paying back insurance payout

moleonthemove

Hi all,
I wonder if anyone can tell me if I have been duped by a finance company.
I bought a property on mortgage in 1988, at the time of obtaining a mortgage I was required to pay an insurance premium to cover the mortgage shortfall if I defaulted on payments. Due to ill health and loss of job, the inevitable happened, I couldn't keep up payments and as a result left the property, which was subsequently repossessed. I later received a letter from a debt recovery service regarding the payment made by the insurance company to the mortgage lender, they wanted the £10,000 payout back, as I was in a better situation I agreed a payment plan. My question is were the insurance company correct in requiring the money they had paid back, why if I had paid a premium initially was this not what I had paid for. They told me that if it went to court they would win because previous cases had made the decision. Is it fair, I fully accept my responsibilities regarding the mortgage, the mortgage company received the payout on the endowment policy I had also paid for.
Be interested in any views. I am still paying for the debt.

silvercar

It is all standard. The isurance covers the mortgage lender if they get back less than they lent, following repossession. You were required to pay the premium to cover the lender and the insurance company do have the right to chase you.

Whether its fair is a different question, but it is standard.

Johny_T

IMO Whether it is fair or not is not a question!

In summary, you have been stung by what, in my opinion, is possibly the most outrageous example of lenders taking advantage that there could be.

When you took out your mortgage you took out what was known as ‘A Mortgage Indemnity Guarantee’ (now referred to as a higher lending charge)

The workings are something along the following lines.

Your LTV (the amount being borrowed by you compared to the value of the house) is a high(ish) percentage
The Mortgage company do not like this as, if you were to default and they reposes, they may not get enough to cover the loan
However the lender wants your money (but don’t want to put them at risk)
Therefore you buy an insurance policy to cover the lender for any shortfall in what is owed vs the house price sold for if you default
You default and the home is repossessed
The mortgage company auction off your old home for far less than its market value but don’t care as the insurance company pay them the difference
The insurance company chase you for what they have paid out despite the fact that you have paid a premium

You pay an insurance premium to cover someone else that allows them to make money, cover their risk and then the insurance company wants the money off you that they paid out even though you paid a premium to ‘cover’ this!

This is clearly an unfair practice where the lender is taking advantage of their position (in that you have no real choice if lenders act together as a cartel to further their aims and to disadvantage the consumer).

If you can’t pursue yourself there will be companies out there that should be able to look at this situation for you. Have a search around, find one you are comfortable with and if there is no risk to you give it a go. You have nothing to lose.

A word of warning: You will probably find that a number of mortgage advisors will now jump on this and state any of the following:-

1) No way, it’s perfectly right, you can’t do anything, don’t bother, maybe wait a while
2) It’s your fault, you wanted the mortgage, you made your bed now lie in it
3) You’ve been reposed therefore you must be a X factor watching, tracksuit wearing idiot who just saw what he wanted and didn’t care about the risk (ok, I made up the tracksuit bit but you get my drift)

I have found some of the threads regarding this whole mortgage mess (PPI, charges, exit fees etc etc) absolutely fascinating in that there are clearly people out there who have suffered at the hands of lenders yet a few of the advisors (who let’s remember are paid to sell the lenders products) just seem to have a vendetta against what they don’t agree with.

MSE forums are meant to encourage unbiased debate and mutual help not further the agenda of big business.

Anyway rant over (I get like this every now and again).

Carry out some research, ask advice from those who support you as opposed to the lender and let everyone on here know how you do!

Johny_T

Actually if I get sometime this weekend I'm tempted to do a bit of investigation on this myself! This is not fair and cannot be allowed!!

Now I've got myself off and have a nice cup of coco and calm down!

A_Nice_Englishman

Thing is, if the insurance company weren't allowed to pursue defaulting borrowers the insurance would be open to abuse.

Dishonest borrower pays his first mortgage payment, then nothng and waits for reposession which might take six months. Insurance company pays lender the shortfall and borrower gets six months' free housing. Who pays? The other borrowers who pay higher premiums.

homer_j_3

Have you considered that for the lender to claim on the insurance they will have had to demonstrate to the insurer that they have obtained the best price that they can.

Reinsurance happens all the time. All the life companies reinsure themselves against loss for example.

What ever your views are of 28 posts on this forum, I am sure that you have got the comeplete wrong view of the majority. We are here to help and offer advice just as anybody else is and just because our knowledge is quite specific to the topics discussed on here, it doesn't mean other peoples views is not are equally important.

You cannot claim for everything and HLC to my knowledge is something that is not claimable. If you somehow find something that gives you an angle and I am incorrect - I will personally email Martin and reccommend you for a researchers job for him

moleonthemove

Thank you to all who posted replies, special thanks to Johny T, for the very informative comment. I'm sorry I haven't replied before, I lost track of my thread and couldn't work out how to find it till now. Darn clever these computers at hiding things.
Anyway thanks again to all.
I will ask some questions when I get back to UK next March, and will post any useful info here.

dunstonh

I have found some of the threads regarding this whole mortgage mess (PPI, charges, exit fees etc etc) absolutely fascinating in that there are clearly people out there who have suffered at the hands of lenders yet a few of the advisors (who let’s remember are paid to sell the lenders products) just seem to have a vendetta against what they don’t agree with.

I think you will find the advisers are 100% those claiming fees where it is applicable. However, there are a number of people trying to claim back fees for things that shouldnt and cannot be claimed back and those are the threads where you see the adviser respond in the appropriate manner.

Johnny, you have been here little over a month and clearly you havent been round long enough to see the larger number of occassions advisers have helped people get redress or point out issues or problems.

This site is about moneysaving and not trying to get away with paying valid fees. I should also point out that as an IFA and not a mortgage adviser, I am not paid by any lender so your claims of bias are not correct.