The FCA (Financial Conduct Authority) established the MCOB (Mortgages and Home Finance: Conduct of Business Sourcebook) as a means of governing the relationship between mortgage lenders and borrowers, and it applies to mortgages entered into on or after 31 October 2004.
For your clients, a mortgage is one of the most significant financial commitments they will ever make. When consumers agree to a mortgage, they rely on their broker or mortgage lender for transparency – to provide them with accurate, reliable and trustworthy information. When this does not happen, and mortgage lenders do not comply with FCA legislation, solicitors are obliged to protect their clients’ interests and seek compensation where appropriate.
The FCA lays out various rules in relation to the sale of mortgages – these rules examine the following:
In line with MCOB, non-compliance across multiple mortgage lenders has been uncovered, and thousands of mortgages are deemed to have been mis-sold. Solicitors across the country are now helping consumers litigate for duly owed compensation.
This type of mortgage often allows the borrower to make significantly lower repayments than they would with a standard repayment mortgage, however, borrowers are often unaware that the initial capital amount will become due and payable, in full, at the end of the mortgage term.
This often leaves them with an impossible financial decision; forcing them to sell the property to satisfy the terms of the mortgage or, in some cases, re-mortgaging the capital amount again.
When an interest-only mortgage is sold, the lender is supposed to ensure that the borrower has a credible repayment strategy in place, for both the interest and the capital amounts. If this was not done, the mortgage was likely mis-sold.
Interest-only mortgages are often sold alongside endowment policies –the idea being that, at the end of the mortgage term, the endowment policy will yield enough of a return to cover the capital amount still owed on the mortgage.
However, the risks associated with an endowment policy are sometimes not adequately explained to consumers. If the policy is linked to the stock market, for example, the returns are directly related to its performance. If the performance is not as positive as expected, the results could be catastrophic for the borrower.
It is part of the mortgage lender’s responsibility to ensure the borrower will be able to meet the terms of their mortgage. If the mortgage end-date runs past the borrower’s retirement age, this mortgage may be classified as mis-sold.
Lenders are required to confirm that the borrower can afford to repay the mortgage. With self-certification mortgages, this requirement is often overlooked by lenders to ‘fast-track’ mortgage applications. Borrowers are not required to prove their income and expenses, they simply had to declare that they could afford the mortgage repayments (even if they could not) and the mortgage would be granted; this forms substantial grounds for a mis-sold mortgage claim.
Many borrowers are unaware of the astronomical fees added to their accounts – these fees were added for various reasons; such as switching mortgage lenders or falling behind on mortgage repayments. These should have been explained at the beginning of the mortgage, but often, they were not. It is also worth checking the amount of commission that a broker has received for offering a particular mortgage product. Significant commission may mean that the broker was more ‘incentivised’ to recommend one product instead of another – it is worth examining if this product was indeed the best product for the borrower at the time.
Solicitors are being inundated with mis-sold mortgage enquiries, and analysing each client’s case tends to be a tedious process. As a result, large firms across the country have turned to companies like Atechy Legal to generate thousands of pre-qualified, litigation-ready, leads per week, and companies like Atechy Finance for case funding, allowing solicitors to focus on helping as many clients as possible, as quickly as possible.