Mortgages are loans obtained for the specific purpose of buying property, generally homes. Since they are complicated and not repaying them can result in one’s home being repossessed, there are very meticulous rules in place to protect the borrower. It is the duty of the mortgage adviser or lender to ensure that the borrower is given all the necessary and correct information regarding this loan. An honorable lender will only sell a mortgage once things like suitability, affordability, loan to value and client needs have been carefully assessed.
During the flourishing years, mortgages were sold at an unprecedented speed and frequently, without thoroughly checking the details. In the rush to make a profit, very rigorous compliances were ignored and numerous mortgages were sold. This resulted in mortgages being issued which should not have, which in turn lead to mortgage mis selling.
Sub-prime lending (giving loans to people who will find it difficult to keep up with the repayments, so a higher interest is charged by the lender to make up for the higher risk taken) became a common practice. These sub-prime mortgages frequently had annual percentage rate (APR) as high as 40%. Offering mortgages to borrowers who could not afford a normal mortgage with greater interest rates was obviously not going to end well. As a result, thousands of borrowers are now not able to meet their payments and are at risk of losing their homes.
Other than the main areas that lenders have to abide by, they are mandated by law to meet certain obligations when giving contracts to borrowers. If the below mentioned criteria is not met, a mortgage can become void, or unenforceable.
Supply a copy of the contract to the borrower within ten days of getting the credit.
Explain the cooling-off period clearly.
Explain that there are penalties for early settlement.
Explain the details of the repayment schedule.
Talk about any increase in interest which may become payable.
Claims
If a borrower feels that they were the prey, they can make a mis sold mortgage compensation claim and get money back. Some examples of mis sold mortgages include:
The mortgage was sold, while the borrower was on benefits.
Improper assessment to check if the borrower could afford the monthly payments.
Mortgage goes past the retirement age.
The individual borrower’s situation was incorrectly assessed
The commission paid to the broker by the lending institute was not explained.
A borrower who was a council tenant was advised to purchase their own council house without bothering to assess the financial condition.
Lender advised the borrower to take self-certification mortgage without the borrower being self-employed, just so more money could be borrowed.
Broker had to be paid a percentage of the loan as fee separately.
The mortgage was within the sub-prime borrowing or fell below adverse credit.
The mortgage was an endowment mortgage and no warning of risks involved was provided regarding how premiums would be invested.
The only information given was that it is a long term investment mode.
There are numerous other scenarios where mortgage mis selling occured and professional advise is available to help victims make claims.
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