Coming up: mortgage misselling scandal

HelpWhereIcan

Is a potentially big issue imho.

No matter what many brokers on here may do, there will be a significant number of advisers out there who will not be able to show that they carried out a full analysis of the customer's income and expenditure ie down to the amount spent on utilities etc.

Most generic fact finds out there do not insist that this information is completed and you may be surprised at the number of brokers who do not issue a comprehensive reasons why letter (rwl). Anyone relying on the likes of sourcing systems and most back office software to produce their rwls may not have sufficient coverage of the customer's affordability ie how much spare did they have, how did you calculate it, how much did they say they could afford pm and how does this compare with the payment on svr?

dunstonh and I are part of the same network and he will confirm that they have recently been focusing on this in a big way. I have had my issues with things they have advised us to do (they are not overly prescriptive) in the past, but have to admit that everything they have warned against has either come to pass or looks like it will soon.

Any broker taking this lightly does so at their peril - especially in the face of a difficult economic climate and claims firms constantly looking for new income streams.

HelpWhereIcan

UK007BullDog wrote: »

I have no control over the person leaving me after they got their mortgage. They could go crazy and borrow on CC's, loans and hire purchases.

Interestingly, my network has suggested that the onus may be put on the adviser to determine whether the person's financial history will dictate whether this will happen.

Obvious in the case of an adverse credit client, but consider the person who comes to you to consolidate £40,000 in credit card and other unsecured debt.

Does the fact that they have run up this level of debt already not act as a warning that they may just use the newly freed up income (and credit facilities) to run up the same level of debt again?

If we want to be seen as professionals we have to start saying no more often and documenting when a customer acts against your advice - not only on the file but in all correspondence with the client (rwls etc).

We should start to look at other ways of helping clients in debt such as unsecured broking, snowballing advice, debt management, IVAs etc etc rather than just looking to consolidate debt.

EdInvestor

http://www.financial-ombudsman.org.uk/news/speech/CML_TB.html

FOS outlines policy on mortgage misselling

In assessing complaints, I hope that financial businesses will look carefully at whether they have treated the customer fairly. This is not just about considering whether the products have been fairly and clearly described. It is also about considering whether the business did enough to take account of the individual circumstances of the particular customer. There are some basic steps that firms should have taken that would assist in their handling of complaints. The FSA’s rules require firms to put in place a responsible lending policy and to keep an up-to-date record of that policy:

"A mortgage lender must put in place, and operate in accordance with, a written policy setting out the factors it will take into account in assessing a customer's ability to repay."

Where is your written policy? Have you retained the copy from the time the mortgage was agreed? Can you demonstrate that the policy was reasonable and that you applied it in the particular case?

dunstonh

dunstonh and I are part of the same network and he will confirm that they have recently been focusing on this in a big way. I have had my issues with things they have advised us to do (they are not overly prescriptive) in the past, but have to admit that everything they have warned against has either come to pass or looks like it will soon.

Have to be fair to the network, they are pretty good at warning on issues and introducing ways to protect the adviser. Problem is that some never listen.

As an IFA I am used to documenting everything but that is new to many mortgage advisers and from what I understand, it hasnt been done very well with quite large numbers.

Remember that more endowments pay out redress because of missing or incomplete documentation than actual complaints upheld due to mis-selling. The network complaints dept have said before that actual mis-sales are about 25 in 1000 complaints but a further 225 complaints are not upheld but result in redress due to missing documentation or poor quality documentation that cannot support the adviser. It is that large number of poor quality client files that encouraged many of the claims companies to put in complaints whether there was a mis-sale or not in the hope that they would get lucky. Mortgage advisers need to beware that claims companies dont turn on them.

UK007BullDog

Totally agree with what has been said. I find as a broker one does more intensive fact finds than as an adviser at a bank from own experience.

I do not agree 100% with the future affordability, because there is no way we can see into the future on affordability. Especially not if someone takes a 4, 5 or even 10 year deal. I think it should be handled by giving us a fixed rate, say 2% or 3% on top of the rate the customer gets. If they can then still afford it I cannot see a problem. But if the rates go up to 10% or more then its just tough luck. We can only be so much nannied. People also need to take responsibility and need to realise what is going on around them and plan for their future.

If the subprime claims come on I cannot see anyone doing those as it is just too risky for the broker. The broker might then charge huge fees to cover all the cost incurred to safeguard their backsides in case a claim like that comes in.

My OH is keeping a tab on things by reading the mortgage papers and he is asking me if this is all worth it. All this hassle and costs only to be kicked by the customer in the end. And I do feel at times why bother.

homer_j_3

I do not know where to start with this one to be honest.

I have tried writing a response for the last 20 mins and none seem to make all the points that I want to.

There will be carnage if the FSA open up and invite complaints of this nature. They are understaffed and have had a budget deficit with all the projects that they are doing.

When this happens, there will be lawsuits going in against the lenders too I bet.

UK007BullDog

Total carnage. And no one will be offering any advice anymore.

The broker will put 2 to 3 mortgages in front of the customer and say "chose the one you want".

In the recommendation letter its: "You chose the xyz from that lender because you....."

Or there will be just super brokerages and the small one person band (like me) will disappear.

Guy_Montag

I've said in the past, & this just goes to show, I should have run up the biggest, self-cert, IO, teaser-rated, 100% mortgage I could get my grubby hands on; then, when it all went pear-shaped, complained to the FSO & taken legal action claiming my lender had a duty of care blah blah blah.

Absolving people of all personal responsibility for any bad decision they make doesn't make this country a better place to live in.

Trollfever

Do I hear the sound of paper shredders?

UK007BullDog

Trollfever wrote: »

Do I hear the sound of paper shredders?

Not really as one cannot do that. If one does not keep files for at least 7 years that would be an instant disqualification and an expulsion by the FSA.