Mis-sold Mortgages

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Mis-sold Mortgages

Mis-sold mortgages are mortgages sold to homeowners through a mortgage lender or broker who either gave incorrect advice or mis-sold a mortgage.

Typically, mis-sold mortgages were taken out with sub prime or specialist mortgage lenders.

See if you can claim compensation for being mis-sold your mortgage or given poor advice by your mortgage broker or lender. Enquire now

How were mortgages mis-sold?

During the 1990s the mortgage industry saw enormous change. Homeowners who had adverse credit ratings were not able to receive traditional lending from banks or building societies. Hence, new 'specialist' lenders entered the market to capitalise on the demand.

Sub-prime and specialist lending

Sub-prime mortgage lenders formed - such as Kensington Mortgage Company and Mortgages PLC. These lenders were keen to distribute their products through mortgage packagers so broker commission for mortgage completions became very generous.

With the creation of similar lenders, the specialist lenders sector became more defined. Mortgage brokers were actively encouraged to introduce mortgage applications to such lenders, which saw an increase in mortgage packagers. Companies such as Private Label (who later became GMAC RFC).  In 2007, 21 specialist lenders contributed to the £362 billion gross mortgage lending.

Financial Services and Markets Act and mis-selling

In 2000, the Financial Services and Markets Act was imposed upon the Financial Services Authority (FSA) which included an obligation to provide an effective regulatory regime which would provide confidence and help the public understand all aspects of financial services. On October 31, 2004 regulation was extended to the mortgage industry - M-Day. The Mortgage Conduct of Business Rules (MCOB) forms part of the Business Standards in the FSA handbook.

MCOB applies to all firms which carry out regulated mortgage business. This is broken down into sectors such as business loans secured on a residential property or equity release schemes.  The lender and broker market were made to prepare for M-Day and were required to provide comprehensive documentation relating to the mortgage sale and advice given; this included the production of a Key Facts Illustration (KFI).

MCOB requires mortgage lenders and mortgage brokers alike to treat customers fairly (TCF).

Any breach of these rules may be deemed as having mis-sold a mortgage.

Have you been treated fairly or mis-sold a mortgage?

When taking advice from a mortgage broker or lender you should have been asked to provide information on your personal financial circumstances then provided with information and products based upon this.

You may have been mis-sold a mortgage for many reasons, in particular, if you had not been treated fairly.

The full disclosure of the terms of business contained in the Initial Disclosure Document (IDD) must show clearly information about the mortgage introducer including any fees they charge and what products they have access to, for example “whole of market”. 

Mis-sold mortgage compensation

A selection of products that you qualified for after providing your personal information should have been shown to you unless it was clearly stated that only one was offered.  This personal information should have been recorded in a “fact find” document.  All documentation relating to your transaction should have been retained by the mortgage broker.  If this is not the case it is a clear breach of MCOB.  Companies have been fined over £1m for such a failure and ordered to pay compensation.

• Read the FSA publication about Kensington.
• Read about the Mortgage regulations from the CML

Common areas of a mis-sold mortgage are when a self certification of income was accepted, in particular if you were employed. These are known as self cert mortgages and these are no longer available having been banned by the FSA. 

Other areas of mis-sold mortgages include being offered an interest only mortgage beyond your retirement age with no consideration for how you were able to make repayments.

The affordability of a mortgage should always be taken into consideration by a lender, if this was not it may also mean you were mis-sold your mortgage as some lenders ignored other financial commitments such as unsecured borrowing, credit cards and other loans, these may have been sold with payment protection insurances (PPI) - another area you may be able to claim for compensation.

How do I know if I was mis-sold my mortgage?

If you can answer yes to any of the criteria below, you may have been mis-sold a mortgage. If that is the case, complete our free, no-obligation mortgage claim enquiry to speak to a mortgage claims specialist about whether you have a case.

Were you:

• Not provided with the correct documentation by your mortgage broker - for example the Key Facts document
• Sold a self cert mortgage when you were employed
• Not informed about all the fees and charged correctly
• Exploited and sold a mortgage you could not afford
• Completed on a sub-prime mortgage when you qualified for a lower rate
• Encouraged to borrow more than you originally wanted to
• Advised to terminate a mortgage and charged fees for redemption
• Asked to take out a new mortgage with any conditional insurance such as Accident Sickness and Unemployment
• Encouraged to have a loan term beyond runs past your retirement
• Experiencing a large increase in repayments - payment shock

If you can answer yes to any of the questions above, complete our mortgage claims enquiry form to see if you have a case.