Any experience with SAM (Shared Appreciation Mortgages)?

Ozret

I appreciate this is a very niche question. I'd never heard of a Shared Appreciation Mortgage (SAM) until about 4pm today when we discovered my In-Laws have one on their property.

Very simply, in the very late 90's Barclays and Bank of Scotland produced this product. It predated Equity Release and appears to have been totally unregulated. The product numbers were relatively low (@ 15k loans)

In essence the home owner could borrow 25% of the then value of their property. When the property was sold the Lender would get back 75% of the equity + the original loan. A very simple example is as follows:
1998 value: £50k
SAM loan: £12.5k
2024 value: £500k

Repayment: £375k + £12.5k = £387.5k

It was only offered to the over 60's, so we are looking at the Borrowers who are now in their 80's. This has arisen as Mrs Ozret is dealing with her Mother who has gone into full time care due to dementia and her Father who is effectively housebound at this time of year due to a serious breathing disorder. Should he have to go into care the intention was to sell the house to pay for his well being.

Having done a bit of research, it seems that there has been a number of successful legal challenges with a number of Solicitors now offering their services. We are going to look into this but it's early days. 

So, has anyone encountered this type of loan? Have you challenged it? Was it successful?

TIA

k12479

Ozret said:

...the home owner could borrow 25% of the then value of their property. When the property was sold the Lender would get back 75% of the appreciation in equity + the original loan.

The figures should look like:
1998 value: £50k
SAM loan: £12.5k
2024 value: £500k

Repayment: £337.5k + £12.5k = £350k

A recent thread here: https://forums.moneysavingexpert.com/discussion/6499573/shared-appreciation-mortgage#latest

Although most of these complaints smack of buyers, or inheritors, remorse more than anything else.

Ozret

k12479 said:

Ozret said:

...the home owner could borrow 25% of the then value of their property. When the property was sold the Lender would get back 75% of the appreciation in equity + the original loan.

The figures should look like:
1998 value: £50k
SAM loan: £12.5k
2024 value: £500k

Repayment: £337.5k + £12.5k = £350k

A recent thread here: https://forums.moneysavingexpert.com/discussion/6499573/shared-appreciation-mortgage#latest

Although most of these complaints smack of buyers, or inheritors, remorse more than anything else.

Thanks, I'll take a look at the link & for my adjusted figures

As for the complaints, the first and last don't apply. As for #2, we were aware that the In-Laws had taken out some sort of equity release but didn't know which type until today. We live a couple of hours away & there's no way they would ever have moved to be closed to us;  we've always known that the house would be sold to care for their needs in later life.

MWT

Ozret said:

Having done a bit of research, it seems that there has been a number of successful legal challenges with a number of Solicitors now offering their services. We are going to look into this but it's early days. 

Be cautious about anyone offering to take this case for you as there are a lot fake legal services out there offering to take on your case with no real intention of actually taking on the banks at all, they just want to have you on their books so they can raise money from unwise investors, or take the opportunity to sell you insurance against losing a prosecution, or just try to get fees out of you.

The only one I've seen that looks to be legitimate is https://www.teacherstern.com/ but their groups are closed to new members.

I'm not particularly hopeful that the pending legal action against BoS will be successful though, but until it is heard I doubt you will find anyone else willing to invest in legal action.

At its root, there is no reasonable case for mis-selling and the current court case is based on the claim that the terms are 'unfair', but the banks can also reasonably counter that the terms were fair in the context of foreseeable propriety value growth at the time and they were set as they were to balance the risk that there might not be enough growth in value to cover both the loan and reasonable interest. 

The fact that growth was much higher than expected is just a fortunate windfall, not an unfair contract.

Either way, the case against BoS is the one they are investing time in at the moment, not Barclays, and until there is a verdict I would be very distrustful of anyone claiming they will take action for you...

Both banks do have a hardship fund for those who are heavily impacted by these loans and it may be worth looking into that, but pay attention to the terms that go with accepting any payment from the fund...   

Ozret

MWT said:

Ozret said:

Having done a bit of research, it seems that there has been a number of successful legal challenges with a number of Solicitors now offering their services. We are going to look into this but it's early days. 

Be cautious about anyone offering to take this case for you as there are a lot fake legal services out there offering to take on your case with no real intention of actually taking on the banks at all, they just want to have you on their books so they can raise money from unwise investors, or take the opportunity to sell you insurance against losing a prosecution, or just try to get fees out of you.

The only one I've seen that looks to be legitimate is https://www.teacherstern.com/ but their groups are closed to new members.

I'm not particularly hopeful that the pending legal action against BoS will be successful though, but until it is heard I doubt you will find anyone else willing to invest in legal action.

At its root, there is no reasonable case for mis-selling and the current court case is based on the claim that the terms are 'unfair', but the banks can also reasonably counter that the terms were fair in the context of foreseeable propriety value growth at the time and they were set as they were to balance the risk that there might not be enough growth in value to cover both the loan and reasonable interest. 

The fact that growth was much higher than expected is just a fortunate windfall, not an unfair contract.

Either way, the case against BoS is the one they are investing time in at the moment, not Barclays, and until there is a verdict I would be very distrustful of anyone claiming they will take action for you...

Both banks do have a hardship fund for those who are heavily impacted by these loans and it may be worth looking into that, but pay attention to the terms that go with accepting any payment from the fund...   

Thank you for your words which are very informative.

For clarification, the SAM my In-Laws took out was with Barclays rather then BoS. It appears that Barclays only offered the product for 4 months (May - August 1998) before it was withdrawn. Although we can't prove it, it seems my F-i-L may have been 'targeted' as he celebrated his 60th birthday at the end of May; although it could be a coincidence.

MWT

Ozret said:

Although we can't prove it, it seems my F-i-L may have been 'targeted' as he celebrated his 60th birthday at the end of May; although it could be a coincidence.

This probably isn't of much use either way, as this product was only available to those over 60, so there is likely to be a strong correlation between reaching the required age and taking a loan in many cases.

Similarly, the lenders typically required the borrower to take independent advice before proceeding...

If they still have their original paperwork look for a witness signature by an IFA for example.

We should also remember that this product offered the borrowers a lump sum that they could not otherwise have accessed at that time so they were potentially attractive products to those who had a need for the cash and no other route to get it...

Ozret

MWT said:

Ozret said:

Although we can't prove it, it seems my F-i-L may have been 'targeted' as he celebrated his 60th birthday at the end of May; although it could be a coincidence.

This probably isn't of much use either way, as this product was only available to those over 60, so there is likely to be a strong correlation between reaching the required age and taking a loan in many cases.

Similarly, the lenders typically required the borrower to take independent advice before proceeding...

If they still have their original paperwork look for a witness signature by an IFA for example.

We should also remember that this product offered the borrowers a lump sum that they could not otherwise have accessed at that time so they were potentially attractive products to those who had a need for the cash and no other route to get it...

Thank you again for your input.

At present the F-i-L has no idea what has happened. The whole thing has come about due to the M-i-L going into care and us getting their finances into order. It's possible that the paperwork is in existence at the house but we will only be able to have a look once Mrs Ozret tells her Dad what we've discovered. Clearly is  going to be a difficult conversation to have.

shufflemonkey

I know that Barclays were also taken to court by Teacher Stern and ended up settling out of court which means Teacher Stern is now taking individual claims from Barclays customers to Barclays who were not part of that priginal case. Hopefully this will help the case that they are currently taking to BOS.

MWT

shufflemonkey said:

I know that Barclays were also taken to court by Teacher Stern and ended up settling out of court which means Teacher Stern is now taking individual claims from Barclays customers to Barclays who were not part of that priginal case. Hopefully this will help the case that they are currently taking to BOS.

If they are now taking individual Barclays claims that is good news, right after the out of court settlement they were not doing that and the group was closed of course. 

Certainly worth asking them at least, and finding out if there is any time-bar on the claims as I know that was also a concern a few years ago...

If they do take the case it may be relatively costly to pursue as an individual action.

Flugelhorn

Ozret said:

MWT said:

Ozret said:

Although we can't prove it, it seems my F-i-L may have been 'targeted' as he celebrated his 60th birthday at the end of May; although it could be a coincidence.

This probably isn't of much use either way, as this product was only available to those over 60, so there is likely to be a strong correlation between reaching the required age and taking a loan in many cases.

Similarly, the lenders typically required the borrower to take independent advice before proceeding...

If they still have their original paperwork look for a witness signature by an IFA for example.

We should also remember that this product offered the borrowers a lump sum that they could not otherwise have accessed at that time so they were potentially attractive products to those who had a need for the cash and no other route to get it...

Thank you again for your input.

At present the F-i-L has no idea what has happened. The whole thing has come about due to the M-i-L going into care and us getting their finances into order. It's possible that the paperwork is in existence at the house but we will only be able to have a look once Mrs Ozret tells her Dad what we've discovered. Clearly is  going to be a difficult conversation to have.

Just say that realise that they must have taken out a loan at some point and need to find the details of it to sort out all the finances - no need to tell him how much is owed.

Ozret

shufflemonkey said:

I know that Barclays were also taken to court by Teacher Stern and ended up settling out of court which means Teacher Stern is now taking individual claims from Barclays customers to Barclays who were not part of that priginal case. Hopefully this will help the case that they are currently taking to BOS.

Thank you for your  comments. Things have moved on since the weekend. We are aware of the new claim which Mrs Ozret is looking into. It appears there are a large number of people looking to proceed with some sort of action. At present we are considering our options