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

dunstonh

Will be really interesting to see how this one pans out. Surely the claims companies wouldn't be spending their time doing this if they didn't think there was something in it?!

Cartel took over £34 million of up front £495 payments on the belief it could get debts written off. When the high court ruled against it, it went into administration taking all that up front money with it (which had conveniently found its way out of the company). There were plenty of others too.

Contracting out of SERPs had some claims companies putting in complaints on that until the FSA did its review and found that only around 1.5% of people were potentially mis-sold (and even then many of those would not have been). There are still some companies acting in this area but they put in fake complaints (template letters that are the same for everyone containing lies) in the hope it sticks but if it doesnt, it doesnt matter as the claims company transfer the pension taking around 5% commission on it (often doing the very same things they are complaining about). The money is not in the complaint but the commission on the transfer but some will get lucky on the complaint as well.

Claims companies are notorious for putting in fake complaints in the hope that some stick on a technicality or an amount is small and will be auto paid out as its too expensive to fight it. Over half the complaints on PPI do not have PPI.

Having had some discussion on this subject with a group of other advisers, the consensus was that if they started getting complaints in that they would report those complaints as fraud to the lenders and try their hardest to get the borrowers complaining onto the mortgage fraud register.

The FOS itself has said it doesnt feel there is a widespread issue waiting to come in. The main area that has legs is that where a subprime lender was recommended when prime would have been available.

Graham_Devon

chewmylegoff wrote: »

P.s. and I don't think it has legs. The claims management companies are morons and without a high profile judgement against a bank to use as leverage this ain't going anywhere in my view. The banks will just reject and the borrower will find it impossible to evidence to the FOS that they didn't understand they were only paying the interest unless the mortgage documentation was spectacularly deficient.

I dunno, I'm just following the whole thing with bitter interest.

People keep saying it won't happen, but it appears we get closer each week. Barclays and Lloyds are on record stating they are preparing for the claims. That was the first I knew.

Then this article was posted. Then various "we can't afford our house...if only we'd got the right advice" articles appeared.

Now the FOS is involved.

dunstonh

People keep saying it won't happen, but it appears we get closer each week. Barclays and Lloyds are on record stating they are preparing for the claims. That was the first I knew.

The key voice is the FOS. They say there is are some areas but its not interest only that they feel has legs.

There will be some payouts. The problem is going to be the range where it is likely to happen.

Mortgage regulation started in October 2004. So, anything before October 2004 is disregarded. Most lenders restricted interest only by 2008. The documentation on IO after 2004 was much higher and has steadily increased. So, the window of cases where it is possible to complain is quite small.

You then look at filtering those down.
1 - mortgage brokers. Most of whom will have the correct warnings and in addition to the FSA prescribed warnings. Some wont. Some may have said it but may lack the audit trail and get caught out by opportunistic try it ons.
2 - Many of the lenders moved to non-advice basis in their distribution. So, complaints about advice wont stick where no advice was given.
3 - There is still the issue about how do you compensate someone who is not actually financially worse off and could well be better off in most cases (they only paid the interest, no capital payments. so cheaper each month. If they stuck with renting then rent payments would almost certainly have been higher and they wouldnt have seen the value of the equity rise).

There will be payouts but the chances are many of those will be luck or unrelated issues to interest only.

Graham_Devon

Well it's all a little deja-vu for me. The PPI miss-selling started out in the very same way. I remember posts like the above on the PPI issue, and that's ballooned into a monster.

Just a few days ago, people were suggesting they couldn't see how this could possibly go ahead. Now that it is....were looking into what may be able to be claimed. Things move on quickly. It's certainly interesting, especially looking at those who can't actually afford their homes....

dunstonh

Well it's all a little deja-vu for me. The PPI miss-selling started out in the very same way. I remember posts like the above on the PPI issue, and that's ballooned into a monster.

The FSA retrospectively changing the rules was an surprise with PPI. However, if you look at the PPI position, just 0.2% PPI complaints at the FOS are advised. Advised cases have a very low success rate on complaints as well as the audit trails are typically there. The success is on the sold cases. Not advised or DIY. Most mortgages are advised or DIY. Not sold.

There is also the issue that everyone knew the banks had been selling it with dodgy reasons for decades. Interest only is not dodgy. It was a choice.

Just a few days ago, people were suggesting they couldn't see how this could possibly go ahead.

Nothing seems to have changed from a regulatory point of view over the last few years. Self cert complaints are expected to rise although borrowers shooting themselves in the foot may put many off. Subprime where prime should have been used will be the big one but if we put that in context, subprime was a tiny percentage of overall mortgages. If you look at the claims companies that are now setting up for this, they are focusing on those two things.

There is also one big thing about interest only complaints that makes them harder to accept they were mis-sold. The name. How can anyone actually complain they didnt know their mortgage was interest only?

Just thinking of something else, the FSA have 3 year/6 year timebar rule. The firm can timebar a complaint if you do not complain within 6 years of the event or 3 years from being reasonably aware of a problem. The lenders have been writing out to interest only borrowers for many years year now reminding them that they need to have a repayment vehicle. The timebar can start three years from that first notification. These timebars cannot be used on PPI as no documentation has been sent to start the timebar. Although some lenders appear to be doing such things now with PPI with letters now going out making them aware they had PPI.

I just checked my mortgage statements with C&G. I have interest only on one chunk of it and warnings were were present on the 2004 statement and all those since saying about needing a repayment vehicle.

The claims companies need something else to happen next. PPI timebars are going to come in. Without something else, their business model ends. Some are now cold calling on investments saying "have you lost money? If so, you can complain". Now any investor will tell you that it is not grounds for complaint but they are again trying it on in the hope you get lucky. I have seen templates on these at compliance meetings (we get warned of trends/issues). The template letters are all the same and a complete disgrace and clearly fraudulent in nature. However, FSA rules require that all areas regarding the advice have to be checked and some will get upheld on a technicality.

antrobus

dunstonh wrote: »

....Just thinking of something else, the FSA have 3 year/6 year timebar rule. ...

And the FSA didn't make that up all by themselves. They have that rule because that's what it says in the Limitation Act 1980. Specifically, s2 "An action founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued", subject to s14A (Special time limit for negligence actions where facts relevant to cause of action are not known at date of accrual) where you have three years from the "earliest date on which the plaintiff ... had both the knowledge required for bringing an action for damages in respect of the relevant damage and a right to bring such an action".

Of course, there is still bags of fun to be had arguing about when someone possesed the knowledge required for bringing an action for damages etc, but there are limits to how far you can push that.

Loughton_Monkey

antrobus wrote: »

.....Of course, there is still bags of fun to be had arguing about when someone possesed the knowledge required for bringing an action for damages etc, but there are limits to how far you can push that.

If it please your honour.... I know I've had my Interest Only mortgage for 20 years. I know I should have kept my endowment policy up.....

But in November 2012, there was this excellent post on an Internet forum in which the OP seemed to suggest I have been mis-sold....

My mortgage salesman, M'lud, failed to take into account that I didn't have a brain, and I thought I was buying the "Only Interesting" mortgage.....

wotsthat

http://www.guardian.co.uk/money/2012/nov/07/mortgage-balance-never-reduces

Question in the Guardian - got to be made up.

Q I have mortgage which was originally taken out with an endowment policy. I cashed in the endowment some years ago and never informed my building society. I am still paying the mortgage payment every month and everything is up to date.

Every year, I get a statement from my building society and the balance on my mortgage is about £22,000. This figure never seems to go down. My house was ex-council when I put in to buy it, which is why I got it so cheap. At the end of the mortgage term when I reach 65 (in seven years' time), will I just have to pay the building society £22,000? SN

Graham_Devon

wotsthat wrote: »

http://www.guardian.co.uk/money/2012/nov/07/mortgage-balance-never-reduces

Question in the Guardian - got to be made up.

Yer, I'm with you there. Looks like someone is sending a question in designed to anger people (the council house, I got it cheap bit) and make the IO thing look a bit silly.

Seems the guardian fell for it.

I can't imagine that's a real life case, when its written in such a way.

On saying that....look at the comments.....

The questioner might be ignorant of financial products, but they might also have been mis-sold their mortgage and misinformed at the time of purchase about its nature. Any paperwork from the time might help make a case.

Eellogofusciouhipoppokunu

wotsthat wrote: »

http://www.guardian.co.uk/money/2012/nov/07/mortgage-balance-never-reduces

Question in the Guardian - got to be made up.

Probably just a joke to get the frothers going. Seems to be working...