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Report
THE MORTGAGE CLAIMS
BUREAU AND YOU
A GUIDE TO MANAGING MIS-SOLD MORTGAGE CLAIMS
AIM
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
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AGENDA
1. Background
2. Documentation
3. Q & A discussion
4. Practical examples
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INTRODUCTIONS
THE MORTGAGE CLAIMS BUREAU AND YOU
BACKGROUND
WHAT IS A MORTGAGE?
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
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WHAT IS A MORTGAGE MIS-SELLING?
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.
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PPI PROCESSING VS. MORTGAGE
MIS-SELLING PROCESSING?
Most mortgages were sold correctly
The complexity and possible variations of mortgage
mis-selling
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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 ONCE
IN ANY FOUR YEAR PERIOD
SINCE OCTOBER 2004?
DID YOU TAKE OUT A MORTGAGE FROM
ANY OF THESE LENDERS BEFORE
OCTOBER 2004?
Amber Home Loans
The Mortgage Business (TMB)
G-Mac
London Mortgage Company
Paragon
Mortgage Express
Birmingham Midshires
SPML (Southern Pacific)
Igroup
First National
Pink Home Loans
Mortgage Trust
CHL
The Mortgage Lender
Kensington
Future Mortgages
Edeus
Mortgage Works
Preferred Mortgages
GE Money
Rooftop
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’
WHAT IS A MORTGAGE?
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’
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TYPES OF MORTGAGES
REPAYMENT
INTEREST ONLY
KEY DATES
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
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SUB PRIME MORTGAGES
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
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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
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Edeus
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
THE USUAL SUSPECTS
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
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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 a
pension 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
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2 . DEBT CONSOLIDATION
On 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
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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
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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!
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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
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6. RIGHT TO BUY SCHEMES
Right 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.
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BROKERS
Some 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
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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
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