MORTGAGE MIS-SELLING UPDATE
RECENT DEVELOPMENTS INCLUDE:
The Financial Ombudsman Service has
recently ruled that home owners can obtain financial compensation from mortgage
lenders/brokers if they have failed to provide the borrower with suitable
advice. Home owners who begin such claims early may be able to avoid
repossession.
WHY HAVE THESE CHANGES BEEN MADE?
In the boom years lenders were
approving mortgages at record rates. Mortgage brokers were reaping the benefits
through commission. In the rush to provide mortgages it appears that these
institutions may have been professionally negligent and mis-sold mortgages.
Lenders and brokers are regulated by
the Financial Services Authority (FSA). Their rulebook for mortgage advisors
(Mortgage and Home Finance: Conduct of Business - MCOB) provide that advice
must be “suitable for that customer”. Many people have been sold inappropriate
or unaffordable mortgages and in the current climate are experiencing
difficulties in making their repayments. Repossessions are on the rise, but can
be postponed or even avoided if a mortgage mis-selling investigation is
undertaken. The Financial Services & Markets Act 2000 provides that
breaches of the MCOB rules are actionable at the suit of a private person who suffers
loss as a result. The FOS ruling potentially opens the floodgates to a huge
number of claims against lenders and brokers for failing to follow the FSA
guidelines.
Examples can include:
- Where housing association tenants who had a fixed rent for life were persuaded to purchase the property, but were not advised what would happen when the attractive discounted rate set up on the mortgage ended.
- Where the broker dealt with certain aspects of the advice / application superficially
- Where a client has been sold a mortgage with a fixed rate for a specified period of the term of the mortgage (i.e the first 5 years of a 25 year mortgage are at a fixed rate whilst the remaining years are at a variable rate). If the monthly repayments on the fixed rate are so high that the borrower is pushed to their financial limit and would have no chance of paying the variable rate in the future and so is, in effect, borrowing beyond their means. If the borrower has been told that when the fixed rate ends they should remortgage with another lender to get a new fixed rate and as property prices were increasing this would be achievable. If the clients were not advised of the inherent risk in this approach they may not have been given suitable advice. As they may not have considered that the value of the property could fall leading them to negative equity, that remortgaging may not be possible (especially in view of the credit crunch) and that the variable rate may be too high to repay.
- In addition Right To Buy purchasers have apparently received particularly poor advice
Who should a borrower claim against in
the event of mortgage mis-selling?
It rather depends who sells the product. If it is sold by the
sales force of the product provider then obviously the claim lies against the
lender.
If it is sold by a broker then it lies against him. If the
complaint is not dealt with by the broker adequately the client can refer to
the FOS which has the explicit power to order the firm to pay for distress and
inconvenience as well as financial loss. If the broker is insured and the claim
is notified to insurers then they should deal with it. If the broker goes bust
but was insured and the insurers don't avoid cover e.g. for late notification
then the claimant can recover against the insurers under the Third Party Rights
Against Insurers Act 1930.
In the event that a broker goes out of business or a lender has
gone into liquidation, as they are both FSA regulated, clients can use the
Financial Services Compensation Scheme to pursue any claim. Compensation can be
sought for financial loss only.
EASYJET
EasyJet demanded to see the death certificate of a
passenger who died before they’d agree a refund on his ticket. Ozan Yunus
tragically died of meningitis shortly before he was to fly to Spain and his
friend asked for a refund to donate it to charity. EasyJet said “If we had a
penny for every refund we are were asked to issue because a passenger had
apparently died we’d have........a penny because this is the first time we’ve
ever given a refund”.
So EasyJet really aren’t very trusting then, so untrusting
that it’s surprising really that they didn’t demand to see the will to ensure
that the deceased had left his EasyJet ticket to his friend. They then realised
that wills can be forged and then demanded to there at the reading.
An EasyJet spokesman said “We were fed up being only the
second most hated airline behind Ryanair, so by demanding to see a death
certificate we’re now number one”.
Bad as this is, the price the pair paid for their two seats
was £108, yet EasyJet resold the seat for £92. Basically they profited from the
man’s death.
Even Ryanair’s Michael O’Leary said “Wow, and I thought we
were bad”.
EasyJet did eventually apologise, sort of, they said “We
would like to apologise for any inconvenience experienced at such a difficult
time” adding “That we made a lot more difficult”.
I wonder if when his friend make the call to their customer
service department he was told that the call was being recorded for training
purposes. Hope so, and EasyJet use the call to train their staff not to be such
a***holes.
ERIC
Simon Cowell has become a Dad and he’s already been
reported to Social Services for landing his kid with the name Eric. And he’s
been told by Mumsnet that just because he’s got man boobs doesn’t mean he can
breast feed the poor kid. Which he revealed he was trying to do with a picture
he released to the media.
Cowell said “I never knew how much love and pride I would
feel”. Presumably he means for someone who isn’t himself”.
On the Eric thing. Originally Cowell told his paramour
Lauren Silverman that he wanted to call the kid after his Father and she told
him “There is no way I’m calling my child Dad”.
PARIS
According to the Daily Mail Paris Hilton went commando at
her 33rd birthday party. Paris said at the party that she felt like
a Princess but I’m pretty sure that part of royal protocol for Princesses is to
wear pants. In the literally hundreds of Barbie Princess movies there’s not one
called Princess Pantless.
So what did parents get her for her birthday?. They
got her a plastic surgery voucher in the hope that she’d use it to get an
expression for her face. Any expression would do because any expression would
be better than looking completely vacant all the time.
