the Department for Work and Pensions have written to you explaining that the Transitional Arrangements you queried are being applied to your case and that a decision on the loan application will be required.”
The transitional arrangements are not or have been applied in respect of Mr P’s case. He is correct a decision does need to be made with regards to the loan application.

“Your difficulties are being explored and you have been informed that the Regulations are able to meet your ability to take up a loan offer should you wish.”
The difficulties he states “are being explored” are not difficulties, if the regulations are followed. The regulations have not been designed to force someone who lacks capacity, to sign a contract/agreement.

“Furthermore, legal advice on the complexities around relevant Power of Attorney and your decision-making ability is being sought.”
Why is there a need for legal advice and why are the complexities around Power of Attorney and Mr P’s decision-making ability.
The regulations are not advisory, so have to be followed. There are no complexities around Power of Attorney, the DWP has been informed on numerous occasions, but are still not able to grasps the facts.
The facts are:
It’s not possible to set up Power of Attorney for someone who has already lost mental capacity. Power of Attorney is set up by an individual whilst they have capacity, so that there is a nominated person, who can manage the individual’s affairs, in the event, they lose capacity.

As has been stated to the DWP on a significant number of times. Mr P has been medically examined by two phycologists, who have confirmed in writing, that due to severe brain damage, Mr P lacks capacity, to enter into contracts or agreements.

“DWP has assured me that should you need to make another Office of the Public Guardian Power of Attorney approach the cost of the application would be met.”

He seems to be ignorant of the fact surrounding the Office of the Public Guardian.  Their role is as follows, as stated by them:

The Office of the Public Guardian (OPG) protects people in England and Wales who may not have the mental capacity to make certain decisions for themselves, such as about their health and finance.
We also help people plan ahead for someone to make certain important decisions for them, should they become unable to do so because they lack mental capacity.
We’re responsible for:
Taking action where there are concerns about an attorney or deputy, registering lasting and enduring powers of attorney so that people can choose who they want to make decisions for them, maintaining the public register of deputies and people who have been given lasting and enduring powers of attorney, supervising deputies appointed by the Court of Protection, and making sure they carry out their work in line with the Mental Capacity Act 2005, and looking into reports of abuse against registered attorneys or deputies.
Our current priorities are to:
Understand our customers better and plan ways of measuring how well we are meeting their needs, provide more digital services, work with partner organisations to improve our service, and ensure it can be accessed by all our users.

To correct the statement made in the letter. The only organisation who are able to take action is the Court of Protection. According to the regulations it is for the DWP to make an application for a deputy and pay the cost. The cost of a deputy has to be funded, by the person/organisation applying. The time scale involved before a decision is made by the Court of Protection, that and if an order is made, has an average timescale of over 1 year.

Post 6th April 2018, Mr P’s SMI benefit ceased as he had not signed a loan agreement, after significant email and telephone calls back and forth, they agreed to continue with and backdate Mr P’s SMI benefit. They however did state that the regulations state this can only be until November 2018.

 

Updated
26th May 2018