This is the first in a series of articles about mortgage misselling which aims to provide hard facts and offers advice in defending any claims.
Many in the mortgage industry may view the recent stories from claims management companies and other commentators that missold mortgages will be the next big misselling scandal to hit the industry to be nothing more than opportunist scaremongering.
The general view is that they are unfairly hyping up the prospects of unmeritorious claims purely to line the pockets of ambulance chasing companies feeding on the unrealistic expectations of borrowers who think they can blame their mortgage advisors or their lender because they are now having trouble affording their mortgage.
The Financial Ombudsman Service said recently that it is upholding only just around 10 per cent of all mortgage miss-selling claims made by CMCs.
It has also not seen an increase in the number of claims relating to the miss-selling of mortgages , despite an increasing number of firms appearing when searching for missold mortgage on Google.
So – can we all sleep easy in our beds at night and dismiss this out of hand as something which will go away as quickly as it came?
I am not so sure about this.
From FOS’ own website there are some worrying figures.
There were 9,537complaints in relation to mortgages for year ended March 2012 up from 7,067 complaints in relation to mortgages for year ended March 2011.
We do have to put these into perspective as these figures will include complaints about all mortgage related issues including potential Treating Customers Fairly breaches but the trend is that the number of complaints are growing.
Absolutely these figures are dwarfed when you look at the number of payment protection insurance complaints which FOS is dealing with.
But they are growing and what is possibly more worrying is that the number of upheld decisions is likely to start growing as CMCs become more professional in the manner in which they present cases and as FOS begins to understand the complex issues behind these claims.
It is not only the CMCs themselves who are stoking up the fire here but the number of firms of solicitors who are acting for claimants and looking at this market is growing as well
There is an instinctive feeling by those with an interest in this sector that mortgage misselling is taking the same path taken by first endowments and then PPI.
Widespread dismissal at first of the merits of such cases by both the sellers and the regulatory bodies followed over a number of years by the steady erosion of a blanket denial followed by an acceptance by those regulatory authorities of the merit of such claims.
We could indeed be in the middle of a phony war at the moment – the quietness before the storm – and what a storm it could become.
Hardly a day goes by without there being something in the mortgage press about mortgage miss-selling.
One day it is a CMC in the press with a series of adverts on how to claim against the industry, the next day it is the CML pouring cold water on commentators who are calling this the next big miss-selling scandal. Is it any wonder that many people in the industry are not only confused but also concerned about the claims culture that we now live in and what impact this could have on their businesses and their own personal finances?
Despite having kept up to date with a lot of what has been written recently, some very good and informative, I have yet to see a definitive guide to what this is all about – not only looking to either dispel or confirm the hype out there but also looking dispassionately at what we talk about when mortgage miss-selling is mentioned, what is being alleged and more importantly what can be done about it .
I feel we are in a good position to explore this. As a firm of solicitors we have been dealing with the mortgage intermediary market for over 25 years- long before the FSA was a glint in the Governments eye. We have seen the mortgage sector go from being completely unregulated, before pre-Mortgage Code Compliance Board days, to what is probably the most regulated sector that I know.
So firstly we willtake a look at what a missold mortgage actually means by going back to basics -retracing our steps to when customers were sold interest only and other unsuitable mortgages, what was the process at the time/ the sourcing systems and their then processes, what was the obligation on the part of advisors at the time of the sale
Following this we will be inviting expert commentators to give us their thoughts on what potential heads of claim could be alleged by claimants -what possible grounds they could have for doing so and what evidence they would need to substantiate these claims
We will then bring out the big legal guns – specialists in this area to examine what the claimants think are the areas – they will comment on whether these are provable in law and if so what evidence would be needed. They will also be looking at how compensation is likely to be assessed if claims are successful
Next up we will set out how such claims are likely to be formulated- what will be the process of initiation and what you could expect to see coming through your letterbox anytime soon
Finally we will be offering some thoughts about how you can defend any such potential claims, what your options are , how much it is likely to cost you and whether you need to disclose any such claims to your insurers or regulator.
To sum up we will be taking a stab at the future, looking at figures and trends and estimating how much of an issue this could turn out to be. We will also be taking a look at other areas of financial miss-selling and what exactly we think could be out there for the future.
All in all a comprehensive review of all the difficult questions and providing most if not all of the answers. No -one can foretell the future but you are a hell of a lot better prepared if you have the chance to consider it before it actually arrives.