MSE News: Mortgage blow as building society hikes SVR

howardtheduck

Can I suggest that anyone who used a mortgage broker to take our their Skipton mortgage and is now having difficulty in locating their Key Facts Illustration write to the Compliance Department at the head office of the firm through which they took out their Skipton mortgage. They keep a copy of your KFI for 7 years and will provide it free of charge upon request. I recently requested and received mine and upon checking it, suprise, suprise, no mention of Skipton's right to scrap the SVR guarantee. This is in breach of the Financial Services Authority's dislosure requirement and likely to render the "exceptional circumstances" clause unenforceable. In 2008 the FSA ruled against Halifax when it tried to enforce a 'collar' hidden in the small print (sound familiar?) of its tracker mortgages because the collar was not disclosed in the KFI.

I would urge you all to check your KFI's as I am willing to bet my bottom dollar that it does not mention anything about Skipton being able to scrap their maximum 3% SVR pledge. If you can't find them you can obtain them by following the above. Even if the particular mortgage broker you took out through has moved on or the firm has been taken over e.g. one estate agent being taken over by another, you can write to the new firm's head office compliance department and they will happily provide you with a copy of your KFI.

(IANYL)

Leon_W

Very good post howardtheduck.

It didn't say on the KFI that Skipton could scrap the guarantee and I posted earlier in this thread that I thought it was exactly the same position as Halifax trying to enforce a "small print" collar. Any broker should help you dig out your KFI and make a complaint.

Brokers should be on the side of fairness and I too would be annoyed if what appeared to be a critical "Key Fact" of the mortgage was not stated on the KFI. It does no good to my business of providing mortgage advice if even I can't rely on a Key Features document to be accurate as it renders it completely useless.

Best of luck.

Thrugelmir

Leon_W wrote: »

It does no good to my business of providing mortgage advice if even I can't rely on a Key Features document to be accurate as it renders it completely useless.

Best of luck.

Then shouldn't you read the full contractual terms of every different lender you use? In order that you can assist your clients make an informed decision.

The KFI is to allow comparison of different mortgage products. Not to cover all eventualities which is the purpose of the contract.

Leon_W

Thrugelmir wrote: »

Then shouldn't you read the full contractual terms of every different lender you use? In order that you can assist your clients make an informed decision.

The KFI is to allow comparison of different mortgage products. Not to cover all eventualities which is the purpose of the contract.

No, that is absolute cobblers Thrugelmir

I am not a contract lawyer, I am a mortgage broker. It is not realistically possible to go through every small print contract with a client, so I also have to rely on a "Key Facts" document documenting the "Key Facts" !

Are you saying I should seek legal council on every grey area within a lenders small print before advising a client? Somehow I don't think clients would be prepared to pay for this ! Totally unworkable and total nonsense.

regards

Thrugelmir

Leon_W wrote: »

No, that is absolute cobblers Thrugelmir

I am not a contract lawyer, I am a mortgage broker. It is not realistically possible to go through every small print contract with a client, so I also have to rely on a "Key Facts" document documenting the "Key Facts" !

Are you saying I should seek legal council on every grey area within a lenders small print before advising a client? Somehow I don't think clients would be prepared to pay for this ! Totally unworkable and total nonsense.

regards

Precisely my point. Therefore its totally unrealistic for a lender to cover every eventuality within a KFI. Particularly an event which has never occured previously in financial history.

In the business world I am amazed how flippant many people in never either reading or seeking advice on contractual terms before signing.

howardtheduck

ThrugelMir,

I find your lack of knowledge (and faith) disturbing.

Let me point out a few things for your information:

(1) The KFI making no reference to being able to revoke the SVR ceiling with the SVR set at never more than 3% save in “exceptional circumstances” is a breach of the FSA’s disclosure requirements in addition to rendering the term unenforceable. This was the case with Halifax tracker mortgages that were sold without the collar being included on the KFI. Skipton Building Society’s SVR is linked directly to the BOE BR. Therefore the contract is for a base rate tracker with a guaranteed ceiling. The fact that it is called an SVR is irrelevant.

(2) Here's an extract from 'The Times' newspaper dated 3rd December 2008.

“The Financial Services Authority indicated yesterday that more than half a million Halifax customers on tracker mortgages should benefit from further interest rate cuts even though the small print on their loans supposedly prevents them from doing so.

An estimated 550,000 Halifax borrowers with tracker mortgages, which move up and down in line with the base rate, appeared set to miss out on future rate cuts because the small print on their loans allowed Halifax to stop reducing rates once the base rate falls below 3 per cent.

Jon Pain, the FSA's retail market manager, said yesterday that this 3 per cent threshold, or “collar”, could be unenforceable. He said collars should be included in a lender's key facts illustration (KFI) - the mortgage documents given to every borrower. Halifax removed the details of its collar from its key facts in 2005.

Mr Pain told the Council of Mortgage Lenders (CML), the industry body representing the banks and building societies that make home loans: “If it is not [included] you run the real risk of both breaching our disclosure requirements and having an unfair contract term you cannot enforce.”

A spokesman from the FSA defended the request to simplify the documentation, adding: “It cannot be right that to shorten your KFI you take out something which is required under FSA rules. It is a rule that a collar should be included in a lender's KFI.” ”

Here's another extract from 'The Telegraph' dated 3rd December 2008.

"Jon Pain, the FSA's managing director of retail markets, told the Council of Mortgage Lenders' conference: “While tracker interest rate floors can be a legitimate term of a mortgage, it can only be if it is clear and unambiguous to the consumer and is consistently and prominently spelt out in the initial key facts document and offer document throughout the sales process.”

"If it is not, you [the lenders] run the real risk of both breaching our disclosure requirements and having an unfair contract term you can't enforce." He added: "I am well aware of potential systemic risk that some lenders face in a very low interest rate environment. But the solution cannot be to introduce contract terms that don't exist or unenforceable.”

(3) Given the doubt about the meaning of a written term, specifically the “exceptional circumstances” clause relied upon by Skipton Building Society to renege on its SVR guarantee, under Regulation 7(2) of the UTCCR 1999, the interpretation most favourable to the consumer shall prevail. This is simply the contra proferentem rule which provides that an ambiguous term will be construed against the party that imposed its inclusion in the contract.

(4) Skipton Building Society has acted unilaterally and retrospectively in defining the term. The unilateral and retrospective definition of what constitutes “exceptional circumstances” by Skipton Building Society creates a significant imbalance in the respective rights under the contract to the detriment of the a consumer, contrary to the requirement of good faith (UTCCR 1999 Reg. 5)

(5) Finally, you might want to look at Re Citro [1991] Ch 142 which is the leading authority on the meaning of "exceptional circumstances". The Court of Appeal ruled in Re Citro that "exceptional circumstances" had to be more than the "melancholy consequences of debt and improvidence". Skipton Building Society failing to foresee the BOE BR remaining low and failing to making adequate provision for this is merely a case of debt and improvidence.

(6) The Financial Services Authority in 2006 found that a "any other valid reason" term in mortgage contracts by Intelligent Finance to be an unfair contract term as the term allowed the firm to increase a charge, but did not specify what the valid reasons were for doing so, or allow customers to exit the contract freely. It was held that it was not clear to customers why the charge they had to pay would be increased. The term also appeared to give Intelligent Finance the freedom to use any reason to increase it, even if it was not connected to the mortgage or to the redemption of the mortgage. I consider the “exceptional circumstances” term relied upon by Skipton Building Society to be an unfair term to be in the same vein as the “any other valid reason” term used by Intelligent Finance. Notably, Skipton Building Society did not specify what constituted “exceptional circumstances” in either the mortgage offer, Key Facts Illustration (KFI), or any other documentation at the time of the contract.

I hope this clears things up.

HowardTheDuck

p.s. For the benefit of everyone else on this thread, you have to wait until the final response from Skipton Building Society before you can take your claim to the Financial Ombudsman Service. However, you can write to the Financial Services Authority immediately (I have already done so detailing why Skipton is seeking to rely on an unfair term to justify reneging on its SVR pledge. The FSA is currently investigating the issues I have raised).

(IANYL)

Thrugelmir

howardtheduck wrote: »

ThrugelMir,

I find your lack of knowledge (and faith) disturbing.

Let me point out a few things for your information:

(1) The KFI making no reference to being able to revoke the SVR ceiling with the SVR set at never more than 3% save in “exceptional circumstances” is a breach of the FSA’s disclosure requirements in addition to rendering the term unenforceable. This was the case with Halifax tracker mortgages that were sold without the collar being included on the KFI. Skipton Building Society’s SVR is linked directly to the BOE BR. Therefore the contract is for a base rate tracker with a guaranteed ceiling. The fact that it is called an SVR is irrelevant.

(2) Here's an extract from 'The Times' newspaper dated 3rd December 2008.

“The Financial Services Authority indicated yesterday that more than half a million Halifax customers on tracker mortgages should benefit from further interest rate cuts even though the small print on their loans supposedly prevents them from doing so.

An estimated 550,000 Halifax borrowers with tracker mortgages, which move up and down in line with the base rate, appeared set to miss out on future rate cuts because the small print on their loans allowed Halifax to stop reducing rates once the base rate falls below 3 per cent.

Jon Pain, the FSA's retail market manager, said yesterday that this 3 per cent threshold, or “collar”, could be unenforceable. He said collars should be included in a lender's key facts illustration (KFI) - the mortgage documents given to every borrower. Halifax removed the details of its collar from its key facts in 2005.

Mr Pain told the Council of Mortgage Lenders (CML), the industry body representing the banks and building societies that make home loans: “If it is not [included] you run the real risk of both breaching our disclosure requirements and having an unfair contract term you cannot enforce.”

A spokesman from the FSA defended the request to simplify the documentation, adding: “It cannot be right that to shorten your KFI you take out something which is required under FSA rules. It is a rule that a collar should be included in a lender's KFI.” ”

Here's another extract from 'The Telegraph' dated 3rd December 2008.

"Jon Pain, the FSA's managing director of retail markets, told the Council of Mortgage Lenders' conference: “While tracker interest rate floors can be a legitimate term of a mortgage, it can only be if it is clear and unambiguous to the consumer and is consistently and prominently spelt out in the initial key facts document and offer document throughout the sales process.”

"If it is not, you [the lenders] run the real risk of both breaching our disclosure requirements and having an unfair contract term you can't enforce." He added: "I am well aware of potential systemic risk that some lenders face in a very low interest rate environment. But the solution cannot be to introduce contract terms that don't exist or unenforceable.”

(3) Given the doubt about the meaning of a written term, specifically the “exceptional circumstances” clause relied upon by Skipton Building Society to renege on its SVR guarantee, under Regulation 7(2) of the UTCCR 1999, the interpretation most favourable to the consumer shall prevail. This is simply the contra proferentem rule which provides that an ambiguous term will be construed against the party that imposed its inclusion in the contract.

(4) Skipton Building Society has acted unilaterally and retrospectively in defining the term. The unilateral and retrospective definition of what constitutes “exceptional circumstances” by Skipton Building Society creates a significant imbalance in the respective rights under the contract to the detriment of the a consumer, contrary to the requirement of good faith (UTCCR 1999 Reg. 5)

(5) Finally, you might want to look at Re Citro [1991] Ch 142 which is the leading authority on the meaning of "exceptional circumstances". The Court of Appeal ruled in Re Citro that "exceptional circumstances" had to be more than the "melancholy consequences of debt and improvidence". Skipton Building Society failing to foresee the BOE BR remaining low and failing to making adequate provision for this is merely a case of debt and improvidence.

(6) The Financial Services Authority in 2006 found that a "any other valid reason" term in mortgage contracts by Intelligent Finance to be an unfair contract term as the term allowed the firm to increase a charge, but did not specify what the valid reasons were for doing so, or allow customers to exit the contract freely. It was held that it was not clear to customers why the charge they had to pay would be increased. The term also appeared to give Intelligent Finance the freedom to use any reason to increase it, even if it was not connected to the mortgage or to the redemption of the mortgage. I consider the “exceptional circumstances” term relied upon by Skipton Building Society to be an unfair term to be in the same vein as the “any other valid reason” term used by Intelligent Finance. Notably, Skipton Building Society did not specify what constituted “exceptional circumstances” in either the mortgage offer, Key Facts Illustration (KFI), or any other documentation at the time of the contract.

I hope this clears things up.

HowardTheDuck

p.s. For the benefit of everyone else on this thread, you have to wait until the final response from Skipton Building Society before you can take your claim to the Financial Ombudsman Service. However, you can write to the Financial Services Authority immediately (I have already done so detailing why Skipton is seeking to rely on an unfair term to justify reneging on its SVR pledge. The FSA is currently investigating the issues I have raised).

I'm aware of the details. The difficulties faced by the Skipton most likely materialised after December 2008 and are still in fact continuing during this period of low BOE base rates.

sarahbennett

Thrugelmir wrote: »

I'm aware of the details. The difficulties faced by the Skipton most likely materialised after December 2008 and are still in fact continuing during this period of low BOE base rates.

What difficulties? Record profits? Rampant acquisition trail? Multi million pound margins? If my company had difficulties like this, I'd be in clover.... :-)

sarahbennett

Thrugelmir wrote: »

In the business world I am amazed how flippant many people in never either reading or seeking advice on contractual terms before signing.

I agree, but as you are aware of the details of this particular fraud/deception on behalf of the Skipton Building Society, perhaps you should be at another forum discussing flippant people who never read contracts or seek advice, as opposed to (as in this case) people who have law degrees, read every term, and even check the case law.

Skipton have taken money by demanding it of their customers but they have no legal basis to do so, the contract does not provide it. An organisation that is in difficulties is not in a position to buy bad debts and bail out other financial institutions.

I do agree that people should try to read their own contracts, but fail to see how any amount of reading of this contract would have led the buyer to magic up an interest rate floor on their floorless base rate tracker mortgage.

Gorgeous_George

howardtheduck wrote: »

...(2) Here's an extract from 'The Times' newspaper dated 3rd December 2008.

“The Financial Services Authority indicated yesterday that more than half a million Halifax customers on tracker mortgages should benefit from further interest rate cuts even though the small print on their loans supposedly prevents them from doing so.

An estimated 550,000 Halifax borrowers with tracker mortgages, which move up and down in line with the base rate, appeared set to miss out on future rate cuts because the small print on their loans allowed Halifax to stop reducing rates once the base rate falls below 3 per cent.

Jon Pain, the FSA's retail market manager, said yesterday that this 3 per cent threshold, or “collar”, could be unenforceable. He said collars should be included in a lender's key facts illustration (KFI) - the mortgage documents given to every borrower. Halifax removed the details of its collar from its key facts in 2005.

Mr Pain told the Council of Mortgage Lenders (CML), the industry body representing the banks and building societies that make home loans: “If it is not [included] you run the real risk of both breaching our disclosure requirements and having an unfair contract term you cannot enforce.”

A spokesman from the FSA defended the request to simplify the documentation, adding: “It cannot be right that to shorten your KFI you take out something which is required under FSA rules. It is a rule that a collar should be included in a lender's KFI.” ”

Here's another extract from 'The Telegraph' dated 3rd December 2008.

"Jon Pain, the FSA's managing director of retail markets, told the Council of Mortgage Lenders' conference: “While tracker interest rate floors can be a legitimate term of a mortgage, it can only be if it is clear and unambiguous to the consumer and is consistently and prominently spelt out in the initial key facts document and offer document throughout the sales process.”

"If it is not, you [the lenders] run the real risk of both breaching our disclosure requirements and having an unfair contract term you can't enforce." He added: "I am well aware of potential systemic risk that some lenders face in a very low interest rate environment. But the solution cannot be to introduce contract terms that don't exist or unenforceable.”

...I hope this clears things up.

Yup, it's as clear as mud.

In summary, mortgage advisers are just administrators and accept no responsibility for letting their clients enter into dodgy contracts. The same aplies to solicitors who handle the house purchase.

While we are here let's mention valuers who are really just people who look at the info that is freely available on the Internet and guess what a house should sell for then apply a made up adjsustment depending on the lender's desire to lend money. Nice work if you can get it. And the wannabe buyer pays for the guess with no guarantee that they will want to or be able to buy the property. Some sales have many guesses.

KFIs need to be 30 pages long. Or contracts need to be shortened to the length of the Key Facts Document. Or people need to learn to read what they sign.

The FSA are toothless and spineless.

I wish all Skipton's customers the very best of luck but I don't accept that Skipton's argument is totally flawed.

GG