Cover
Skeletons in the cupboard
After the scandal of PPI and endowment mortgage mis-selling the mortgage industry has due reason to be worried that other skeletons could be lurking in the cupboard. Sarah Davidson investigates
As All Hallow’s Eve approaches, treats and toffee apples are bought and children kitted out in the requisite witch and warlock costumes the mortgage industry has a few of its own ghosts and ghouls to face up to.
No-one likes nasty surprises and
usually, it’s better to be prepared for the worst and hope for the best.
It seems that behind closed doors that exactly what movers and shakers in the mortgage industry are doing. Preparing for the worst.
But what past misdemeanours haunt the industry still? Try this on for size: thousands of consumers claiming they’ve been mis-sold sub-prime mortgages; hundreds of thousands of consumers claiming they’ve been mis-sold interest-only mortgages; and potentially lenders being held to account for irresponsibly failing to check self-certified incomes. Gulp.
Mis-selling
Given that mis-selling has caused multi-billion pound headaches for lenders and insurers in the past preparation seems a good idea.
The Financial Services Authority said
earlier this year that mis-sold personal pension and endowment policies alone have led to nearly £15bn having been paid in compensation to consumers. Meanwhile payment protection insurance has been so widely mis-sold to consumers that banks including Lloyds TSB, HSBC, Barclays, Santander and RBS have set aside almost £9bn for PPI claim refunds.
Just last month the Financial Services Authority revealed there were 30,014 complaints about mortgage firms in the first six months of the year, the highest number since the regulator started compiling the figures in 2006. Although no-one at the Council of Mortgage Lenders, Building Societies Association or the Association of Mortgage Intermediaries will admit it, a source with first-hand knowledge has confirmed contingency planning conversations addressing these possibilities are going on in private. And various brokers closely affiliated with AMI have corroborated that the intermediary trade body is indeed aware that a sub-prime and interest-only mis-selling scandal is a possibility. How likely a possibility remains to be seen.
32 mortgage introducer OCTOBER 2011
Speculation is often unhelpful - particularly in the case of mis-selling - but given the premise that it’s better to know where the black holes are than not, we’ve tried to find out what brokers should be doing to protect themselves. “The risk areas for me are where
borrowers who could have got a prime priced mortgage were given a sub-prime mortgage instead,” says Rob Clifford, industry entrepreneur and director of national broker, Moneyquest. “I also think the potential for interest-only mis-selling is bigger than you imagine.” It’s a mighty can of worms.
The ghosT of sub-priMe pasT Brokers need to know where the skeletons are hidden and pundits agree that the sub-prime problem is most acute for borrowers who were advised to take a sub-prime mortgage when they could have qualified for a cheaper prime deal. “The most likely scenario will be where
borrowers were sold sub-prime where they were able to get a loan at a prime rate,” says Robert Sinclair, director of the Association of Mortgage Intermediaries. “However at some points sub-prime rates
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60