The subject of mortgage-related complaints was dragged into the spotlight in a speech given at the Council of Mortgage Lender’s recent complaints handling seminar by Tony Boorman, decisions director and principal ombudsman at the Financial Ombudsman Service.
Before taking a closer look at the speech and its implications for brokers, I should remind readers what the FOS says about its role.
“We are not a regulator, a trade body or a consumer champion,” the FOS says on its website. “Our role is to settle disputes without taking sides. So when we look at a complaint we give both sides a fair hearing.”
Now we are reassured about the FOS’ impartiality, what can Boorman’s warning to the mortgage industry about mis-selling mean?
The first thing to remember is that the speech was di-rected at an audience of lenders and much of its content concerns how lenders may be subject to customer complaints re- garding the affordability of loans. It also lays out what the FOS’ attitude might be should a complaint remain unresolv-ed and end up at its door.
The reason the FOS is looking so closely at mortgage issues is that while unresolved complaints about endowment mortgages have declined to fewer than 10% of its new cases, those concerning the administration of mortgage accounts have increased by 50% in the past 12 months. The figure now stands at around 6,500 a year.
Significantly for our sector, Boorman points out that complaints against brokers account for some but by no means all of the increasing caseload of mortgage disputes the FOS is seeing.
But warning signs about a future increase in the number of mortgage complaints are in evidence. First, as the FSA’s Financial risk outlook sets out, there are three key consumer risk indicators – high LTVs, high income multiples and mortgage terms of more than 25 years. Nearly a third of mortgages sold between April 2005 and September 2007 fell into at least one of these categories, with 150,000 customers having loans that fell into all three.
Second, some 1.4 million borrowers are due to come off their fixed rate deals in the next 12 months and these individuals will need to find other products in what is likely to remain a challenging borrowing climate.
Other issues the FOS believes are likely to prompt a rise in its mortgage workload are arrears, debt collection and repossessions.
The Citizens Advice Bureau and the Financial Services Consumer Panel are lobbying lenders and the courts to en-sure that all possible solutions are explored before homes are repossessed, but the trend in repossessions is still heading upwards.
The liquidity crisis is also likely to boost mortgage complaints in the same way that stock market falls earlier this decade contributed to exposing the mis-selling of investment products.
One clear message to emerge from Boorman’s speech is that the FOS is keen to keep down the levels of mortgage-related cases it receives and is urging lenders – and presumably brokers – who receive customer complaints to deal swiftly and effectively with complaints.
But this doesn’t mean that firms should reject complaints they know the FOS would have been likely to uphold, according to Boorman. It is not in the interests of consumers or lenders for debt-related issues to remain unresolved for lengthy periods, he points out.
Despite the strength of Boorman’s warning, he is reass-uring about the impartiality of the FOS and says that it will work with all parties to reach mutually agreeable solutions before making awards.
It should also be noted that although it was not mentioned in Boorman’s speech, the FOS is consulting with representatives of the broker sector and continuing its efforts to un-derstand brokers’ responsibilities.
I can only repeat what has been said many times before – ensure your advice and sales process complies fully with the Financial Services Authority’s Treating Customers Fairly initiative with regard to affordability. And have a compliant and effective complaints procedure in place that encourages speedy resolutions and maintains a comprehensive record of actions and recommendations.