Mortgage Rejected - Should I have to pay the broker anyway?

mwjburton

We recently used a mortgage broker to find a mortgage on a house we are buying. The property is being sold with some minor (non structural) fire damage and does not have a usable kitchen and is not immediately habitable.

We made the broker very aware of these issues from the outset as we had been led to believe these could be a major hurdle when applying for a mortgage.

However the broker said he did not think this was a problem and he recommended an Abbey mortgage which he said should have no problem approving us.

Our incomes and ability to repay the mortgage were indeed passed and we then moved onto the valuation.

The valuer subsequently visited the house and reported that Abbey do not give mortgages on properties with fire damage / no usable kitchen. So he declined to value it and recommended Abbey reject the mortgage, which they did.

The broker then suggested a few other mortgages, none of which were acceptable to us. He then said we should pay about half of his fee (£250) anyway, despite the fact we don't have a mortgage.

According to him, Abbey only added this new "no kitchen" policy during our application process and he was not notified of the change.

I feel rather sick at the idea of paying for poor advice, but I do recognise that he has invested his time in pursuing it.

Is there a code of conduct for brokers in this regard?
Any thoughts?

Many thanks.

Conrad

Don't worry, the FSA rules are your freind.

The FSA have a core set of rules encompassed by the heading - 'Treating Customers Fairly' (TCF).

I as a broker would have told you up front you would not likely get a mortgage on such a property, but as ever people are lead blind by inexperienced people that have perhaps gleaned most of thier limited knowledge from a training course.

Ok, so specifically here is why the broker cannot charge the fee, and would lose if it went to an Ombudsman;

1) Abbey did not change thier rules part way through - no decent lender can lend on a property that is in lending terms not fit for immediate occupation

2) The onus is on the broker to discharge his duty of care and to have systems in place that ensure TCF if delivered as an outcome. His system is not robust enough to spot potential 'obvious' problems.

Do not pay it, end of. If he gets stroppy, contact the FSA immediately and give his detials to them - that shoudl be the end of it.

grey_lady

Some brokers do work on a no mortgage offer, no fee basis.

I suppose it depends if he's genuinely telling the truth about Abbey changing their policy, if you happen to have the valuers phone number you could call him up and ask him how long that's been their policy, or even phone up Abbey's mortgage deptartment and ask them. If he's telling the truth you could offer to pay half of what he's asking.

dunstonh

I disagree slightly with Conrad (only on one of the points).

Brokers are allowed to charge for work done if the mortgage does not proceed providing it is a reduced amount from their normal fee and its fully documented in their disclosure documents. Check the initial documents the broker gave you that outlined his/her fees. If it says nothing on there about mortgages not proceeding but still being charged then they cannot charge you.

Rick62

Sorry, but what nonsense dunstonh, the poster made it clear up front that there was fire damage and no usable kitchen. The broker was not competant to handle this, Abbey never changed their policy.

Go back to the broker, say very sorry but i made the position clear and you have not been able to provide a reasonable soltion, it is not TCF to charge a fee. If he is still awkward ask him for a copy of his complaints procedure, don't actually make a complaint initially, if he has any sense whatsover he will drop his demand for any fee staraight away.

dunstonh

It's not nonsense and its quite correct and normal for fee based. Check with your compliance team if you dont believe it. Fees are allowed to be charged if the mortgage does not proceed providing the fees are disclosed.

I'm not saying that the broker wasnt incompetent and that it should have been picked up during the free consultation period but they are allowed to make a charge within the rules.

I do also agree that the threat of a complaint would likely see the broker drop the request for money.