The Financial Services Authority (FSA) has set a precedent by fining the mortgage lending company GMAC-RFC, which no longer takes on new business in the UK, £2.8 million for treating some of its customers unfairly. GMAC also had to repay £7.7 million to the customers concerned.
The customers were those that fell into arrears on their home-loans and the cause of the unfairness was due in part to the monthly fee of £45 that was charged on overdue accounts. The FSA decided that this was unfair as it was disproportionate to the actual cost of processing to the lender.
The administration of the GMAC mortgage book was outsourced to Homeloan Management Ltd (HML), a subsidiary of the Skipton Group who uses a standardised format for dealing with those in arrears. HML also manages loan books for many other lenders and applies that same format to other mortgage holders who are in arrears. This could mean that there are vast numbers of borrowers out there who could claim against HML as well as any other lender/administrator who uses this model of charging.
This is almost a mirror of the bank and credit card charges fiasco except that the FSA acted and got a result but with the banks and credit card companies the Office of Fair Trading (OFT) missed the open goal. I can see many parallels between the two but no joined up thinking. The OFT were robbed of a result at the last minute by a legal technicality that they should arguably have spotted. But why the difference between the two cases? Is it than one group are lovely home-owners and the other group are dirty credit card defaulters?
There will no doubt be an industry forming around reclaiming mortgage arrears fees over the coming few weeks, if one isn’t already out there.
The overall majority of those in mortgage arrears will probably also have unsecured lending problems too. It is strange that they can rely on one regulator to force lenders to act properly, but not in the other. Especially when you consider that the unsecured credit charges could well have exacerbated the position with respect to their mortgage payments situation.
A borrower is a borrower and should be treated fairly whatever the loan was for and whoever the regulator is.
------ Other articles of interest ------
The recent decision by the OFT fails us all
Brokers don’t always offer the best mortgage deals
Mortgage Of The Day – Lloyds TSB Spearhead
FSA to ban self-cert and interest only mortgages
Tags: bank charges, FSA, mortgage, mortgage arrears, News, oft
Gmac are just the first of many lenders that put borrowers who are in financial difficulty under more stress and strain.
The failed Rooftop Mortgages being another along with GE Money.
What appears to be the common trend here is that it is the failed american investment banks who are now trying to recoup as much money as possible.
Many of these customers should never have been granted the mortgages in the first place. During the boom period ironically if the FSA had policed the advice given by qualified advisers then this problem would exist.
Whilst there are undeniable similarities between the Unfair Credit Agreements debacle and the more recent Mis sold Mortgage claim type I would say there is much more weight with the latter. I say this because with Mis-selling there is someone as fault who you can claim against whereas with the UCA stuff claims were being made against the banks on the grounds of, in many cases, genuine mistakes.
It is important to understand this is a very technical and complex area.
Mortgage advisors have been exploiting customers for years placing them into the hands of american owned lenders whos sole focus was profit.
Now there house has coming crashing down the customer is left in the mess.
Many mortgages have been mis sold, and it is good to see the FSA taking the matter seriously
The FSA has listed a set of good practice examples when advising consumers on mortgages:
It says that Suitability letters should be fair, clear and not misleading. They should serve their purpose, which is to explain to the customer how and why a mortgage broker has made recommendations to meet the customer’s needs and personal goals.
Sadly, some brokers were motivated purely by the high commissions they would receive for recommending a particular mortgage.