We asked our experts, if they expect mortgage misselling to be the next wave of claims to hit mortgage advisers?
This week’s commentators include:
Sally Laker, managing director of Mortgage Intelligence Holdings says where there’s muck there’s brass but good documentary evidence will be key to your defence
David Copland, head of The Mortgage Alliance and director of mortgages for LSL Group, financial services division says feel free to dismiss any claims if you’re standing on solid ground
Craig Lowther, managing director of claims management company Moneyboomerang says self-certification, interest-only and sub-prime are all on his firm’s radar so get ready because the claims are on their way
Sally Laker, managing director of Mortgage Intelligence Holdings:
To coin an old expression ‘where there’s muck there’s brass’ pretty much sums up my opinion of claims management companies. Their reckless behaviour has created a ‘might be able to get some money back’ culture, not to mention hounding people at home by countless phone calls.
They are certainly gearing up to cash in on the new chaos they can cause with interest-only because they can play on the consumer’s ability to remember word for word what was explained to them at the time they took out their mortgage. Everything will be reliant on the accompanying documentation when it comes to the ability to claim.
My view is that we must push for stronger regulation of claims management companies (CMCs) as they are creating havoc and running up enormous bills for intermediaries who ultimately end up paying for spurious claims that are just non starters. My concern is that CMCs will be intent on creating the next tsunami of claims because of the sheer numbers associated with interest-only applications.
Years ago, interest-only had to be accompanied by an assigned repayment vehicle but that was later dropped as a requirement (we all know why) but no-one questioned it from a regulatory point of view. Unfortunately, in our culture of retrospective regulation, the ultimate cost is enormous.
David Copland, head of The Mortgage Alliance and director of mortgages for LSL Group, financial services division:
Mortgage mis-selling could very possibly become the next mis-selling scandal – but I hope not. However, given the claims culture that is developing in this country, if there is another mis-selling scandal it will be driven by the claims companies and by the SARS rules that enable claims companies, with a signature from the client, to access every file on a customer held by either a bank or a broker. This is also enabled by the ‘no win, no fee’ culture. If the no fee bit was stopped then it might reduce this.
If a mortgage mis-selling scandal were to occur the Financial Ombudsman service could be inundated with bogus complaints, especially if the proposed changes to the number of free complaints a firm can have adjudicated is raised from 3 to 25.
To guard against any potential mis-selling charges, mortgage advisers need to be confident that they have a robust sales stance, well documented processes and everything on file; if they have these measures in place and have had for a number of years, they can then dismiss any allegations straight away, it is those who don’t have robust processes and who have flaky documentation who are most at risk.
Craig Lowther, MD, claims management company MoneyBoomerang, said:
Having conducted research, we are confident there has been a significant amount of mortgage mis-selling in recent years – both by brokers and in-house advisers at banks.
We believe that a vast number of people who took out interest-only loans were not subject to adequate checks on the separate repayment vehicle that they should have had in place, and in some cases were not aware of the need for such a vehicle.
Many will now be facing massive debts come the end of their mortgage term.
However, sub-prime mortgage mis-selling could be even larger than interest-only, as we believe many borrowers were placed into sub-prime loans by brokers when they could easily have got a cheaper mortgage on the high street.
Self-certification is another area we will be focusing on. We believe that many people who did not fit the criteria for self-certification were advised to take out these mortgages. Why?
Likewise, we believe that many people who remortgaged to consolidate their debts but were never told by the broker or adviser that this would cost them more in the long run. And these examples only scratch the surface.
I expect the number of people pursuing mortgage mis-selling claims to start slowly and then to snowball. The total value of claims could be close to that for PPI.
Clearly a case will have to stand up but we believe we will have the material to ensure this happens.
