Mortgage Prisoners - Let Battle Commence!

The banks were saying "You can't afford to pay less"!!!

THIS WAS WRITTEN 31 JULY 2018, before Panorama exposed the Cerburus scandal - but ANYONE who feels they were unfairly put on SVR and denied a better rate should put pressure on the banks and regulators.

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So, after dragging their heels for years, with the FCA (the cornerstone of 'Fairness' purportedly) having proved themselves utterly toothless, the banks are finally going to be writing to mortgage borrowers stuck on high interest rates (typically SVR) before the end of the year to offer them a better deal ... still in no hurry, then ...
 
I've previously blogged here (with links to earlier posts) about their appalling exploitation of borrowers who were already struggling and more recently I've contributed to the Facebook group 'Mortgage Prisoners UK' - people trapped in unfair deals for any number of reasons.

There are all sorts of excuses the banks have used to try to justify applying higher rates but, given that FCA was usually way behind the ball or at best woolly in its guidance, they got away with it by hiding behind the biggest smokescreen of all - that they couldn't disclose the reasons for their lending decisions because they were "commercially sensitive" - which gave borrowers seeking to complain to the Ombudsman (FOS) no grounds to contest. In the meantime they continued to conveniently misinterpret, ignore or straight out disregard the spirit of the guidance provided and the plight of those they knew they had over a barrel.

Well at last, and largely due to Money Saving Expert's relentless efforts to raise the profile of this issue, we have some sort of tenet admission by the industry that things need to change, but the battle's not even half won. Many of those in the Facebook group - possibly the majority - had their Northern Rock loans taken over by the likes of Landmark / Whistletree, who are likely to slip through the net again because they were companies formed specifically to take over NRAM's loan book, are unregulated and failed to offer new products.  Can you imagine having been a Northern Rock borrower and having the decision about who your new provider would be taken away from you, therefore leaving you exposed to being held to ransom?

And that's still not where it ends - people were put on SVR for many other reasons, including arrears resulting from a change in income.  Suddenly they were a higher risk, so they were put on a higher rate at the next anniversary of their loan - despite the guidance saying that affordability checks shouldn't be applied to existing loans.  And, when they were back in the black, banks like Santander KEPT them on the higher rate for an additional year, to prove they could afford to go back to a lower one!

This is in my view the biggest scandal since PPI mis-selling ... and it's gonna run and run a while yet because nothing has been done to address retrospective complaints made to FOS, who are refusing to re-open those cases because they were ruled on at the time.  Well, if PPI claims could be backdated, and we're receiving clear signals from this most recent announcement that the banks are trying to address their impropriety, affected borrowers should be reimbursed for the difference between what they were asked to pay and any cheaper options that should have been made available to them at the time.

I urge any mortgage prisoners to make as much noise as you can to be compensated for the financial and emotional stress you've been subjected to as a result of this issue.

Thanks also to news organisations who have picked up on this - several of whom who have representatives posting on the Facebook page seeking personal stories to feature in articles. Get yours heard!

Please feel free to comment below - comments are moderated prior to being posted.

'Treating Customers Fairly' - Subjective is not Effective

From my previous posts, you'll know I'm no great fan of how Santander treat their clients.  Now people approach me with their own tales of woe ...

Here's one scenario (skip to next para if you don't want to bother with the details):  A couple were on low income at the previous anniversary of their mortgage contract but Santander still offered them a fixed 2 year term at a very reasonable 2.99%.  They subsequently fell into some arrears, but had 50% equity in their home and were allowed to enter into an arrangement to repay these at £20 mth above their monthly repayment.  However, at the next anniversary last October - having set a precedent under the same circumstances (borrowers were still on low income) and already aware that the family could only afford an extra £20 mth - Santander instead hit them with the Standard Variable Rate (see earlier post) of 4.74%, increasing the repayment by over £330 mth.  The base rate of 0.5% had not moved an iota during this time.

I suppose it's like all aspects of life - once you're deemed to constitute a risk, they'll screw you even further.  "Can't afford the electricity bill?  We'll remove your tariff options and you can pre-pay on this key instead - at a higher cost per unit, of course".  Except in this instance, Santander only focused on one part of the lending criteria - capacity to repay - and completely disregarded the other main determination of adequate security.  With 50% equity, where was the risk that the debt would go toxic any time soon?  They also called the anniversary "new lending" and, besides, they knew the clients were in no position to qualify for a loan elsewhere so they had them over a barrel.

So, the likes of Santander exacerbate the plight of struggling borrowers by penalising them, while they and others in the industry keep reassuring us with soundbites like "working with borrowers to help them overcome their situation", promising to "explore all possible ways of preventing repossession of your home".  And the Council of Mortgage Lender's guidance is to "continue to exercise forebearance where it is fair to do so for the borrower" and that this "does not translate into an immediate possession risk".

The Financial Conduct Authority (previously "FSA") requires financial institutions to adhere to principles of "Treating Customers Fairly" yet, when the above case was escalated to the Ombudsman, the reply proved beyond doubt that once again the regulators are utterly toothless.  Santander were not required to disclose their reasons for applying the higher rate because their "lending criteria is commercially sensitive" - in other words, the industry has closed ranks as usual.  And here was the real classic extract: "A lender must be responsible in relation to the concessions it grants when dealing with consumers suffering with financial difficulties, ensuring the situation is not purely being deferred to a further time in future, ultimately making the situation worse".  It would be funny if it wasn't so tragically ironic.  Hello?  Who is making the situation worse by upping the repayments by, in this instance, 60% (the arrears/loan ratio was barely a quarter of a percent)?  And it took five months for the Ombudsman to reach their conclusions, by which time the couple could have had their home repossessed.  Would any regular person in the street (the ones the FCA is there to protect) consider the above outcome to be "fair"?  I appreciate it's a subjective term, but come on ... you can only stretch semantics so far.

Another twist in the tail - at the previous lower repayment, the arrears represented three months payments and it went to litigation (a whisker away from repossession).  But, at the higher repayment, the arrears represented only a little over a month.  Same people, same arrears/loan ratio, but suddenly within the tolerance of Santander's Collections Department.  Lies, damn lies & statistics.

And the biggest irony of all?  The banks got the economy in this mess in the first place and, having therefore been partly responsible for the borrowers being unable to find work in a depressed job market, inflict even more pain on them by coming back for a double-dip into their pockets.

Homes will be lost, placing an even greater burden on a society already struggling to provide social housing and, stupidly, the banks seem oblivious to the fact that they're only shooting themselves in the foot by terminating loans they could have been acquiring interest on when they're finding it hard enough to get rid of the stuff.

Treating Customers Fairly?  Not likely, while our self-serving banks have no sense of social responsibility.

Tarred with the Same Brush (The Honest Victims of Austerity)

Today marks the trial rollout of the cap on housing benefits across four London boroughs but, as with all new initiatives, not everyone's circumstances fall into neat pigeonholes.

Innocent and ordinarily hardworking people, who fell foul of the job cuts perpetuated by the economic mess our bankers got us into initially, will now fall victim to constraints on reasonable standards of living.

But this time a good portion of the blame should be lain at the feet of the town halls themselves, who were slow to identify cases where the existing system was being so blatantly exploited.  Only look at the first boroughs to be targeted - Haringey, Enfield, Croydon and Bromley.  While the Government has no doubt done its homework in respect of where it can effect the greatest savings on the public purse, they should at least also have made examples of the boroughs that failed to address the obscenity of people on benefits living in £1M+ properties in places like Ealing or Belgravia.

More and more people will see their living standards reduced through no fault of their own and, in my view, none will suffer more than the now middle-aged children of Thatcher's Britain who, having been encouraged into home ownership, are now seeing that dream being shattered because they fall into one of the two most affected unemployed groups: the over 50's, seemingly invisible to employers and recruiters alike, and - at the other end of the spectrum - school leavers who have been let down by a society that allowed it financial affairs to get so horrendously out of control.

And, at odds with the the FSA's new mandate of having to treat theirs customers fairly, banks continue to penalise their unemployed mortgage customers by only taking into account one of the two primary lending considerations - equity and capacity to repay (guess which one?) - when existing arrangements hit their renewal anniversary, opting instead to apply the standard variable rate ('SVR') to inflict even more pain on the embattled long term unemployed who have already seen mortgage relief reduced from interest on the first £200K down to the first £100K.  Santander, are you listening?

You're not quite off the hook yet, Santander

After our action group had a win over Santander in their attempt to hoodwink us on Business Banking charges, you'd think I'd be done with beating them up for a while.

Not so.  From tomorrow, they intend to inflict more pain on 400,000 mortgage customers by increasing their standard variable rate ('SVR') by half a percent to 4.74%.  Oh, and yet again, they've reneged on a promise - that the SVR will be never be more than 3.75 percentage points above the Bank Rate - by raising the cap.  The words 'guarantee' and 'promise' obviously don't translate well into Spanish.

Their reason?  They say 'the cost of providing mortgages has risen over the past three years'.  And why?  Because of the 'need to meet tighter regulatory demands, which in part require them to build up a bigger capital buffer'.

The irony is killing.  Why has governance made organisations such as these so top heavy cost-wise in the first place?  Because they couldn't be trusted to give their clients a fair deal on their own.  You can you imagine the contempt they must have held for investors and borrowers alike, to have to be TOLD to treat them fairly - isn't the first rule of business to build trust and goodwill with your customers if you want them to come back?

Coming from the days when retail banking was a profession I proudly represented as a regional manager in Australia, I've now become totally disillusioned with the banks.  Instead of putting service first, they bombard us with reams of the small print that we all fought to eliminate a few decades ago (whatever became of the 'Crystal Mark'?), in which they disguise strategies deliberately calculated to catch us all out at some time or another - just ask any small investor who, perversely, has to change banks every year if they want to avoid an automatic rollover offering only fractions of a percent.  As BBC Watchdog pointed out, they actually rely on us not to check the anniversary of our investments in the hope that we don't notice.  Not to mention their heavy sales techniques (driven by target not need, as evidenced by recent mis-selling scandals).

Now, I can't understand why the banks aren't making money.  Back in 'my day', banks and building societies could lend out around ten times the amount they held on deposit, on the basis that not everyone would want to draw on their investments at the same time.  So why, when the investments they're offering paltry returns on can generate multiple parcels of borrowing at a higher rate, are they crying poor?  Could it be something to do with needing to replenish the coffers of the investment arms they so irresponsibly decimated? - and which they are now so reluctant to separate from their high street business?

Make no mistake - Joe Average is paying for 'The 1%' to shaft him again and again.  Someone pass the KY.