the mortgage claims bureau and you a guide to managing mis-sold mortgage claims

THE MORTGAGE CLAIMS BUREAU AND YOU

A GUIDE TO MANAGING MIS-SOLD MORTGAGE CLAIMS

WWW.THEMORTGAGECLAIMSBUREAU.COM

To give you the confidence to:

Handle and submit claims to TMCB

Answer customer questions

Have an understanding of why and how mortgage mis-selling occurs

AIM

1. Background

2. Documentation

3. Q & A discussion

4. Practical examples

AGENDA


INTRODUCTIONS

THE MORTGAGE CLAIMS BUREAU AND YOU

BACKGROUND

A loan used to purchase a property

The loan is “secured” against a property, so that if repayments are not made the lender can repossess and sell to get their money back

Residential, commercial or Buy to Let

Term: 5-35 years

WHAT IS A MORTGAGE?


Mortgage mis-selling occurs when a sales representative

from a mortgage broker or lender advises an inappropriate

product to an individual, (the client), which results in that

client suffering a financial loss.

WHAT IS A MORTGAGE MIS-SELLING?


Most mortgages were sold correctly

The complexity and possible variations of mortgage mis-selling

PPI PROCESSING VS. MORTGAGE MIS-SELLING PROCESSING?


WHAT ARE THE PREREQUISITES OF A MORTGAGE MIS-SELLING CLAIM?

To succeed, a claim must be based upon legal precedence or unequivocal breaches of MCOB regulations backed up by a proven financial loss.

WE HAVE MAPPED THESE PREREQUISITES INTO THREE QUESTIONS.

IF YOUR CUSTOMER CAN ANSWER ‘YES’ TO JUST ONE OF THEM THERE MAY BE A CASE OF MORTGAGE MIS-SELLING.

THREE GOLDEN QUESTIONS

ARE YOU CURRENTLY THREE MONTHS OR MORE IN ARREARS WITH YOUR MORTGAGE?

HAVE YOU SWITCHED MORTGAGE, OR RE-MORTGAGED MORE THAN ONCEIN ANY FOUR YEAR PERIOD SINCE OCTOBER 2004?

DID YOU TAKE OUT A MORTGAGE FROM ANY OF THESE LENDERS BEFORE OCTOBER 2004?

Amber Home Loans

G-Mac

Paragon

Birmingham Midshires

Igroup

Pink Home Loans

CHL

Kensington

Edeus

Preferred Mortgages

Rooftop

The Mortgage Business (TMB)

London Mortgage Company

Mortgage Express

SPML (Southern Pacific)

First National

Mortgage Trust

The Mortgage Lender

Future Mortgages

Mortgage Works

GE Money

Oakwood Home Loans

UNLESS THE CUSTOMER ANSWERS ‘YES’ TO ONE OR MORE OF THESE QUESTIONS, A CLAIM, HOWEVER PASSIONATE, WILL ALMOST CERTAINLY FAIL.

BEING MIS-SOLD A MORTGAGE IS NOT THE FAULT OF THE CUSTOMER!

IT’S ABOUT MONEY, NOT ‘MISTAKES BY THE BROKER OR LENDER’

1. A loan used to purchase a property

2. The loan is “secured” against a property, so that if repayments are not made the lender can repossess and sell to get their money back

3. Residential, commercial or Buy to Let

4. Term: 5-35 years

5. The lender will register with Land Registry as an ‘interested party’

WHAT IS A MORTGAGE?


TYPES OF MORTGAGES

REPAYMENTINTEREST ONLY

1. Oct 1986 De-regulation

2. Foreign banks enter UK market but sell through brokers and high street banks start to set up sub-prime brands – anything goes approach till Nov 2004

3. The Financial Services Authority (FSA) took over mortgage regulation on 31/10/2004

4. The Mortgage Conduct Of Business (MCOBs) took over from The Mortgage Code at the same time.

5. 2nd and 3rd charges and Commercial Mortgages i.e.Secured Loans and Buy to Lets are not regulated by the FSA

KEY DATES


Sub-prime mortgages are those provided by lenders who, in general, do not have a high-street presence

A subprime mortgage is often the financing of choice for borrowers who do not fit the conventional guidelines of mortgage financing

SUB PRIME MORTGAGES


Amber Home Loans

G-Mac

Paragon

Birmingham Midshires

Igroup

Pink Home Loans

Northern Rock (NRAM)

Kensington

Preferred Mortgages

London Mortgage Company

Rooftop

SUB PRIME MORTGAGESEdeus

Mortgage Express

SPML (Southern Pacific)

First National

Mortgage Trust

The Mortgage Lender

Future Mortgages

Mortgage Works

The Mortgage Business (TMB)

GE Money


BROKERS ACTIVELY SOLD SUB-PRIME INTEREST ONLY MORTGAGES BECAUSE THE COMMISSIONS WERE GREATER THAN THEIR HIGH STREET COUNTERPARTS AND WERE USUALLY QUICKER TO COMPLETE

MORTGAGE MIS-SELLING

THE PAST, THE PRESENT, THE FUTURE

THE USUAL SUSPECTS

Examples of mis-sold mortgage scenarios that can be used to support a claim

BUT NOT BE THE BASIS OF THE CLAIM

1. Mortgaged into retirement

2. Debt consolidation

3. Top-up mortgage loans

4. Interest only mortgages without a repayment vehicle

5. Self Cert

6. Right to Buy schemes

THE USUAL SUSPECTS


1 . MORTGAGED INTO RETIREMENT

The term of your mortgage will run past your retirement age and the sales person will not have ensured that a suitable method of mortgage repayment such as apension is in place

Alternatively they may have asked if you have a pension but not confirmed that the income it provides will cover the total mortgage repayment


2 . DEBT CONSOLIDATIONOn the surface, debt consolidation looks like a positive thing. If you are paying a higher rate of interest on a car loan or credit card than your mortgage then why not consolidate?

The problem arises when the Finance Agreement that’s being consolidated is set up over a greater term than it was originally sold on. If you have a 5 year car loan that’s consolidated onto a 25 year mortgage then you are paying interest on that finance for 20 years longer than you would have done originally

This puts you in a worse position than if you had a higher interest rate initially and is classed as bad advice


3. TOP-UP LOANS

125% loan to equity

Top-up loan second mortgage so unregulated and not covered by FSA

Lenders used extra borrowing to load charges and conditions


4. INTEREST ONLY MORTGAGES WITHOUT A REPAYMENT VEHICLE

The sales person should ensure that a suitable repayment vehicle e.g. an endowment, pension or ISA is in place to pay off the mortgage capital at the end of the mortgage term

Some sales people recommended interest only mortgages with no repayment vehicles so monthly repayments remain low

It isn’t acceptable to state you can sell your home to repay the capital as house prices may stagnate as in the current housing market

A huge time-bomb. 1.5 million ‘Interest Only’ mortgages, sold without any form of savings policy in place, will come to the end of their terms in the next ten years!


5. SELF CERTIFICATION

Self cert mortgages are offered to a client when they cannot show proof of their regular monthly income, i.e. when they are self employed

The interest rate charged is usually higher due to the risks involved. Often if they could have proved their income and therefore could have gone with a cheaper lender


6. RIGHT TO BUY SCHEMESRight to buy schemes were used when a client wanted to purchase the council house they were residing in.

Some mortgage brokers upon seeing the discounted selling prices would add on excessive fees for setting up the mortgage. This would then leave a huge and unnecessary bill to pay.


BROKERSSome very good, some very bad

Created the market place

Were paid very high commissions

Didn’t always act in the customer’s best interest

Most have gone out of business


WHY WERE SUB-PRIME MORTGAGES SOLD IN SUCH LARGE NUMBERS?

Credibility of brokers was established by word of mouth

They were the favoured product by brokers

The cost – they were perceived as cheaper

They were quicker to complete than standard High Street Mortagages


the mortgage claims bureau and you a guide to managing mis-sold mortgage claims

Documents

mortgage broker

mortgage regulation

national mortgage

lender slide

background slide

case of mortgage misselling

mortgage claims bureau

aim slide