subject: Mortgage Mis Selling: Home Sweet Home [print this page] Homeowners might find themselves trapped in a home they can no longer afford--victims of mis-sold mortgages. Payments too large to handle or a term too long can make home sweet home into home sweet hell. Homeowners might fall into repossession or foreclosure.
What is a Mis-Sold Mortgage?
Mis-sold mortgages are financial debt instruments used to buy a property but sold to the borrower under false pretences, without proper disclosures or without proper counselling. In short, mortgage mis-selling is akin to professional malpractice.
What Started the Mis-Sold Mortgage Crisis?
There is no one catalyst for the slew of bad mortgages emanating from the financial services sector. But there are reasons for the crisis. In the years leading up to the worldwide economic downturn, mortgages were sold to people under greatly loosened standards. This phenomenon primarily occurred in the United Kingdom, the United States and Canada.
Because of lax standards, mortgage lenders sought to "unload" the instruments before the loans went bad. Financial firms packaged these risky loans in what is often referred to as "mortgage-backed securities". Risky mortgages were pooled with other financial instruments and sold several times over. Eventually, the packaged instruments could no longer be sold, creating an economic downturn in the real estate and financial services markets.
Who Regulates Lender Practises?
The regulatory agency responsible for overseeing the practises of mortgage lenders and brokers is the Financial Services Authority (FSA). In 2008, the Financial Services Authority began to investigate the mis-selling of mortgages and tightened lending standards as well as practises.
What is Mortgage Mis-Selling?
It simply means any situation in which a borrower was either not given enough information or misleading information while taking out a home mortgage. The term is not a legal one. Rather, it is a "catch-all" term for any reason that lead to a mortgage being granted to a borrower which could not afford the note.
What are Some Examples?
Examples include but are not limited to: being sold a mortgage while on benefits, not being told all of the costs, being sold a self-certified mortgage even though not self employed, the mortgage term goes past retirement age, the commission paid were not explained, the borrower was given a sub prime loan, the borrower was loaned money under adverse credit improperly, or being sold an endowment mortgage without proper explanation.
In any of these cases, a borrower would potentially have been mis-sold a mortgage. There are other circumstances for such cases including having to pay a separate fee or percentage to the broker that was not part of the loan and remortgages to pay-off other debts.
What is the Recourse for Borrowers?
The recourse for borrower is to have a professional mortgage audit conducted. This examination will reveal if a borrower was indeed a victim of mortgage mis-selling. There are several law firms which conduct such examinations on behalf of victimized borrowers.
What are the Remedies?
The most common remedy is compensation. The amount varies on a case-by-case basis. A borrower might even have the balance written off, though this is a very rare occurrence. In most instances, the borrower will be awarded compensation. This can occur even if the borrower is in remortgage or the property is under repossession.
Borrowers that have been involved in a mortgage mis-selling can feel confident about making claims without reprisal by the lender because of the "treating customers fairly" rules.
