HSBC pull out of mortgage 2 days before completion

milomilosh · 12 June 2019 at 8:55PM

Hello

I have got myself (or have at least been put) into a bit of a pickle. And any comments or strategies moving forward are greatly appreciated!

I had an offer accepted on a house in February which was in a pretty poor condition. Initially I discussed options with my mortgage broker for a bridging loan to buy the property, but as I was tied into a fixed term mortgage with HSBC on my current flat (which would incur early repayment penalties) we decided to see if they would lend on the property. From here the timeline is as follows:

April 4th - Valuation carried out on property on behalf of and arranged by HSBC
April 16th - HSBC issue mortgage offer to myself/my broker

June 7th - Exchange of contracts (both for the sale of my flat and purchase of new house)
June 14th - Completion Scheduled

But now two days before completion HSBC are saying that the valuation report has deemed the property un-mortgagable and that they will not lend on it. HSBC are saying they did not receive the valuation report until June 4th (and have not raised this as an issue until today!). This has obviously caused a huge amount of stress and means that we will be unable to complete the purchase.

At this stage we think it will be best to continue with the completion of the sale of our flat as to not incur any penalties from this side and ensure we have some cash going forward.

- How can the bank give a Mortgage Offer without a positive valuation?

- Am I protected in any way against costs/penalties I will incur as a result of being unable to complete the purchase (at this stage around £20,000+)?

- Has anyone had any similar experiences? Both my solicitor and mortgage broker have said the situation is ludicrous.

Any help is greatly appreciated.

Thanks

elsien · 12 June 2019 at 8:59PM

Any idea of the reason it has been assessed as unmortgageable and is there a mechanism to challenge that?

muhandis · 12 June 2019 at 9:08PM

What does the mortgage offer say about the valuation?

For instance, on my Halifax mortgage offer, under supplementary information, they confirm that "Your property valuation was completed by a surveyor."

A Barclays offer says "A valuation has been undertaken for Barclays purposes only at a reduced fee and therefore no copy will be supplied to the applicant." and "Value of the property to prepare this Offer: £xxx,xxx.00"

Does the HSBC offer say anything about it being 'conditional upon outcome of valuation' or anything to that effect?

milomilosh · 12 June 2019 at 9:48PM

Within the Mortgage Offer's special conditions it states that the offer is "subject to valuation". Beyond that there is no mention of the valuation.

The reason it has been assess as unmortgagable will be in the valuation report but HSBC are apparently very cagey about anyone outside HSBC talking to the valuation team. Hopefully my solicitor and mortgage broker will be able to make inroads tomorrow and find out more; It's a Victorian property so the issues could rage from damp to more complex structural issues..

muhandis · 12 June 2019 at 10:52PM

Setting aside HSBC's inordinately long delays, I don't understand how the conveyancer permitted the client to exchange without confirmation about the valuation when the offer mentions that its "subject to valuation".

I hope you find a way to minimise your losses.

milomilosh wrote: »

Within the Mortgage Offer's special conditions it states that the offer is "subject to valuation". Beyond that there is no mention of the valuation.

LRmortgage · 13 June 2019 at 5:58AM

I too am very surprised that the Solicitor allowed you to exchange contracts with that condition in the offer.

Did they raise this with you before exchange? Did you tell them to go ahead anyway?

If they didn’t raise it with you, I’d suggest they are somewhat liable here. Obviously I don’t know the full details, but as a broker I am surprised that this has happened and would be asking questions of the Solicitor.

silvercar · 13 June 2019 at 8:22AM

Did you have a survey or home buyers report? If so I would be looking at that and asking whoever undertook that to speak to the valuation department at the lender.

I am also shocked that your solicitor allowed you to exchange without explaining this risk. Usually they make sure that they have a copy of the mortgage offer before exchange.

Are you sure you have actually exchanged, rather than just having signed the papers ready to exchange?

kingstreet · 13 June 2019 at 8:39AM

When you apply directly to HSBC is has a two tier system.

First it underwrites the individual and issues an offer to lend, subject to an acceptable valuation.

Then it carries out the valuation on the selected property and issues a full formal offer if it's acceptable.

It seems that someone has mistaken the former for the latter.

muhandis · 13 June 2019 at 9:26AM

milomilosh wrote: »

- Has anyone had any similar experiences? Both my solicitor and mortgage broker have said the situation is ludicrous.

I was under the impression that the OP used a broker?

kingstreet wrote: »

When you apply directly to HSBC is has a two tier system.

First it underwrites the individual and issues an offer to lend, subject to an acceptable valuation.

Then it carries out the valuation on the selected property and issues a full formal offer if it's acceptable.

It seems that someone has mistaken the former for the latter.

davidmcn · 13 June 2019 at 9:44AM

kingstreet wrote: »

When you apply directly to HSBC is has a two tier system.

First it underwrites the individual and issues an offer to lend, subject to an acceptable valuation.

Then it carries out the valuation on the selected property and issues a full formal offer if it's acceptable.

It seems that someone has mistaken the former for the latter.

Would they have instructed solicitors at the first stage? I'm not particularly familiar with HSBC, but in my experience it's rare for lenders to issue instructions to solicitors which are still conditional on underwriting/valuation points.

Solicitors will usually view the mortgage offer as the lender indicating that they're ready to lend subject to the solicitor signing off on their side. Obviously the solicitors should be checking there's nothing buried away in the offer, but the lenders aren't exactly helping matters if they fail to flag up unusual conditions.

kingstreet · 13 June 2019 at 9:59AM

We don't do a lot with HSBC so I was relying on my earlier knowledge of the direct route. AFAIK via the intermediary route, it works the usual way with offer issued after valuation.

Seems very odd.

HSBC pull out of mortgage 2 days before completion

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free