A HOMEOWNER S GUIDE TO MIS-SOLD MORTGAGES

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1 A HOMEOWNER S GUIDE TO MIS-SOLD MORTGAGES

2 HAVE YOU BEEN SOLD THE WRONG MORTGAGE? Prior to the credit crunch of 2007, the number of mortgages sold in the UK was at a record high. Most of these were correctly sold, with many of those customers being given good and accurate advice by lenders and brokers Unfortunately, there were also significant numbers of unscrupulous lenders and brokers who sold mortgages that were more financially beneficial to them and did not always have the best interests of the customer at heart. Today, this mis-selling is affecting large numbers of the population who have suffered financial loss, had to re-mortgage to get a more affordable interest rate or become mortgage prisoners who cannot afford or get out of mortgage deals that they should not have been sold in the first place. This guide has been put together to help you understand whether or not you were mis-sold your current or previous mortgage and how to make a claim if you were. We hope you find it useful. If anything is still unclear, you have a question we haven t covered or you would like to speak to an expert, just get in touch. 2

3 WHO ARE THE MORTGAGE CLAIMS BUREAU? The Mortgage Claims Bureau Ltd is a claims management company. We manage mortgage mis-selling complaints and pride ourselves on providing a comprehensive service that identifies whether you have a valid mis-sold mortgage claim or not. If we find that you do, we structure a complaint on your behalf against the lender or broker that sold you the mortgage. The specialist nature of this service means that we do not take claims applications directly from homeowners, but ask that you submit your claim application through one of our partner companies who distribute this guide for us. We will then work with them to obtain the maximum possible refund for you. MAKING A CLAIM WILL NOT AFFECT YOUR CURRENT MORTGAGE WHAT IF IT WAS MY FAULT? If you were advised to take out a mortgage it was not your fault if the mortgage was inappropriate. Under the FSA guidelines, the broker or mortgage lender has a duty of care to advise you of the risks as well as the benefits in taking out the mortgage and to fully explain what mortgage products were available at the time - enabling you to make an informed decision on whether or not to take their advice. Likewise, they had to inform you if taking the mortgage was in your best interests given your financial circumstances. WHAT IS A MIS-SOLD MORTGAGE? The Financial Services Authority (FSA) set out clear guidelines and rules on how mortgage lenders and brokers must act when advising you. A breach of these rules either through poorly advised mortgages, or deliberate malpractice that has caused you financial loss, is grounds for a claim. HOW WILL A CLAIM AFFECT MY CURRENT MORTGAGE? Making a claim will not affect your current mortgage or your rights as a consumer. The Financial Ombudsman Service rules are set out to protect your rights and prevent companies from selling you inappropriate products. It is your right to question the advice you received without discrimination from your existing lender or broker. These rules exist to safeguard your finances, and prevent your lender from treating you any differently as a result. They cannot call in the mortgage, change the interest rate or penalise you in any way because you have made a claim. In fact in some situations your lender may even reduce the amount you owe as part of the financial redress if your claim is upheld! 3

4 HOW DO I KNOW IF I HAVE A VALID CLAIM? There are many different circumstances where mortgage mis-selling may have occurred. If you can answer yes to just one of these three questions your mortgage may have been mis-sold: 1 2 Are you currently three months or more in arrears with your mortgage? Have you changed your mortgage provider or re-mortgaged more than once in any four year period since October 2004? 3 Did you take out a mortgage with one of the following lenders before October 31st 2004? Amber Home Loans Birmingham Midshires CHL Edeus First National Future Mortgages G-Mac GE Money Igroup Kensington London Mortgage Company Mortgage Express Mortgage Trust Mortgage Works Oakwood Home Loans Paragon Pink Home Loans Preferred Mortgages Rooftop SPML (Southern Pacific) The Mortgage Business (TMB) The Mortgage Lender OUR SPECIALIST KNOWLEDGE MEANS WE KNOW THE TYPES OF LENDER AND MORTGAGE MOST LIKELY TO HAVE BEEN MIS-SOLD DID YOU ANSWER YES? If the answer to any of these questions is yes, then it s time to take action by completing an application form and letter of authority. Your signed letter of authority will allow us to collect much of the information we require from your lender or broker on your behalf, however the more you can tell us about your mortgage on your application form at this stage, the better. If any of the scenarios opposite apply to you, please mention this in the any other information section on the application form. 4

5 DO ANY OF THE FOLLOWING SITUATIONS APPLY TO YOU? YOUR MORTGAGE RUNS PAST YOUR RETIREMENT AGE This applies when your mortgage term runs beyond the age you told your adviser you wished to retire. He or she should have been satisfied that you were able to afford your monthly payments, even if the term runs beyond your retirement. If you were/are in the fortunate position to have sufficient retirement plans, your adviser should have obtained evidence of these from you and put a copy in your mortgage file. YOU CONSOLIDATED OTHER DEBTS INTO YOUR MORTGAGE On the surface, debt consolidation looks like a positive thing. If you are paying a higher rate of interest on a car loan, than on the mortgage you are being offered, why not consolidate? The problem arises when you look at the cost over the long term. For example, if you have a five year car loan consolidated into a 25 year mortgage then you will pay interest on that finance for 20 years longer than you would have done. This would put you in a worse position than if you had a higher interest rate initially and is therefore considered bad advice. YOU WERE IN EMPLOYMENT, BUT WERE ADVISED TO TAKE OUT A SELF-CERTIFIED MORTGAGE Self-cert mortgages are offered when you cannot show proof of your regular monthly income (e.g. if you are self-employed). The interest rate is usually higher due to the risks involved. Often if you could have proved your income, you could have used a cheaper lender. YOU TOOK OUT AN INTEREST-ONLY MORTGAGE WITHOUT SETTING UP A WAY OF REPAYING THE MORTGAGE AT THE END OF ITS TERM Your broker should have ensured that a suitable means to repay the capital on an interest-only mortgage was in place at the time of advice e.g. a pension or an ISA. Some brokers recommended interest-only mortgages with no repayment vehicles, so monthly repayments appeared lower because they knew a full repayment mortgage would be too expensive. It is not acceptable for them to have stated that you could sell the house to repay the capital, because house prices may decrease as well as rise over your mortgage term. YOU PURCHASED YOUR HOME UNDER THE RIGHT TO BUY SCHEME Right to buy schemes are used when you want to purchase your council house. On seeing the discounted selling prices, some mortgage brokers added on excessive set up fees. These fees are often hidden, so you are unaware that they had been added to your mortgage. 5

6 THE PROCESS Making a claim with us is really straightforward we deal with everything for you. Here s an overview of the claims process, so you know what s going on behind the scenes. GETTING STARTED 1 Complete the application form, sign the letters of authority and return your claim pack to the address on the bottom of the application form. INITIAL ASSESSMENT 2 One of our qualified claims managers will carry out an initial assessment. IN-DEPTH ASSESSMENT 3 Your mortgage paperwork is obtained from your broker and lender and a detailed audit is carried out. SUBMISSION OF YOUR CLAIM 4 At this stage we will suggest the most appropriate route for your claim. If your claim is processed through one of our 3rd party specialists they will ask you to sign a fresh contract and terms and conditions with them, (but the fee you pay remains the same). Your claim will be submitted to the broker, lender or Government compensation scheme on your behalf, and pursued through to completion. This is the longest part of the process, but you will receive regular updates until your claim has been completed. 6

7 FREQUENTLY ASKED QUESTIONS HOW LONG WILL MY CLAIM TAKE? The average claim takes seven to ten months but can vary on an individual case by case basis. HOW MUCH WILL I RECEIVE IN REDRESS? The redress you are paid is unique to you and our legal experts will assess your personal compensation amount on a case by case basis. HOW MUCH WILL IT COST? To investigate, we do not charge an upfront fee. If your claim is successful we will charge 25% + VAT from the monies that you are awarded. In the vast majority of cases there are no other costs involved. The only exception is if your claim is very high in value and is against a broker that has ceased trading. In that instance we may suggest that a forensic audit report is written by one of our 3rd party specialists. They will charge you a discounted price of 199, which will be additional to our fee. This will be discussed with you in advance and will only proceed with your permission. WHAT DO I NEED TO DO? All you have to do is complete the application form, sign the letter of authority and return them to the address on the bottom of the application form. JARGON BUSTER ARRANGEMENT FEE Charged by the broker and sometimes the lender, for arranging your mortgage. Brokers often receive a fee from you and your lender. BROKER The individual or company that sold and packaged your mortgage on the lender s behalf. CAPITAL REPAYMENT A method of repayment that ensures that you pay back the interest and the original loan capital and guarantees your mortgage will be paid off at the end of the term. ERC Early Repayment Charge what a lender may charge if you pay your mortgage back before your existing mortgage deal ends. INTEREST-ONLY A mortgage where you only pay the interest on your loan, and so don t reduce the original amount you borrowed. A separate savings plan should be in place to pay off the original loan amount, in full, at the end of the agreed mortgage term. LENDER The company that owns, underwrites and administers your mortgage. MIS-SELLING An advised sale that does not meet the requirements for suitability, or the know your customer obligations. RIGHT TO BUY A mortgage purchase scheme allowing council tenants to buy their homes at a cheaper rate. TERM This is how long your mortgage runs for, and is normally between five and thirty five years. 7

8 Tel: The Mortgage Claims Bureau, 71A High Street, Littlehampton, West Sussex BN17 5AG The Mortgage Claims Bureau is a trading style of Robin Hood Refunds Ltd. Robin Hood Refunds Ltd CRM is regulated by The Ministry of Justice in respect of regulated claims management activities. Their registration is recorded on the website Registered Office: 71A High Street, Littlehampton, West Sussex BN17 5AG