Did one or more of the following happen to you when you were being advised about your mortgage during the sale process?
- Was it suggested that you applied to a specific lender for “speed”?
- Did the correct process for the mortgage sale take place?
- Were you provided with an Initial Disclosure Document by your mortgage adviser?
- Were you provided with a copy of the mortgage Fact Find Document by your adviser?
- Were you provided with a copy of the Key Facts Illustration by your mortgage adviser?
- Was regular overtime, commission or bonus payments stated as being guaranteed?
- If you were self employed, did the stated income figure match those notified to HMRC or was it suggested that a different figure be noted?
- Were you advised to go down the self-certification route when there was proof of sufficient income to qualify for the mortgage?
- If you were re-mortgaging to consolidate debts, were you advised of the additional costs as a result of this by extending your repayment period?
- Were you advised to change the purpose of the remortgage application to fit a lender’s criteria?
- Did any minor adverse credit that you might have prevent you going with a ‘High Street’ type lender or were you recommended to a so-called ‘sub-prime’ lender?
- If you were advised to take an interest-only mortgage, were you made aware of the need to have a repayment vehicle in place to repay the capital debt at the end of the mortgage term?
- Were you contacted to change your mortgage by telephone by a company ‘out of the blue’ or by an adviser you already knew?
- If you were contacted, had you given them your permission to call?
The monitoring of mis-sold mortgages currently lies with the Financial Conduct Authority. It has the power to fine, suspend and even ban brokers that do not have tight controls in place, or didn’t treat customers fairly under the very strict rules of legislation called the Mortgage Code of Business (MCOB) and could not ensure the suitability or affordability of a new mortgage to its customers.
What constitutes a mis-sold mortgage?
Mortgage advice given to consumers by advisers must comply with the statutory principles of Treating Customers Fairly (TCF). This aims to help customers fully understand the features, benefits, risks and costs of the financial products they buy. It also aims to minimise the sale of unsuitable products by encouraging best practice before, during and after the sale.
The legislation makes the following very important statement – “A firm must pay due regard to the interests of its customers and ‘treat them fairly'”.
What might constitute a mis-sold mortgage arranged for you? The following are just examples:-
- The broker placed the mortgage with a lender that paid him the best commission (this is called a procuration fee) when a more suitable product was available elsewhere and probably at a cheaper rate
- Borrowers who are advised to self-certify their incomes, possibly to ‘fast track’ their mortgage application when they qualify for a (cheaper) full status product
- The broker failed to provide an Initial Disclosure Document at the start of the mortgage interview. This details the sort of mortgage advice they can give and whether they can recommend products from all lenders or from just a limited ‘panel’
- The broker failed to supply a copy of the Key Facts Illustration that must include the financial details of the recommended mortgage so the borrower can make an ‘informed choice’. This will include the initial and future (anticipated) interest rates, the current and future (anticipated) repayments, fees charged and early repayment penalties (if any) etc
- No available records are available of the sale/advice process
- The broker has failed to take due care in assessing the borrower’s future ability to pay the mortgage after the initial rate expires. This is referred to as ‘payment shock’
- Self-employed applicants who were advised to take a mortgage term beyond retirement with no ‘real’ means to repay
- Inclusion of State Benefits currently received that might not be guaranteed in the long-term
- Omitting some debts when assessing the borrower’s ability to pay the mortgage. These are usually unsecured debts i.e. loans, credit cards etc
- Lack of clear advice on having a repayment plan in place to repay the mortgage at the end of the term. An interest only mortgage will not, by definition, repay the original capital debt, so what is the repayment method?
- Coercion into buying a mortgage product that was inappropriate for the borrower’s needs
- Inappropriately combining other financial products with mortgages in a way that makes them seem compulsory e.g. buildings & contents insurance, accident sickness and unemployment cover or mortgage payment protection insurance
- Not offering products from other lenders when a borrower’s true credit rating is established. This is called ‘cascading’ and should include product offerings from several lenders and not a more expensive one from the original one
- Offering mortgage products where the initial rating period (i.e. fixed, discount etc) does not suit the borrower’s individual circumstances
- Failure to offer borrowers a selection of mortgage products and not assisting in the decision process
- The broker charging excessive fees. The guidelines suggest that the broker should be remunerated in proportion to the amount of work needed to finally place the mortgage
- Failure to fully explain early repayment penalties (if applicable) when borrowers leave their current lender
- The broker recommending a full remortgage with a new lender when a further advance from the borrower’s current lender would have been more appropriate (and probably cheaper)
- Any suggestion on the part of the broker to omit details that might seem irrelevant but are important to the lender, e.g. omitting to disclose other occupants over the age of 17 living in the property which is to be mortgaged
There are many more breaches that constitute a mis-sold mortgage. The fundamental question that you need to ask yourself is “was I treated fairly by my mortgage adviser”?
Remember that TCF does not mean the same as brokers being ‘nice’ to customers or creating satisfied customers, it is a breach where there is failure by ‘a firm (to) pay due regard to the interests of its customers and treat them fairly’.
Mortgage Audits is a trading style of Personal Reclaims Ltd who is regulated by the Claims Management Regulator in respect of regulated claims management activities number CRM11179. Registration is recorded at www.claimsregulation.gov.uk. For all terms and conditions, complaints procedures and company information, see www.personalreclaims.co.uk.