Mortgage Arrears Fees Rip-off

hamiltonh20

I have a buy-to-let mortgage originally bought to help pay for my mother's care home costs, unfortunatley due to falling rental rates the rent does not quite cover the mortgage and have been locked in by early remdemption payments so have not been able to sell either.

After a family bereavement I had to use last savings to pay for the funeral and missed a month on the repayment of £360 - instant £75 charge. I had already been in touch with the lender to keep them informed. Having just got a job after 2 years of disasterous self-employment I had no extra capacity so the one month arrears stayed that way accruing at £75 a time.

I wrote to the head office and months passed with finally with a letter and call. They waived the 3 months of charges accrued whilst waiting for their repsonse and I believed I had agreed to pay off the arrears (by now £460) over 3 months at £150 a month. The 3 months was crucial since I asked the adviser how long it would take to clear the arrears and that was his answer.

That was four months ago, I have since requested a statement and found that they are still charging me £75 a month! I have paid off £600 and been charged £300 back - surely worst loan shark territory rates, not a high street bank...! Having challenged them they say that it is absolute policy accross the board to continue charging this outrageous fee if an arrears situation exists - preposterous! Why on earth would anyone agree to paying an extra £150 a month so that the could continue to pay £75 in charges a month! It would have been cheaper to have taken out the money on a credit card!!!!

I find this not only logicaly but morally wrong especially when trying one's best to get out of debt but being cynically ensnared by totally unreasonable and nonsensical circular policies that amount to nothing more than a total rip-off!!! The bank are supposedly searching for the recording of the conversation in which their advisor "implied" a 3 month pay-back schedule for my modest one months arrears... Does anyone else have a similar experience and is there any recourse to action - I want to threaten Bankers Ombudsman/FSA but am selling with completion due about December (finally out of the early redemption trap) and want some resolution before then - I think chances to negotiate after redemption are very low! Thanks to anyone who can help!

MarkyMarkD

Just because you've made a payment arrangement for your arrears doesn't cancel out the fact that you remain in arrears, and hence an arrears fee would be payable.

I'm not sure what your issue is - if you can work out now you could have paid the money off by borrowing it elsewhere, why didn't you do so in the first place?

I know you won't find this comment helpful, but setting up a BTL arrangement for your mother which is so flaky that even with the benefit of a (presumably) 15% deposit the rent doesn't cover the mortgage payments is madness. I know you say that rental levels have fallen, but surely that should have been factored in in your calculations in the first place?

Presumably you're saying that you made no provision for void periods either and just thought you'd default on the mortgage if you couldn't let the property for a few months?

BTL isn't a money-printing machine.

Conrad

I sympathise with anyone in your situation and would think a complaint to the chairman (no one else) by special delivery post (and keep a copy) might help.

The crucial principle the lenders have to abide by is called 'TREATING CUSTOMERS FAIRLY'. This is not optional but mandatory.

In particular you might want to say this; 'I understand under the TCF principle you must consider cases of payment difficulty in a sympathetic and helpful manner'.

Worth a go, BUT, they may well say something like this; 'you agreed to our terms when you took the mortgage'.

Give the chairman (again no one else, only him) 7 days to respond and say if not satisfied you will go to the FOS (Financial Ombudsman Scheme) and also write to let the FSA know your story.

Conrad

Sorry Ive just noticed this is a B2L mortgage, which the FOS as far as I know do not cover.

PasturesNew

A buy to let mortgage is a business arrangement.
It is not a personal arrangement.

Apart from the obvious fact, that you should have been aware of all charges/penalties so you didn't get yourself in this position, this is something that should have been a part of your initial business start-up research and spreadsheet.

Sorry, but while nobody likes to throw money away, it's "just business" for you.

I do sympathise because we all do what we can today to sort the problems of today and sometimes we can't see the wood for the trees and think we've found an easy way to solve a problem, which comes back and bites us .... but you always need to fully understand the implications of not being able to pay any debts back.

dunstonh

Nothing personal but you entered into a high risk investment (borrowing to invest is high risk) with the aim to earn more money and it hasnt worked for you.

You made a decision to go into business of buy to let, didnt do very good research and now you are paying for it. It is risk you take. You won't be alone as a lot of new landlords with no experience have done the same.

The funny thing is that last year we were saying on this forum that when mortgaged buy to lets start going wrong, the forum would see an increase in posts from people trying to pass the blame onto someone else for their own mistakes. With endowments they could get away blaming the adviser. With a mortgaged buy to let though you cannot blame anyone apart from yourself.

Buy to lets are not regulated by the FSA and you have no financial ombudsman service to refer to.

MarkyMarkD

It really is shocking that people get into this situation, though.

If you invested in the right part of the country a few years ago, you could get rental yields around 7-8% which would amply cover the interest only payments on an 85% mortgage, even accounting for a risk of a few void periods or rental reductions.

If you instead invested in an area with 5-6% rental yields, then you were asking for problems.

And if your investment was in a new build flat with all the over-supply problems (not to mention gifted deposit cons) that have now come to light, that's doubly true.

Even if the investment was a reasonable one, if the approach was to treat any margin over interest payable as "spends" from day 1, that was a disaster waiting to happen. At the very least if the recipient was 100% dependent on this income to live on, some ought to have been put aside to cover voids etc.