Companies currently marketing themselves as PPI claims experts are reporting that they will aim their sights on the mortgage market, and particularly brokers, whom they believe have sold interest only and sub-prime loans when their clients would have benefited from alternative options. With the interest only method consistently in the public eye at present, due to pressures from the FSA to restrict lenders offering the option on a wider basis, the companies believe that many people will be keen to find out whether they have a valid claim.
With the PPI claims sector gradually dwindling, claims management companies are now actively seeking an alternative source of income. Companies such as Money Boomerang are targeting brokers who they claim have sold clients costly sub-prime and self-certified mortgages, when these clients could have been eligible for a mainstream mortgage if the broker had researched the market sufficiently to locate an alternative.
In addition, the interest-only proposition is under the spotlight, as the companies plan to pinpoint brokers who they believe did not fully advise their clients that they must also take out a means to repay the capital back during the term of the loan. This issue has particularly been brought into focus of late, as reducing house prices have prevented some borrowers from refinancing or selling on their homes in a bid to repay their debt, due to a lack of equity in the home.
The managing director of Money Boomerang, Craig Lowther, said: “Just when the banking ship appeared to have righted itself following the PPI scandal, it has hit another iceberg. And once again, only a fraction of the problem’s huge scale is visible above the surface. With the banks’ credibility holed below the waterline once more, what started with a trickle of claims could soon be a torrent.”
In response to the suggestions of poor practice, The Council of Mortgage Lenders has rebuffed the belief that thousands could benefit from allowing claims companies to take on their case. On behalf of the body, a spokesperson said: “The information provided to customers as part of the mortgage sales process is designed to minimise the risk of mis-selling, and protect consumers. With around 11 million mortgages in existence, problems will occasionally arise, but there is no evidence of widespread mis-selling – when people suffer difficulties, they are usually because of changes in their circumstances rather than problems with the original mortgage.
“As with any financial product, if a consumer believes they have a legitimate complaint about their mortgage or how it was sold, the Financial Ombudsman Service offers a completely free and fair service that can provide redress if appropriate.”
Many within the mortgage industry also note that firms like Money Boomerang are not non-profit organisations, such as the Financial Ombudsman Service, and will charge 25 per cent of all successful claims made. And many brokers in the market believe that claiming against interest only based loans in particular will not be the simplest process for any interested parties.
Simon Butler, of Contractor Mortgages Made Easy, said: “It is fair to say that some mortgage holders who have been sold a sub-prime or self-certified mortgage may have a case, as a broker with a decent whole of market background would know which mainstream lenders offer leniency where others may not. However, when advising on interest only loans, advisers must also document and make it clear that the client taking such a loan has fully understood that they must have a repayment strategy in place to pay back the funds.
“The case was previously highlighted with the raft of endowment mortgages that were mis-sold during the ‘80’s and early 90’s. In that instance, many brokers had a case to answer, due to guarantees of definite repayment were being provided where they should not have been. But since then, due to tighter FSA regulation and firmer underwriting from lenders themselves, any prospective client looking for an interest only loan will clearly be told that they should only take on this method with a firm and robust repayment strategy in place. It’s hard to believe that everyone holding this type of loan could claim otherwise.”
Article by: Simon Butler, Operations Manager at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager
Tel: 0844 44 88 80