Mortgage Blackhole

trigg_2

Dear all,
I am posting this new thread in desperate hope on behalf of my parents.
I will try to explain as best I can and be as brief as possible so forgive me.

In December 2001 my parents employed a company of Independant Financial Advisors to arrange a mortgage. The application was made to Northern Rock (Now Legal and General) for a part repayment mortgage and part interest only mortgage.
The application was submitted via by the Financial advisor but the lender stated that this was not an option and advised the Finacial Advisor that they could offer an interest only mortgage. Without consultation or authorisation by my parents the mortgage offer was accepted by the Financial advisor and was completed.

In 2005 my parents discovered that the Mortgage that the Interest only mortgage that they had been paying totalling £13500 in payments for the last four years had only reduced the mortgage balance by 3 pence.
The financial advisor was contacted and on reviewing the application stated he could not understand what had happened and instigated an investigation.
The outcome was that the application had not been checked by the advisor or the solicitors acting on their behalf. My parents made a formal complaint to the Finacial advisors who after months of deliberation stated that my parents should have been reasonably aware that the mortgage completed on a different basis from that requested.
The matter was then placed in the hands of the Financial Ombudsman who after investigating concluded that in 2001 when the financial advice was given the Financial advisors were members of the Mortgage Code Compliance Board and therefore complaints against these firms would have been considered by the Mortgage Code Arbitration Scheme. The complaint was registered after 1st August 2003 when the Financial advisors became an appointed representative of Sesame. The Ombudsman therefore would not continue with the complaint.
The matter was then presented to Sesame who in their investigation concluded that they would not help with this matter as at the time the advice was given the Financial advisors were not a member of the Sesame Network and that Mortgages were not a regulated product until 31st October 2004. This meant that prior to this date the FSA was not required by the Government to monitor and control the sale of mortgage products.

This has left my parents who are 6 months from retirement in financial ruin. They have explored every possible avenue that they are aware of to recover this money which has been lost.
I am hoping that somewhere there will be a solution to this problem which will at least put my parents in the same position they should have been in had the Advisor not failed to notice the error in the mortgage application.
I would be most gratefull for any advice you may have on whether this matter can be dealt with by another governing body or whether it would be possible to pursue the matter through the courts.
Many thanks for you time in reading this matter.
Kindest Regards
Elliott

UK007BullDog

Elliott,

I was not a broker before regulation so cannot comment on that but if the Ombudsman has pushed it away then there is nothing else that can be done.

And it is exactly as stated by the regulator. Your parents would have gotten statements for the 4 years every year where they could have seen they are only paying interest.

The only alternative is to get a new mortgage and to find a lender who lends to ages 75 or 80 and do a repayment mortgage. Could they afford that? Maybe you can help them pay it? If they now get a mortgage on the £13500 for the next 10 yrs they would pay around £150 (Capital & Interest). Is this affordable for them or maybe can you help them by paying a part?

UK007BullDog

Again as I don't know the procedures in those days but the solicitor could have only gone forward with the mortgage if your parents signed the documents. So it could be that your parents trusted the adviser that all is fine, but they should have read (or maybe they did, but did not understand it) the document and in the end they did sign the docs and sent them back to the lender and solicitor.

The solicitor can only go by what he/she sees on the docs. They are not in a position to query anything as they do not know your parents requirements.

I don't think you will get far in the courts and it will cost you more than the actual mortgage. The fact that your parents got at least 4 mortgage statements and each showing interest only payments and they did not realise will not be in their favour.

trigg_2

Thank you for your quick reply. My parents did place heir trust in the advisor and didn't feel the need to go over his work. They are not up todate with the mortgage products and I suppose didnt expect to see the mortgage dramatically reducing. Do you feel that the courts would be too expensive to go through. I know it is difficult to say without having all the facts infront of you but would they stand a good chance of winning if there are no signed documents by them authorising this mortgage type.
Thanks
Elliott

UK007BullDog

But they did sign the documents and sent them back to the lender and the solicitor, otherwise the mortgage would not have gone through.

Even the first statement would have shown them that no repayments were made. Latest by the second year they should have realised something is up as the amount has not reduced at all.

trigg_2

Yes they did sign the original application for a part repayment and part interest only mortgage but did not sign for or agree to the interest only mortgage. Is there no hope?

furndire

I'd try asking the same thing on http://www.consumeractiongroup.co.uk,

dunstonh

Mortgages are not long regulated so pre-regulation stuff doesnt fall under the rules that post regulation business does.

I am hoping that somewhere there will be a solution to this problem which will at least put my parents in the same position they should have been in had the Advisor not failed to notice the error in the mortgage application.

Unlikely I'm afraid.

I would be most gratefull for any advice you may have on whether this matter can be dealt with by another governing body or whether it would be possible to pursue the matter through the courts.

Tough one. Who do you take to court? The adviser who sent the paperwork in? The lender who didnt set it up that way? The solicitor when describing the contract to your parents? Or your parents themselves for signing the contract without verifying the terms.

The adviser wouldnt have seen the offer letter and back then, apart from sending the application in, there wasnt much else the adviser did. It was basically, find a deal and send the application in.

Yes they did sign the original application for a part repayment and part interest only mortgage but did not sign for or agree to the interest only mortgage. Is there no hope?

The application is just an application. It is the mortgage offer letter that is the contract and the your parents would have signed that. It is recommended that it is signed in front of the solicitor so the solicitor explains the terms. Did this happen?

This has left my parents who are 6 months from retirement in financial ruin.

The mortgage was only advanced 5 years ago. They have been paying significantly less per month than they would have been quoted initially. So, what has happened to that money that they havent been paying? Why didnt they query the lower payments? They first found out about it nearly 2 years ago. Did they alter the mortgage at that point?

How much was the mortgage for and for how long? A long term mortgage with only 5 years gone wouldnt have dropped much in value. A short term one would have had much higher repayments so would have been noticeable if set up on interest only basis in error.

The application was made to Northern Rock (Now Legal and General)

Are you saying they remortaged at some point from Northern Rock to Legal & General? If so, when?

EdInvestor

trigg wrote:

This has left my parents who are 6 months from retirement in financial ruin. They have explored every possible avenue that they are aware of to recover this money which has been lost.

Seems a little extreme.

Are you saying that the value of their house has not risen since 2001? Surely it must have gone up by far more than 13k.

If they are facing financial ruin due to not having paid off a part of half a 13k mortgage, then perhaps they'd better consider trading down to a cheaper property and releasing some of that extra equity they no doubt now enjoy.

Rick62

I'm sorry Trigg, but in legal terms they have not sufferred any loss, so I don't think they have any basis for any claim. All that has happenned is they have not made any capital payments, but have instead kept the capital (or spent it on other things).

jamesd

What money have your parents lost?

They were paying the lower interest only mortgage payments, so that left them the difference between interest only and partial repayment to invest, save or spend. What happened to that money?

What have they done to recover the situation since they became aware of it?

What is the nature of their impending or current financial ruin?

What was the original mortgage amount, how much was supposed to be interest only and how much repayment? What was the interest rate? How long was the mortgage supposed to last? This information will make it possible to estimate the financial effect on them.

How old is the older parent? What is their combined income now and in retirement? This will make it possible to examine some possible solutions.