Victims of a suspected mortgage fraud face repossession after losing their appeal against a High Court ruling.
The Court of Appeal has dismissed four appeals from individuals who entered into a sale-andrent-back deal with a firm now being investigated for mortgage fraud.
Northumbria Police is investigating North East Property Buyers for an alleged fraud involving 2,000 mortgages which has been described by police as potentially the biggest mortgage fraud to have taken place in the UK.
Borrowers entered into an agreement with the firm under which it bought their properties at a discounted price and allowed them to remain in them as tenants.
In many cases the tenants say they were assured they could stay in their properties for life as long as they complied with the terms of the tenancy.
NEPB took out mortgages with lenders including The Mortgage Business and Southern Pacific Mortgages Limited, but failed to pay the loans.
The lenders then attempted to repossess the properties and in November 2010 a High Court judge granted orders of possession after ruling that the lenders’ right to enforce their security had priority over the rights of the tenants to remain in their homes.
Of nine test cases considered in the High Court ruling, four appealed, but there are said to be another 90 cases where lenders have started repossession proceedings against individuals who sold their home to NEPB in a rent-back deal.
There is also a substantial number of other cases where lenders are awaiting the outcome of appeals.
An anonymous tenant of the NEPB scheme who contacted Mortgage Strategy says: “My family and I are devastated at the outcome of the appeal. I thought the court would have ruled in favour of the tenants and allowed us to stay in our home and pay rent to the mortgage company – but that’s not going to happen.
“I’m now looking to register for a housing scheme or rent another house – it is a nightmare.”
A second firm, Newcastle Home Loans, is also being investigated by Northumbria Police in the criminal case against NEPB.
No charges have been made but there have been several arrests and the main suspects have been bailed.