Here we go again

Mortgage lender Swift 1st (nice people to do business with….I have the scars) are the latest crew to be fined by the FSA.

A £600,000 fine and order to pay customers £2.3 million in redress over large and uneccesary fees and charges added on when their borrowers were in mortgage difficulty.

The acting director of enforcement and financial crime at the FSA, Tracey McDermott, said “Many of Swift’s customers were already in a vulnerable position, having fallen into arrears on their mortgage payments, and they could ill-afford excessive and unfair fees.”

Online source Mortgage Strategy ( ran a piece back in december 2010 that revealed that Swift had already earmarked £9.4 million as funds they knew they would have to pay out in fines if they got caught. If that is to be believed why did the FSA only dent their war chest? I would have fined them double their contingency fund.

To add insult to injury a spokesperson for Swift said ““We are committed to ensuring we treat our customers in a fair and transparent way”, which must be the most duplicitous bunch of old bollocks I have ever heard. if that was the case why did they get fined??????

Do you really owe all that money or are they just fees added on?

Many people complain that their mortage arrears seem way over the top compared to their own calculations. The reason for this is that minute you run into arrears the lender starts whacking on huge fees and charges.

  • Arrears management fees,
  • Bounced direct debit fees
  • Late payment fees
  • Fees for sending letters tellling you owe them money
  • Fees for phoning you to tell you that you owe them money
  • Fees for telling you that you owe them fees……and on and on

So your actual arrears of £2,000 end up being a £7,000 debt.

The thing to remember is that the lender cant get possession on fees owed, only on the arrears themselves but many lenders dont seperate the 2 things out in their letters. You have to ask for a seperate breakdown.

You can also challenge fees and charges because they are supposed to be a fair reflection of true adminsitrative charge, not another money making scam, which is how they are actually used.

One of my clients was charged £20 everytime the lender called her – whether she answered the phone or not. Her statement showed they had called her 40 times in 3 months, all while she was out at work, so that fee alone came to £800. How is that a fair reflection of the actual cost?

The FSA wont commit to a figure that they consider fair for sending a letter but do tend to regard anything over £12 to be excessive and many lenders charge £35 per letter, a few even charge £50.

A while back Kensington Mortgages were fined by the FSA for charging £50 for every time they re-pesented a payment to a bank and it bounced. Problem with this is there was no indication on how many times they would re-present it. If they whack it back in 4 times in a month, there is another £200 a month for that fee alone.



Mortgage broker fined and banned

Mortgage Broker Michael Lewis was fined a massive £106,000 by the FSA and banned from the financial industry.

His Gillingham based company Lewis Partnership were found submitting false information to obtain mortgage the naughty little man.

He had claimed on one occasision that a client had paid over £11,000 to him from a pension plan and that this client earned £145,000 pa. Turned out to be complete bollocks.

In the notice issued by the FSA they said of Lewis (nbo relation to me I want stress)  ‘You were knowingly involved in mortgage fraud by submitting two mortgage applications to mortgage lenders within a month of each other containing information which you knew to be false and contradictory.  You also submitted a third mortgage application for the same client in August 2008, which contained further information which you knew to be false and contradictory.’

Just shows, you stick on a suit and the world believes you

A matter of Some Interest


There are many types of mortgages on the market; Repayment mortgages, endowment mortgages, fixed rate mortgages, tracker mortgages and so on.


One type of mortgage that grew in popularity through the boom years of the 1990s was the ‘interest only’ mortgage, a type of mortgage where, surprisingly enough, the borrower just paid interest but no capital, gambling on house prices rising enough so that by time it came to settle the account the value would have gone up enough to cover the capital they borrowed. This meant that the monthly instalments were much lower.


These types of mortgage contributed to the mortgage crash of the past few years and in truth they are a long term gamble. A person borrows £150,000, spends 25 years paying the interest on it and then finds at the end that they can still owe money on the capital so in strictly financial terms they are very risky. Since the crash they have been frowned upon and discouraged by the Financial Services Authority. Some banks have stopped offering them altogether as a prime example of irresponsible lending.


But there is a flip side to this when it comes to borrowers in mortgage difficulties, whereby interest only mortgages can be a useful temporary tool in saving homes from repossession.


The vast majority of people who get into arrears with their mortgage do so because they have lost employment and find themselves on benefits. Until Ian Duncan-Smith brings in the mooted universal benefit there are a range of different benefits available, from Job Seekers Allowance, to Employment Support Allowance, Working Tax Credit, Disability Living Allowance and on and on; but the there are various eligibility rules for each benefit and none of them are paid to allow  borrowers to meet their monthly mortgage, apart from one, a handy little benefit called Support for Mortgage Interest Payments, or SMI as it is known in the trade.


SMI is only available for mortgages taken out for home purchase or repairs, so those secondary loans used for debt consolidation and that holiday of a lifetime and buy a car don’t count. Set at 3.62% it pays a fair whack of a borrower’s monthly mortgage figure and can be the difference between coping and having their home repossessed.  On an interest only Mortgage SMI will cover a big chunk of the borrower’s monthly mortgage payments and the shortfall can often be found out of remaining benefits. So asking the lender to change to interest only can take a huge financial burden off of the borrower and mean the difference between losing their home and keeping it.


Persuading the lender to convert to interest only to gain SMI has been a common and much used tactic available to the borrowers and their advisers and has helped in thousands of cases but recently, as I mentioned above, the FSA has frowned upon interest only mortgages and is applying pressure on lenders not to grant this boon to its clients, which means that a large proportion of people are about to lose their homes, who 12 months ago wouldn’t have.


Housing advisers and negotiators across the country groaned when they heard about the FSA’s stance.


Converting to interest only was never a mandatory concession. Lenders were always reluctant to do it but with a bit of smooth negotiating it was often possible to arrange but now, the FSA have really put the boot in to borrowers in difficulty, providing reluctant lenders with the perfect excuse, ‘the FSA don’t like us to’.


Obviously converting to interest only for the next 20 years is not advisable but more often than not the conversion only needs to be in place for a couple of years to get people through a tight spot and let’s face it, who keeps with the same mortgage company for the full 25 year term anyway? Very few. Most take advantage of better deals to remortgage at some point.


Requesting conversion to interest only as a negotiating tool doesn’t mean that the borrower stays on the deal forever. The usual strategy being to request to capitalise the arrears after 6 clear monthly payments. Capitalisation is where the arrears are simply swallowed up in the overall mortgage. With the arrears gone, the threat of repossession is gone and the lender is also back on track.


Last year the FSA published the Mortgage Market Review in which they criticised lenders for not doing enough for people in mortgage difficulties and going for possession without exploring alternatives. In June this year they produced a paper saying that lenders must be tighter on alternatives to repossession. Interest only requests are seriously affected by those recommendations and yet the report refers to the problems with interest only mortgages on the basis of a long term deal. It isn’t good as a long term deal but as a short term measure of say a year or 2, to help people through a bad patch and hopefully to a point when are back in work and able to cope, it can be the differences between home saving and homelessness.


Projected figures for mortgage repossession for the coming year vary depending on who is producing them but forecasts seem to hover around the 40,000 to 50,000 mark. With the FSA’s new recommendations it is highly likely that those figures will seriously rise, maybe even double if lenders pull away from granting interest only mortgages for a short period.


By Ben Reeve-Lewis

Useful leaflet

The National Homelessness advice service has a decent overview guide to dealing with mortgage arrears produced back in June.

It doesnt provide the real nitty gritty of tactics that you would really need but it does help break the spell that if you are facing repossession you are dead in the water

A free copy here  titled “Are you worried about your mortgage”

More repossession due this year

The Council for Mortgage Lenders, who are the governing body for the industry claims that they estimate 40,000 people’s homes will be repossessed this year, 9,000 have already gone, a slight drop in the first quarter of 2011. (article from This is Money here

What amazes me and pisses me off is their persistent claim that this drop is because lenders are being more sympathetic to borrowers in difficulty. I see no evidence of that on the frontline.

And to make things worse a few weeks back the Financial Services Authority, who are usually the ones to prosecute the lenders for sharp practices, issued a new paper calling for lenders to be more cautious in granting forbearance (alternatives to repossession) and take a more long term view.

This is going to seriously hamper the work being done by advice agencies and lawyers across the country trying to keep people in their homes in the face of the lack of sympathy from the lenders. The FSA report becomes another thing they can hide behind when turning an offer down.

More repossession cases are going to have to be done through the courts because of this less-than helpful report from the FSA

Young man You’ll go far

On the naughty step this week is the young, ambitious solicitor representing Santander I came up against in the county court.

My client had already had 5 adjournments, I wasnt even going to bother asking for a 6th but would happilly accept a suspended possession order which would give us the time we needed to do what I had to to save her home.

Mr Cocky launched into a prepared speech with the correct level of personal outrage and said that his instructions were to push for outright possession. He added, to show he had heart, that he would be prepared to agree to a suspended possession order. I didnt have the heart to tell him that was all I had come for.

As we were walkiing into the actual courtroom the usher turned around and said “We’re just turning the tape on”. He looked horrified and hissed to me “I didnt know they taped it…..I cant be heard to agree to a suspended order. I’ll ask for an outright and you ask for a suspended and I wont fight very hard”.

My equally hissed response as we were taking our seats in front of the judge was “No, no, no. All bets are off, you’re trying to stiff us”.

I asked for a 6th adjournment, now solely on principle. His inexperience showed and he made the classic mistake of telling the judge what to do. Judge got the hump….I got my 6th adjournment

Naughty man!!