Question to the Department for Work and Pensions:

To ask the Secretary of State for Work and Pensions, what provisions there are for the repayment of an SMI loan in the event of bankruptcy or home repossession; and whether such loan repayments will be prioritised over other existing debt in such an event.

Where possible, a legal charge will be secured over the claimant’s property as security for the Support for Mortgage Interest (SMI) loan. The legal charge will rank below any pre-existing charges on the property including the mortgage. Pre-existing charge holders will always have priority in recovering their debt from the equity when a house is sold or in the event of bankruptcy and if the amount of equity available after the sale of the property is less than the amount due to be recovered the balance will be written off. Where a customer in receipt of SMI loan becomes bankrupt or enters an Individual Voluntary Arrangement (IVA) there is provision for SMI loan payments to continue if the claimant has a continuing liability to make mortgage repayments. The Department does not anticipate that the introduction of SMI loans will lead to an increase in the number of homes that are repossessed.