Feel Ripped Off by Mortgage

Mark_Lion

Deleted_User said:

I would send a complaint in to whoever took over the brokers and let them direct you accordingly.  FoS should still be open to you as an option 

What does FoS mean?
I do have a lot of emails from my solicitor. I will look through them all, and see if there is anything relevant to the Catalyst loan.

MWT

Mark_Lion said:

What does FoS mean?

Financial Ombudsman Service - https://www.financial-ombudsman.org.uk/

Mark_Lion

These are emails between myself, solicitor KR and  real estate company. Only included portions about Catalyst. There is no actual detail of the contract conditions.

Me
Just to let you know, some of my mortgage money is made up with Catalyst funding. They did stop funding for the time being, but I got in and am now being processed.

KR
My dealings with Catalyst are that they do work at their own pace.  Unfortunately I am unable to chase them from my end, and will have to leave you to chase them on a regular basis.  Would you kindly keep me advised?

Me
In order for me to chase Catalyst up, does that mean nag my mortgage broker, or contact Catalyst directly? Sorry, being a first time buyer, I am not sure who to push and how hard.

KR
Thanks for your email addressed to Kathy, with regard to chasing Catalyst either ask your broker for their details and you can contact them direct or alternatively ask your mortgage broker to chase them up for you.

Me
I got a phone call today from Jaqueline at Catalyst. She said my money is approved and ready to go. She wants to send me some paperwork, but has to wait for Mr Eborn's solicators to get started.
 
I asked her how long it will take to finalise the Catalyst loan. She said two weeks.

KR

Dear Mark,

Could you let me have a copy of what Catalyst sent you?

KR

Hi Mark 

I have now received a copy of Catalysts Offer to you – so you needn’t forward a copy to me after all.

Real estate seller

I spoke to your solicitors, KR, yesterday who said that she had received your offer from Catalyst together with some documents.  There appear to be certain conditions that Catalyst have stated and Kathy Rhodes would like to run through them with you.  She will be in the office tomorrow on 01344 123456.

 

I understand that the main one was that Catalyst require a Home Buyers survey to be done on your purchase.  This would probably work out cheaper if you asked the surveyor doing your mortgage valuation to do the more in-depth survey at the same time.  The Home Buyers survey is the ‘middle’ one and not quite so detailed as a full structural survey.

KR

I have today heard from Catalyst who have confirmed that the only item they are awaiting from us is your completed direct debit mandate.  Would you please confirm that this has been forwarded to them?

Mark_Lion

The only loan I had before the mortgage was a car loan, which was arranged by the car dealer. Had no problems with it.

Never had any other loan, so I did not know what equity meant at the time. 

Also during emails and deeds of my house I saw there was a problem with car parking availability. This annoyed me to the point of almost cancelling the purchase. 
Catalyst told me if I cancel, I would not get any funding from them for another house.

I was very angry about it and worried about it for weeks after moving in.

This is what I have from Catalyst. I thought my solicitor was giving me the Catalyst contract, but later got a letter saying they are keeping my paperwork. I could have it if I wanted. 

Asked people at work why this is. They said it is for safe keeping.

I was already moved into my house when I received that letter.

The first paragraph says what I should have done, but I thought it meant understand the following information below it.

Reading it now, I can see it is a information letter only.

This is what it says...

Equity Mortgages and Your Home

Please be aware that this is information only and does not form part of the mortgage agreement so it is not a legal document. You MUST read the mortgage agreement very carefully and make sure that you understand everything it contains as you will be bound by its terms. We recommend you get you own legal advice before you sign the mortgage agreement.

1. An equity mortgage is similar to a normal mortgage because the money you borrow will be secured against your home and you will have to make payments to the lender under the equity mortgage. The payments which you will have to make under the equity mortgage are listed at the end of this note. The fact that money is secured agains your home means that your home is at risk if you do not keep up payments under the mortgage.
2. An equity mortgage works by the equity mortgage lender doing a valuation of the home you want to buy to work out how much the home is worth. The equity mortgage lender will then fund a portion of the amount you have to pay for your home by a percentage which has been agreed with you first (please be aware that there are limits on the amount which the equity mortgage lender will fund value by).
3. For example, if the value of your home was £200,000 and the equity mortgage lender contributed £50,000 then you only contributed £15,000. This means the equity mortgage lender funded the price you had to pay by 25%.
4. In exchange for financing a portion of the value of your home the equity mortgage lender will have an equity mortgage against your home.
5. This means you will have to make interest payments to the equity mortgage lender every month and you will have to pay the equity lender some of the money you receive when you sell your home unless you pay back the equity mortgage lender before you sell your home.
6. The interest payments you will have to make to make the equity mortgage lender every month will be calculated by reference to the total value of your home at the time you bought it. To start with, you will have to pay a proportion of 1.75% a year on the total amount of that value. The proportion is calculated as a percentage of the total interest charge representing the proportion of amount by which the equity mortgage lender funded the initial purchase price. The amount you pay a year will be spread out over 12 months so you will pay a proportion of that every month
7. For example, if the value of your home was £200,000 then in the first year the total interest charge is 1.75% on £200,000 which is £3,500. Using the example above, if the equity mortgage lender funded the price you paid by £50,000 then you only contributed £150,000. This means that the equity mortgage lender funded the price by 25%. In the first year you will therefore have to pay 25% of £3,500 (the total interest charge). This is £875 or about £73 a month in the first year.

There is more if you want me to type it, I will.

MWT

The part that you have copied so far makes it clear that you would have to repay the equity loan if you sell the house, but is there anything in the rest of the letter that tells you that you would also have to repay the equity loan after 25 years or earlier if you repay the main mortgage in full...?

Mark_Lion

I thought the monthly payments I was making were coming off the Catalyst total, as well as the Nationwide total. 

This is what the letter says...
You must take out a standard mortgage with a different lender or you will not be able to take out the equity mortgage. If you ever pay off your standard mortgage you must also pay off your equity mortgage at the same time. You can pay off your equity mortgage before your standard mortgage.

Paying back the amount you borrowed becomes payable if and when you repay the first mortgage (unless there is a simultaneous approved remortgage).
Or on the 25th anniversary of the date you took out the equity mortgage. This means that you must pay off the equity mortgage within 25 years.
 

MWT

It would be interesting to see if @Deleted_User feels able to comment, but given what you have posted here, it is difficult to find anything wrong or unclear in the information you were given, and nothing appears to suggest that there was any repayment of the Catalyst loan through the monthly payments, but I would have expected you to have seen that information before agreeing to the Catalyst Equity Loan, and the letter afterwards should have been a repeat of information that had already been given to you...

Regardless, even though there was nothing to suggest that you were repaying the loan you formed that belief and behaved accordingly.

Your broker looks most likely to be 'on the hook' for any failings in their advice and your understanding of what the Catalyst product involved, do you perhaps have any emails between you and the broker that refer to Catalyst and information similar to that contained in the letter you have provided the extracts from... ?

[Deleted User]

I agree with MWT,  it feels like you have been given all the relevant information prior to agreeing to take out the equity loan.  Your lack of understanding is an issue but unless you can show that you made it clear you didnt understand and asked for clarification that wasnt forthcoming then i dont know how anyone would realise you didn't know what it was.

It seems clear to me but im in the industry so i can cut through the waffle a bit easier. 
The solicitor doesnt advise on any part of this, they have just dealt with the funding aspect and left the application up to other people (you and the broker).  This isn't different to current help to buy arrangements.

It remains whether the broker is liable for your lack of understanding but some may argue you had all the relevant information and if you didn't raise concerns yourself then no one else can read your mind.   The best argument is if you would class as clearly financially vulnerable and this wasnt picked up by the broker.  (if someone who is dyslexic or something wants a mortgage i have to evidence the extra care taken to confirm understanding).  Again, given how long ago im not sure of relevant regulations at the time 

Mark_Lion

Checked my emails. Nothing detailing Catalyst conditions.
Only 1 email of me asking broker to confirm the full amount I was able to spend to buy a house.

This was his reply...

Thu 30/04/2009 12:30

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hi mark, sorry for the delay .

 

the 185000 was the maximum purchase price, as it accounted for your cash being used as well , and then the maximum from catalyst was added into the equation too.

 

sorry this is a few days old now

 

john

MWT

Thanks for checking the emails Mark, doesn't look like there is anything helpful there.

I'm stuck on the same points as Deleted_User, the details they provide are clear, and carefully broken down into manageable statements and would have been set out like that in the documents you had to sign at the time.

It would have been helpful if you had a copy of what you signed, but it doesn't look like they were trying to hide anything or mislead you, but somehow you didn't understand what was being described in the documents, and did not apparently ask anyone to explain it in more detail.

Not easy to make a case for a complaint based on what your got so far...

Can you recall where you signed the Catalyst loan documents?

Did you have an opportunity to read them properly and ask questions before signing?