Advice please on Mortgage Indemnity(MIG)

summer2014

Hi
In 1991 we took out a mortgage with Leeds Building Society and was told we have to pay for MI (£1400) in order for the bank to reclaim any cost etc should we default on payments and the property is repossessed. It was explained that should this happen the bank would get back the loss and we would not owe anything to the bank. We were satisfied with the explanation given to us and decided to proceed.
Unfortunately my ex-partner lost his job and I couldn't not keep up with the payments on my salary, our home was repossessed and I and my children went to live with family members.
At the time Leeds assured us the arrears would be covered by the MIG and we would not owe anything.
Appx 2 years after and to date Halifax (who took over from Leeds Building Society) have been chasing me for the outstanding balance of £17K saying that was the shortfall when the property was eventually sold. I explained that we thought this was covered by the MIG and they received this. They explain they did but are entitled to recover the cost (through their insurance company) I'm confused as why were we made to pay this insurance?? Can any one please advice what I can do.
Thank you

Senior_Paper_Monitor

You are certainly confused.


1) Halifax (Lloyds Group) have not taken over Leeds Building Society. They may feasibly have sold your mortgage/contract on to Halifax but I would be surprised if that was the case - similarly they may have obtained the MIG from Halifax (although I think this unlikely) and they are chasing you as any insurer will do if they have paid up for your default.


2) MIG protects the lender not you - BUT in order for it to do so they must exhaust all normal avenues of recovery from you. At that point the insurer will often then pursue for recompense.

dunstonh

Leeds Permanent (more commonly known the The Leeds) merged with Halifax.

The current Leeds Building society is a rebrand of the old Leeds & Holbeck Permanent Building Society. It has nothing to to with the other Leeds.

As said above, MIG protects the lender. Not the borrower. it does not remove the liability for the borrower to repay the debt.

Senior_Paper_Monitor

Well spotted Mr Dunstonh - your brain obviously more up to speed than mine this Monday morning !


In that case it is the mortgager (rather than the insurer) currently chasing - don't expect either to 'let go'.

kingstreet

The lender received the payout from the insurer, but under the principle of subrogation, the insurer was entitled to recover the amount paid from the borrower.

MIG was not designed to protect the borrower. It protected the lender and made higher loan to value mortgages possible. The borrower paid for it, in return a lower deposit was possible.

The alternative was to put down a 25% deposit. If you could not do that, MIG was the only option at that time.

summer2014

Many thanks for your replies. I didn't understand at the time that we would have top pay the insurance company back. We were led to believe that the fee we paid was to cover any loses to the bank, had we known we would not have taken out the mortgage but would have waited as we were 21 years old and the way it was explained by the bank it made sense to pay this fee. I am not sure what to do now so would appreciate any advice that can be offered, thanks

dunstonh

We were led to believe that the fee we paid was to cover any loses to the bank, had we known we would not have taken out the mortgage but would have waited as we were 21 years old and the way it was explained by the bank it made sense to pay this fee.

In 1991, it was still normal for people to use a solicitor to explain the contract. That didnt end until the late 90s. What did the solicitor say to you about the contract and its terms?

I am not sure what to do now so would appreciate any advice that can be offered,

There is nothing you can do about the MIG. However, how long ago was it that the property was repossessed?

summer2014

It was a shared ownership property (25%) from a housing association and we were advised by them of a solicitor firm who deals with shared ownership. We were not given any concerning information about MIG.
We were accepted for a mortgage by Leeds and continued with the process to buy the property off plan ( new build) shortly afterwards we received a telephone call from Leeds stating that we had to pay a seperate fee for MIG on top of the deposit, because of the information we were given by Leeds we decided to go ahead and borrowed the MIG fee from my parents.


The property was repossessed in 1994

Thrugelmir

summer2014 wrote: »

Many thanks for your replies. I didn't understand at the time that we would have top pay the insurance company back. We were led to believe that the fee we paid was to cover any loses to the bank, had we known we would not have taken out the mortgage but would have waited as we were 21 years old and the way it was explained by the bank it made sense to pay this fee. I am not sure what to do now so would appreciate any advice that can be offered, thanks

If you can recall the details of a conversation from 1991 you have a remarkable memory. Hindsight is a wonderful gift that the human species has. There's many things I regret doing over the years however I just move on.