Bank accepted mortgage application from unauthorised broker

Occident

Hopefully not for much longer.

Annisele

Has your friend suffered a financial loss?

If yes, how?

If not, why does she want to complain?

Occident

She suffered financial loss because the unsecured loan part of the Together package put her into negative equity. She was not offered any other mortgage from the whole of market and she was not a sub prime borrower. She was given the heavy sell for this mortgage. FSCS say she has a legitimate claim but so far they have failed to find a principal. The FSA are after him because he has started up in business as a broker again this year. What was wanted - a low risk repayment mortgage. What was needed - the same. What was sold - a high risk package that put her into negative equity. It also runs past her retirement. None of the FSA requirements for mortgage advice were followed and at the time she didn't know what they were. The mortgage was mis-sold and in an FOS/FSCS decision she would be put back into the position she was in before the mortgage was taken out. In FOS terms this is back to where she would have been if she had only taken out a repayment mortgage. Northern Rock have no application form and no Intermediary Registration form - nothing that proves the broker was authorised. He was a business owner so should have been authorised in his own right and wasn't. The FSA have no trace of him and they were never informed by anyone else that he was an employee.

dunstonh

she did not get a KFI from either the broker or Northern Rock and she has a witness to that.

A copy usually goes out with the offer letter IIRC. So, if she signed that, then she should have got a copy.

The broker did receive a fee from Northern Rock as well as fee from my friend and he did not tell her about the latter until everything was completed.

It is best to stop referring to this person as a broker as you have said they were not. I would question how Northern Rock paid them without an FSA number. The fee paid directly to this person by your friend could be reclaimable if she took this person to court.

FSCS say she has a legitimate claim but so far they have failed to find a principal.

FSCS cant say that because you only get FSCS protection if the firm was regulated by the FSA at the time and is no longer trading. If the person was not FSA authorised then there is no FSCS protection.

Can you please explain to me what the comback is of NR paying an unauthorised broker?

Nothing from your friends point of view but NR may wish to chase this person to get their money back if it was paid. However, given the position of NR, it is unlikely they will spend resources on it to get back around £100-£300.

What was wanted - a low risk repayment mortgage.

NR were a prime lender. So, no complaint there.

What was sold - a high risk package that put her into negative equity.

So, how did she propose buying the house if she didnt need to borrow the deposit?

In FOS terms this is back to where she would have been if she had only taken out a repayment mortgage.

It's irrelevant though because the lender makes the lending decision. She may have been misled by an unauthorised individual but then perhaps NR were as well. However, NR make the lending decision based on the information they were given. Whether the application came via a real broker, a fake one or my 10 year old daughter, doesn't change the fact that the lender goes by what is on the application.

She does appear to have been "conned" by an individual and if she can find him, then she can take him to court (FSA level protections dont apply). However, going after NR seems like a hopeless cause.

kingstreet

What I wasn't clear on the last time this came up, was what happened to the unsecured money the borrower didn't need?

If I needed a hundred grand and my solicitor was given a hundred and thirty, I'd wonder what the rest was for...

opinions4u

I have sat in a room many times with customers and explained options available to them and, where appropriate made a recommendation with a clear set of reasons.

There are many outcomes. These include:

1) The customer is happy and accepts it and remains happy.

2) The customer is happy at the time, because it gets them something that they wanted, but later on circumstances change and the customer turns round to say that I should have had a crystal ball many months / years earlier.

3) The customer chooses their own course of action against my recommendation - and yet there have still been occasions where they return at a later date to say they weren't given the right advice.

Regadless of the dubious status of the arranger of this mortgage, the buyer of the mortgage has been put in a position where they can obtain the funds they need to buy the house they want. They have had the option to pay down capital on the interest only mortgage if they wanted to (effectively making it a repayment) and they have had the use of the unsecured credit for whatever purpose it was used - I bet you there were other debts to consolidate though!

"Hello Mr Mortgage Seller. I have little in savings, owe lots of money and want a mortgage with the lowest possible payments for several times my salary. What can you do for me?"

"Well Ms Naive Buyer. I have a mortgage that repays all this debt, lowers your monthly payments on it and gets you 5 times income. And because it's interest only it gives you the lowest possible payments."

"Yes please".

_Andy_

Hang on O4U, you'll be suggesting people should take responsibility for their decisions next. Haven't you learned that's almost blasphemy on these boards? It's much more in vogue to bleat about mis-selling, compensation for being given a mortgage, blah blah ad nauseum.

DVardysShadow

Occident wrote: »

Thank you all for your comments. The firm was not authorised and the broker was not a friend of my friend - he was an absolute conman. Northern Rock do not have a copy of the application form and on their intermediary application forms the FSA number of the broker must be authenticated by Northern Rock or a mortgage cannot be approved. My friend wants compensation because she was mis-sold the mortgage by the broker (dealt with on another thread). She cannot pursue the broker because he wasn't authorised. Under the Finance and Marketing Act 2000 brokers who apply for mortgages must be authorised or the agreement cannot be enforced and my friend could apply to a court for recission. I just wanted to check that information from your experience. She was a first time buyer who knew nothing about mortgages and got the Together package which was totally unsuitable for her. She didn't even get a Key Facts document or any other paper work prior to the Offer of Loan.

https://forums.moneysavingexpert.com/discussion/2662903 [why start a new thread?]

Occident

My friend is comfortable, had a deposit and did not need the extra funds. She cleared 2 cards with it - of course she wasn't going to incur any debt. She was not given options - it was the only mortgage the "person" informed her of. He gave it the hard sell and told her that it was an excellent opportunity to get an unsecured loan at mortgage rates. He did not tell her that is the loan becomes separated from the mortgage. the interest rate jumps by 5%. He was paid £581 in commission by NR as well as her paying him a fee of £900. It's alright for people with experience to talk of Ms Naive in derogatory terms (I only asked for some advice- there is no call for accusations that my friend is a liar or sarcasm) but first-time buyers do not all know the ropes and the rules are in place for consumer protection. She knows where he is and she knows she can sue him but there would be no point as he hasn't a bean. IF NR had not accepted the application because he was unauthorised - if they had followed their own procedures - then she could have got legitimate advice elsewhere so in my view their breach of MBOC rules and the Finance and Marketing Act is partially responsible for the mis-selling. She is in the process of making a complaint to NR and will take it to the FOS. We will see what happens from there. Thank you for all your input - very helpful - and polite - I am sure.

neas

Must admit when is she going to take responsibility for her own life and finances?

As others pointed out lending up to 125% mortgages were the 'in thing' back then. An individual or someone acting on behalf of said individual could've got that mortgage.

If your 'friend' was too bone idle to read or even take a second to understand the rammifications of such a mortgage then she deserves being shackled with the negative equity.

Heres news for you....

Even if she hadn't taken a together mortgage and got a different mortgage for 95% say... she'd probably still be stuck in a Negative equity situation because of the drop in house prices.

Had that happened with a 95% mortgage, im sure you'd be here trying to blame the uk government or the housing market for her situation.. when quite clearly every place you have to deal with a mortgage it warns " House prices can go up and down and interest rates can go up and down./.. so please factor this in when to make sure you dont get repossessed"

It seems they bought something they truly couldnt afford and have made themselves in a worse situation... As others have pointed out she should grow up and understand the choices in life instead of pushing the blame onto others. Nobody to blame taking a 125% mortgage with a high interest rate... and then house prices slump.. but herself.

The 'friend' wouldn't be whinging if her house had gone up by 40%.... and thus made her comfortably in equity now would she? She'd be singing the praises of an individual who helped her get on the housing mkarket before it took off.

Saddens me people are so naive