Jan/100
Key repossession ruling opens door to mortgage mis-selling complaints
A remarkable ombudsman victory for a householder who had his home repossessed after being mis-sold a hefty mortgage, could set a precedent, preventing others from losing their properties as the recession bites, lawyers say.
Many borrowers who face handing back the keys to their homes could be helped by rules covering “suitable advice”.
Andrew Brown (not his real name) struggled to repay his mortgage but subsequently took his mis-selling case to the Financial Ombudsman Service, and has now won. Despite turning to the FOS late on and being repossessed, he will receive compensation - while other borrowers who begin cases at an earlier stage than he did might well be able to save their homes too.
A housing association tenant, Brown had the valuable promise of a rent fixed for life. However, a mortgage adviser persuaded him to buy the property and failed to consider “what would happen when the attractive discounted rate [set up on that mortgage] ended”, according to an FOS spokeswoman.
Brown was repossessed and had to move; he then lodged a complaint with his mortgage adviser and ultimately brought the case to the FOS.
Industry specialists believe more claims of this kind are now likely to emerge.
There appear to be many cases of people being mis-sold mortgages they could not afford.
A Citizens Advice report entitled Set Up to Fail, on the sub-prime lending market in 2007, found the charity’s repossession clients had often found themselves with “inappropriate and unaffordable” mortgages and secured loans, and that people buying council houses received “particularly poor advice”.
One case it highlighted concerned a couple with a disabled child in south-east Wales who were persuaded to take a second mortgage on their home. The loan wiped out their equity and meant £1,300 - 87% - of their £1,500 monthly income went on mortgage repayments.
The CML accepts the rulebook can be invoked by consumers. “The MCOB rules are there for a reason: to protect consumers,” says spokeswoman Sue Anderson.
In 2007, Cash highlighted how cold-callers were using dodgy selling tactics to convince social housing tenants to exercise their “right to buy” and saddle these low-income homes with inappropriate mortgages.
Although the ombudsman found in Brown’s favour, the issue remains complicated. The FOS is charged with restoring people, as far as possible, to the situation they would otherwise have been in - and that is not straightforward in circumstances such as these.
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