HOPE for scores of North- East families caught up in what has been described as the UK’s biggest mortgage fraud is dwindling following a court judgement yesterday.

The Court of Appeal has dismissed a claim by Darlington solicitors Clark Willis that victims of an alleged buy-and-rent-back property scam have an overriding right to stay in their homes.

The civil action follows the collapse in 2009 of Newcastle Home Loans and North-East Property Buyers and runs parallel to a criminal investigation into the Gateshead firms.

Cash-strapped homeowners would sell their properties to the firms on the understanding they would receive a lump sum and remain in their homes as paying tenants.

However, when mortgages obtained by the Gateshead firms defaulted, the lenders attempted to repossess the properties, effectively making the original homeowners homeless.

Northumbria Police are leading the investigation and detectives, who have made seven arrests, are scrutinising more than 2,000 mortgage applications concerning properties in every major town and city in the North-East. No one has been formally charged.

The civil case is led by Clark Willis and a Newcastle law firm and was first heard by Leeds High Court in 2010, where it was dismissed.

The decision was appealed in December, last year, and the judgement was handed down yesterday.

Diane Hall, a solicitor with Clark Willis, said: “Unfortunately, the decision made in the Court of Appeal was to dismiss our case.

“The decision obviously has an effect on those who continue to occupy properties sold under the unregulated sale-and-rent-back schemes.

“Some occupiers have lived in these properties for many years and believed they could continue to live there for the rest of their lives.

“Now that the Court of Appeal decision has been released, the mortgage lenders have the right to apply back to court to obtain possession orders and take vacant possession of the properties.”

The firm is considering making an appeal to the Supreme Court, and has 28 days to do so. In the meantime, the firm is advising the people involved to seek alternative accommodation if the prospect of awaiting a further appeal causes concern or detriment to health.

Anyone with inquiries is asked to call 01325-281111.