No Longer Being Offered Interest Only Mortgage

keh1968

My husband was made redundant and has been out of work since February 2009. This is the second time, the first was in July 2007 and he managed to find a job in March 2008. Up until 16th October 2009 we were on an interest only mortgage which our lender had switched us to help with the payments and we are currently receiving SMI (support for mortgage interest) which is paid directly from the job centre to our lender which meant that the job centre paid most of the monthly amount and we were able to make up the shortfall. Our lender has now told us that they no longer do interest only mortgages and have switched us back to repayment which has more than doubled our monthly payment. We have spoken to them and they have said we're very sorry but there is nothing further we can do for you. How can they do this, we are not falling into arrears and I don't know what to do. I thought lenders were supposed to help their customers out in situations like this. How can they put a familly out onto the street when if they were just to keep us on interest only until my husband finds a job then they would get their money in full each month. I don't understand, are they allowed to get away with this. They have also logged our arrears on our credit history which will make it more difficult if we want to re mortgage in the future. Please can someone help me ?

Conrad

This is the blind face of regulation at work. Someone in your lender has 'interpreted' new strict FSA guidlines on this to mean they should'nt be offering I/O.

I suspect you could overturn this.

Contact the chief compliance officer at the lender, firstly by phone followed up with a special delivery letter and retain copies.

Tell him/her you do not beleive the lender is applying the spirit of TCF (treating customers fairly). TCF is a core FSA initiative and essentialy says ALL OF A LENDERS PROCESS' MUST ENSURE TCF IS ACHIEVED AS AN OUTCOME.

One could argue that TCF in your case is clearly undermined - you will lose your home due to a petty rule. You need some space whilst you get back on your feet.

ARGUE - 'it is surely better to have a roof over my childrens heads albeit with a non reducing capital balance for the time being, than to lose our home, and if you disagree please state why you think your aim to have us repay capital now, is of higher priority compared to us being able to have a roof over our heads'.


Keep fighting. If this fails which it may as often staff are not fully engaged with the aims of the FSA 'in the round', then you tell them you are going to the ombudsman - then do just that.

poppy10_2

I don't see what is so unfair about expecting customers to repay the debt they have taken on? The lender has shown leniency and compassion before, and despite the husband getting a job in March 2008 it seems they carried on on IO until he lost his job again.

stradlinho

Poppy10 get off your high horse.

Your attitude is disgusting and in no way helps the OP out of the predicament they now find themselves in.

It's pretty pathetic if this is how you fill your time on the internet tbh.

keh1968

Thanks for your understanding, its just what I needed to hear. Lets hope you never find yourself in my situation then you might think differently. Do you have children ? Would you like to see them homeless?

poppy10 wrote: »

I don't see what is so unfair about expecting customers to repay the debt they have taken on? The lender has shown leniency and compassion before, and despite the husband getting a job in March 2008 it seems they carried on on IO until he lost his job again.

keh1968

Thankyou so much for your advice, our case is now in the hands of their Chief Compliance Officer. Thankyou so much.

Conrad wrote: »

This is the blind face of regulation at work. Someone in your lender has 'interpreted' new strict FSA guidlines on this to mean they should'nt be offering I/O.

I suspect you could overturn this.

Contact the chief compliance officer at the lender, firstly by phone followed up with a special delivery letter and retain copies.

Tell him/her you do not beleive the lender is applying the spirit of TCF (treating customers fairly). TCF is a core FSA initiative and essentialy says ALL OF A LENDERS PROCESS' MUST ENSURE TCF IS ACHIEVED AS AN OUTCOME.

One could argue that TCF in your case is clearly undermined - you will lose your home due to a petty rule. You need some space whilst you get back on your feet.

ARGUE - 'it is surely better to have a roof over my childrens heads albeit with a non reducing capital balance for the time being, than to lose our home, and if you disagree please state why you think your aim to have us repay capital now, is of higher priority compared to us being able to have a roof over our heads'.


Keep fighting. If this fails which it may as often staff are not fully engaged with the aims of the FSA 'in the round', then you tell them you are going to the ombudsman - then do just that.

dunstonh

I feel I have to support Poppy here as a very valid point has been raised. Too many people have gone interest only because they felt it was cheaper and have not gone back to repayment basis and that just stores the problem up for another day. The OP was on interest only during a period of employment. So, what was the excuse then for being on interest only? It used to be so easy to get interest only with the intention of going repayment basis later but its been shown that its damned hard and far too many people cannot end up affording switching back to repayment basis and will end up being repossessed or having to sell and go back to renting or downsize significantly.

The lenders have been put under pressure from the FSA not to issue interest only mortgages. That doesnt mean they cannot issue them but some have taken a blanket approach. It is not uncommon for banks to get whiff of a potential problem and resolve it by taking a 100% or nothing approach.

So, as it stands, there are no rules in place from the FSA saying that they cant make it interest only. It is a stance that bank itself has taken. That said, their forced switch from interest only to repayment (in one move) is also not likely to sit well with the FSA's Treating customers fairly guidelines. What about those with endowments or other investment vehicles? They are quite correctly on interest only basis. What about landlords with mortgaged buy to lets? Again, interest only is the norm. I suspect they havent changed to repayment basis on those.

So, in the shoes of the OP I would ask the lender (by complaining and not dealing with the branch) why you are being discriminated against.

keh1968

Thankyou for your comments. We have only ever been on interest only during the times my husband has been out of work. We do understand that it's not in our best interest to be on interest only as non of the capital is being repaid, but if its a choice of keeping a roof over my families head or repaying capital to a bank who have put us and many other people in this situation in the first place, I know which one I will choose.

dunstonh wrote: »

I feel I have to support Poppy here as a very valid point has been raised. Too many people have gone interest only because they felt it was cheaper and have not gone back to repayment basis and that just stores the problem up for another day. The OP was on interest only during a period of employment. So, what was the excuse then for being on interest only? It used to be so easy to get interest only with the intention of going repayment basis later but its been shown that its damned hard and far too many people cannot end up affording switching back to repayment basis and will end up being repossessed or having to sell and go back to renting or downsize significantly.

The lenders have been put under pressure from the FSA not to issue interest only mortgages. That doesnt mean they cannot issue them but some have taken a blanket approach. It is not uncommon for banks to get whiff of a potential problem and resolve it by taking a 100% or nothing approach.

So, as it stands, there are no rules in place from the FSA saying that they cant make it interest only. It is a stance that bank itself has taken. That said, their forced switch from interest only to repayment (in one move) is also not likely to sit well with the FSA's Treating customers fairly guidelines. What about those with endowments or other investment vehicles? They are quite correctly on interest only basis. What about landlords with mortgaged buy to lets? Again, interest only is the norm. I suspect they havent changed to repayment basis on those.

So, in the shoes of the OP I would ask the lender (by complaining and not dealing with the branch) why you are being discriminated against.

Conrad

Poppy misses the point. Whilst it is sensible to be paying down capital, and that every borrower should aim to be doing such, in times of financial hardship it is of course sensible to batton down the hatches.

To state the OP should have immediately gone back to capital and interest on her husband returning to employment last time, also misses the point. After a period of unemployment one doesn't just 'spring back' into action and carry on as normal - no doubt there is a period of 'catching up' and readjustment.

NOW, IN THE GENERAL DISCUSSION AREA, I have outlined why it is some people get into bad debt and others don't, and in general the core traite displayed by the majority of those in arrears is = POOR ORGANISATIONAL SKILLS.
BUT!!!!!!!!!!!!! that's not to say all such people exhibit this traite, some such as our OP here just have an extended period of bad luck.

KEH - best of luck. Don't take no for an answer. I've been in this industry a long time and I can say with certainty, most lender staff are not fully abreast of the aims and detail of FSA rules. This for example is why GE money have had to repay all those late payment charges to borrowers. Honestly I come accross dim lender staff every day - it's just endemic. Just as with RBS and N Rock staff not questioning the bosses actions (which lead to the demise of those Banks), still now most staff will not question the bosses and the culture - most staff just do as told.

I'm thinking your lender may argue they need you to repay captial as they might be breaking some sort of capital adequacy rules as an organisation (ie - too much outstanding debt), but I think the FSA's treating customers fairly rules should TRUMP all else - that's the point here.

RULE ONE of TCF (known as OUTCOME 1) states;

'Consumers can be confident they are dealing with firms where the fair treatment of consumers is CENTRAL TO THE CORPORATE CULTURE'.