MIG taken out now being chased for 'losses'

kingstreet

A mortgage indemnity policy was used by lenders as a means of taking additional security over a loan to value, in excess of what the lender felt comfortable lending.

For example, a lender was willing to lend only upto 75% of the value of the property. The borrower wanted to borrow 95%. The lender would be prepared to increase the loan to value provided the borrower paid for an indemnity policy to protect against non-payment, the excess borrowing over the 75%

The cover allowed the lender to recoup its losses in the event of repossession, both by the sale of the property and the indemnity policy, for any excess not covered by the sale proceeds.

The borrower derived no benefit from this cover as the insurer had the right to demand repayment of any sum paid to the lender.

In the mid 1990s lenders such as C&G stopped arranging such cover but continued to charge the premiums, using them in a form of self-insurance, to cover repossession losses. In the early 2000s, as the credit boom developed commercial pressure drove MIG from most mortgages, with C&G and Nationwide being the first (IIRC) to stop charging for the higher LTV business.

I don't see a borrower having any chance of making a complaint on the issue. Lenders issued factsheets with mortgage offers and published information in their lending guides. The simple choice at the time was to accept the MIG premium, or to save a bigger deposit, or find a lender which did not charge.

opinions4u

emmdee57 wrote: »

Judging by your responses and thinking about it, it appears that MIGs are a rip off

You have only read the responses you want to read then.

and it looks like I have been sold something that does not protect my partner at all, just the lender.

That is correct. That's how it is positioned.

Do you really think that they are selling a product that allows you to miss your mortgage payments, get repossessed and not make a loss?

I am totally peeved as that MIG cost me over £3500, money that I could have placed in my own pocket.

Indeed you could. But you wouldn't have got the mortgage you wanted.

This is something that needs to be looked at by the same people that declared Payment Protection Insurance was a scam.

Having seen many people successfully claim on PPI I don't see a scam.

As for MIG it was always intended to protect the lender. The borrower always remained liable for any losses in the case of repossession. It was always positioned as such too.

But if you couldn't raise a large deposit, typically 25%, you couldn't get a mortgage without it from certain lenders.

Given the outcome here, it looks like the lender was wise to impose such restrictions.

Perhaps it's a sign of our society that some people think they can be rewarded for being repossessed.

holly_hobby

Well said O4U ....

H