It's getting close.... the great IO mortgage miss-selling scandal

Graham_Devon

Fears that interest-only mortgages could become the next mis-selling scandal to hit the banking sector have been raised within UKFI, the organisation which manages taxpayers’ stakes in bailed-out lenders RBS and Lloyds.

UKFI bosses were grilled yesterday by the Treasury Select Committee over the future of state backed lenders.

The revelation UKFI is worried about potential taxpayer liabilities comes ahead of a crackdown on future sales of interest-only loans by the City watchdog as part of sweeping reform of the mortgage market announced tomorrow.

So thats now UKFI getting rather fearful, and barclays taking steps to prepare for a miss-selling scandal surrounding interest only loans.

How far can this run? And if they were miss sold, what do people think the compensation will entail?

Could be a rather unique situation brewing whereby those struggling with repayment mortgages, moved to IO mortgages under "forbearance" then get compensation

For those with low tracker rate IO mortgages, this recession really could turn out to be the gift that just keeps on giving.

http://www.thisismoney.co.uk/money/mortgageshome/article-2221985/UKFI-fears-mortgages-mis-selling-scandal.html

moneyinmypocket

It will all be fine

dryhat

I don't think this will turn out like the endowment or PPI mis-selling.

In those two scandals people were genuinely mis-sold products either through lying or stealing by those selling the products.

IO mortgages are different.
Ignoring the arguments about whether they are a good or bad thing, people knowingly signed up for them.

And the majority of those that signed up did so to reduce their monthly payment.

Mortgage advisors are the ones who should be worried about this.
As the bank's foot soldiers they are as responsible as anyone for the economic carnage that we are now seeing unfold.

Generali

dryhat wrote: »

I don't think this will turn out like the endowment or PPI mis-selling.

In those two scandals people were genuinely mis-sold products either through lying or stealing by those selling the products.

IO mortgages are different.
Ignoring the arguments about whether they are a good or bad thing, people knowingly signed up for them.

And the majority of those that signed up did so to reduce their monthly payment.

Mortgage advisors are the ones who should be worried about this.
As the bank's foot soldiers they are as responsible as anyone for the economic carnage that we are now seeing unfold.

Interest ONLY the clue is in the name.

You can bet that the ambulance chasers will be out in force for this one. It's hard to see how people 'missold' IO mortgages can gain redress. In some cases they have committed a sort of fraud by agreeing to a repayment while having no intention of putting one in place.

michaels

I was missold rent for years, no one told me that after renting for 5 years I would not be given the property to live in forever

I was also missold an iphone when I would have been perfectly ok with an android costing half as much, I was missold my car insurance because I never made a claim so I might as well have had a trhird party only policy, I was missold in Sainsburys at the weekend when I bought something I coulod have bought more cheaply in Tesco and they didn't tell me....Oh and I had to wipe my own ar*e this mornng when really the govt or a big company should have done it for me because I am not responsible enough to do it for myself.

Graham_Devon

Generali wrote: »

Interest ONLY the clue is in the name.

You can bet that the ambulance chasers will be out in force for this one. It's hard to see how people 'missold' IO mortgages can gain redress. In some cases they have committed a sort of fraud by agreeing to a repayment while having no intention of putting one in place.

So why would UKFI be worried, and Barclays preparing?

Would it be more a case of fines for the banks, rather than a comensation style PPI case?

When Barclays first stated they were preparing financially for a miss selling issue, I too suggested there wouldn't be anything in this.

But why would UKFI join in with the fear? What are they fearful of, as I agree with what everyone says when they question why compensation would be involved, but it's obviously worrying the banks.

I can imagine people pouring over this in an attempt to get compensation regardless, but I imagine if compesation WAS paid out, there would be public outcry from those who took a remortgage deal to cover themselves from the eventualities of an interest only deal. And I can only imagine the outcry would be even more vocal from those on IO who prepared and sold up before it was too late.

I don't really see how a fine would be in the public interest. Afterall, were kinda fining the taxpayer in this UKFI issue!

Graham_Devon

michaels wrote: »

I was missold rent for years, no one told me that after renting for 5 years I would not be given the property to live in forever

I was also missold an iphone when I would have been perfectly ok with an android costing half as much, I was missold my car insurance because I never made a claim so I might as well have had a trhird party only policy, I was missold in Sainsburys at the weekend when I bought something I coulod have bought more cheaply in Tesco and they didn't tell me....Oh and I had to wipe my own ar*e this mornng when really the govt or a big company should have done it for me because I am not responsible enough to do it for myself.

You'll like this....

A council has attempted to charge homeowners £122 a year to drive their car through a car park, and £16 a year for a permit to walk through a car park, to gain access to their properties.

The reason? People are suing for accidents left right and centre, and they are having to cover themselves.

All a monumental council co*k-up showing councillors really are on a different planet, and the council said "sorry, we didn't realise this would cause upset, and will re-think". But on a serious level it shows just how much this compensation culture is costing us all.

http://www.dailymail.co.uk/news/article-2221612/Walk-home-Youll-need-16-council-permit-Householders-forced-pay-charge-gain-access-car-park.html

Thrugelmir

Graham_Devon wrote: »

So why would UKFI be worried, and Barclays preparing?

UKFI is responsible for winding down the remaining rump of the old Northern Rock and Bradford and Bingley mortgage books.

B&B has the best part of 250,000 BTL mortgages on its books.

NR's interest only mortgage book has an average LTV well in excess of 75%. So any downturn in house prices. Will impact greatly.

Suspect Barclay's issues may surround the products that were sold as a vehicle to repay the mortgages. Same can be said of HBOS. As its well documented as far back as 2004. That branch staff were set high targets for product sales, again that may have lacked suitability or paid high commission levels back to the bank.

What ever the compensation paid. Borrowers will pick up the tab in the form of higher interest charges. The days of cheap mortgages are slowly ticking away.

Loughton_Monkey

michaels wrote: »

I was missold rent for years, no one told me that after renting for 5 years I would not be given the property to live in forever

I was also missold an iphone when I would have been perfectly ok with an android costing half as much, I was missold my car insurance because I never made a claim so I might as well have had a trhird party only policy, I was missold in Sainsburys at the weekend when I bought something I coulod have bought more cheaply in Tesco and they didn't tell me....Oh and I had to wipe my own ar*e this mornng when really the govt or a big company should have done it for me because I am not responsible enough to do it for myself.

I sympathise. You have truly been 'stitched up'.

I am also a victim of mis-selling. I was 'sold' the idea of voting for a Conservative Government. Having been part of a majority who did that, I expected a Conservative Government.

When this didn't happen, I 'bought' a coalition government because it promised to get a grips on spending, and get rid of the Nanny State and oodles of red tape etc. I now find it taking almost 3 years for the first significant 'cut' physically to take place, and I think the red-tape mountain is a few hundred feet higher...

Thrugelmir

Loughton_Monkey wrote: »

I now find it taking almost 3 years for the first significant 'cut' physically to take place,

Takes time to apply the brakes.

There's plenty of cost reduction intiatives on the agenda. Another couple of years and they'll start to show through.

Cuts isn't the right word. As much tax payers money is simply wasted.

grizzly1911

Thrugelmir wrote: »

Takes time to apply the brakes.

There's plenty of cost reduction intiatives on the agenda. Another couple of years and they'll start to show through.

Cuts isn't the right word. As much tax payers money is simply wasted.

The money will still be wasted it is just front line services that will suffer and all those trying to deliver them.