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Negligence claims could drop after GMAC-RFC vs Countrywide verdict

A ruling in a High Court case between GMAC-RFC and Countrywide Surveyors could result in fewer lenders making claims of negligence against surveyors.

Former lender GMAC-RFC started legal proceedings against Countrywide Surveyors in 2008 for allegedly negligently overvaluing a property which it lent on in 2004.

But Countrywide in turn made allegations of contributory negligence against GMAC-RFC for its lax lending practices.

A judgment on the case was finally made on December 14 2011, in which his Honour Judge Keyser ruled that Countrywide had not been negligent.

But he added that if it had been found liable, the judge would also have found that GMAC-RFC was contributory negligent for not verifying the borrower’s income and other information on the mortgage application.

He claimed that if the lender had carried out the proper checks on the applicant it would probably not have advanced the loan.

A debate was also had in court as to whether the nature of GMAC-RFC’s sub-prime lending was in its itself contributory negligence, but the judge ruled it was not.

He did however rule that GMAC-RFC contributed to its own loss by not carrying out the proper checks and as a result he would have deducted 60% of any money awarded to it if the court had found Countrywide liable.

Ed Coulson, a consultant at law firm Mills & Reeve, says: “Sixty per cent is a significant reduction and should concentrate the minds of mortgage lenders when they are considering suing their own professional advisers.

“In this case the contributory negligence was not as gross as it has been in other cases I have seen with lenders – on that basis one can expect to see reductions for contributory negligence increase significantly in the future.”

One industry source has described the ruling as “landmark”, but Coulson says that he does not see it as a landmark ruling because it is in line with a number of earlier decisions  with equally significant reductions for contributory negligence.

The case centred around a buy-to-let property Countrywide valued in 2004 at £185,000. The applicant had requested a 10-year interest-only mortgage of £166,500 – 90% LTV.

In 2007 the applicant defaulted on its repayments and GMAC-RFC repossessed the property, which was sold in September 2008 for £123,500. The net proceeds of the sale were £118,103.

GMAC-RFC claimed the property should only have been valued in the region of £154,000 in 2004.

The judge ruled that the correct valuation should have been £175,000 but the one given was within the acceptable range of value.

Countrywide also argued that because the deal had been securitised the lender had not suffered any loss as a result of the alleged overvaluation, but this was dismissed by the judge.

A spokesman for GMAC-RFC, which now trades as Paratus AMC, says: “In line with its usual practice, Paratus AMC pursued this case on a contingent fee basis with the benefit of after the event insurance.  The case turned on the expert valuers’ evidence, based on which the judge found the valuation not to have been negligent.

“Paratus AMC do not accept the judge’s findings on contributory negligence which were in any event obiter.  Paratus AMC welcomes the judge’s comments that lending on non-conforming criteria does not constitute contributory negligence per se.”

He adds: “The judgment also helpfully dismisses the suggestion that the securitisation of a mortgage loan somehow extinguishes a valuer’s liability for a negligent overvaluation”.

In its 2010 accounts Countrywide made provisions of £11.9m to guard against potential claims by lenders.

A spokeswoman for Countrywide says: “When we took the decision to make provision in our accounts for potential claims against our surveying business we made the point that we, like the rest of the industry, had seen a considerable increase in claims and that we would defend our position robustly. We are not surprised to see the courts supporting our position.

“We will continue to defend our position when we believe we have fulfilled our responsibilities, but if an error is made, then we seek to settle with claimants as soon as possible.”

Countrywide relied on evidence given by Brian Pitt, an expert witness and  director of Rockstead, while Paratus AMC relied on evidence given by Adrian Bloomfield, also an expert witness and chief executive of the Association of Short-Term Lenders.

Fortress Investment Group bought GMAC-RFC in April 2010 and later changed its name to Paratus AMC.

The claim was made by Paratus AMC and RMAC 2005, the former lender’s special purchase vehicle.

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  • Julie de Souza 6th May 2013 at 11:47 pm

    GMAC-RFC ltd now called Paratus AMC ltd is the worst underhand mortgage company along with their designated company solicitors called TLT solicitors Bristol who I have had the misfortune to have taken a re-mortgage and to deal with. A mortgage made in hell was sold to me with their sole intention to trap.

    In what is evident and in their process of an arms length mortgage, they enticed my broker to act as a legal intermediary, attempted to place the entire blame on him when it was their company solicitor who was also their agent put together this illegal void mortgage acting in dual capacity on their instructions.

    This company did not help me in 2006 when I fell into arrears and very ill after a hit and run car accident. They opted for a super fast eviction based on perjury, and continued to pervert the course of Justice.

    Taking advantage of my continued illness, and me being a Litigant in person, they won a recent case against me after systematically perverting the course of justice and I have all the evidence.

    I could not get legal Aid and I first sued them in 2009 to reclaim amounts £5,500/- added to my mortgage. At this time I did not know the law or what trap they had set up for me. They at first denied all liability and then refunded me when I escalated the case to include serious conflict of interest and various breaches.

    My case was thrown out in 2012 as the lenders along with their company solicitors convinced the Judge I was wasting courts time my evidence bundles and applications began going missing in court and I was made into a scapegoat.

    I was ridiculed for being accompanied with a McKenzie’s friend and found myself being given a double edge sword by one judge as he offered to bar the other judge knowing that me accepting this offer would make me a target of the other judges and would be detrimental for my case.

    My head was served on the platter as I was humiliated and mocked by two Judges for not being able to write and speak in legal terms that caused a great deal of distress to me. I was treated like a delinquent criminal by the Courts as I had to face the financial criminals and I took all the blows until I could bear no more and passed out in the Court. They awarded themselves legal costs A £48,000/- plus in have been added to my mortgage.

    I have been denied a fair hearing because I was a Litigant in person. I still insist and have all the evidence to prove that they have perverted the Course of Justice to win this case in 2012.
    I have not been able to go to High Court for an appeal due to continuous ill health and two operations late last year and due to the Judge declaring in his Judgement that in his opinion my case was not a High Court matter and refused the application I made to transfer my case to the High Court as I had lost my faith in the lower court shortly before he threw my case out after their application to strike.

    His personal opinion that that the lenders, their designated company solicitors acting in dual capacity and my broker did not have any duty to me and he did not feel that this was a High Court matter as he justified himself from dismissing my application I made in Dec 2011 to allow their application made in March 2012 all heard on the same one day hearing.

    This I understood would have influenced my case and it made be believe that going to the High Court would be a waste of time and it would incur more costs. In all truth I could not and still cannot stomach stepping into any court for the rest of my life as the thought makes me physically sick.

    My utter belief in Democracy in this country totally wiped out. After sustained repeated biased refusals of appeals I realized that I was being set up to lose as the I faced the Judges wrath who feigned knowing the law.

    I passed out in Court after experiencing a severe anxiety attack on the ‘one day’ hearing in March 2012 and was taken by ambulance to the hospital and since then I have been in and out of hospital and too ill both physically and psychologically to take this matter further.

    I have never been so baffled by the confusing maze they set me up with as they continue to entrap and defraud millions like me as I began studying the law and understanding how it affected my case.Among the various errors:

    Despite the Court knowing the following: There are no contracts to accompany the deed, no offer letter signed by me to confirm acceptance, no jurisdiction reference to the Mortgage Condition on the deed, I was charged two interest rates during the fixed interest period, the deed was signed by an unnamed solicitor by proxy in the presence of my broker, that they offered all legal costs as an incentive yet denied that they ever instructed their solicitor to act on my behalf, no repayment plan put in place as these sections on the application form is left blank the lenders and their company solicitors processed a void illegal mortgage. Their solicitors denied ever being instructed by the lenders and still went on to process this mortgage without taking written permission from me to act on my behalf.

    My evidence was not inspected by the Judge as it conveniently went missing, what he inspected was a biased non approved joint statement provided to the Court by the Defense with several important disclosure not added as it was left unreleased. Despite me providing the documents to the court it was never looked at as my case was thrown out with their application to strike due to my failure to Particularize my claim. Following the evidence bundle going missing a second application to add the broker and their company solicitor is still pending in court as it was not heard and served by the court despite my requests for the Court to serve them.

    I attempted to prove several counts of conflict of interest and contributory negligence by lender for not making sure their agents put together a legal mortgage.

    The Defense continued to nit-pick about my statements with sole intentions to humiliate as the Judges joined in the band wagon.

    The errors by these so called professionals are laughable and even more so is the judgement of a Circuit Court Judge who took what they said as the truth in good faith, don’t understand what evidence he took on board when he made this faulty judgement as it wasn’t mine that he looked at, he too was duped by them to give out a judgement based on personal opinion as they continued to pervert the course of justice from 2009-2012.

    Several applications that would have befitted my case was dismissed. Had the Court had maintained impartiality I would have won this case. I was even barred from using my evidence when I was the Plaintiff in this case and to question the deed that was registered in 2005.

    Unbelievable and shocking what I have had to endure from the Judges who are put in place to protect victims. The ‘carry on’ in Court between one of the Judges was barred by the other due to personal remarks made during my case and me being given a double edge sword saw the Judges gang up against me and I was ridiculed at every point and treated like a delinquent child not understanding the law who was wasting precious time fighting a case that was allowed to be dragged on from 2009-2012.

    After awarding themselves legal costs of around £48,000/- in around May 2012 Paratus AMC are now demanding that I put together a repayment plan to include the legal costs not formally ordered by the Court. Despite them knowing that when they processed this re-mortgage, there was no repayment plan at inception this would leave a empty pot for 7 years. These costs were not as a result of a court order.

    They had without providing any evidence in disclosure convinced the Court that they have an agreement….there is no agreement other than a half filled application form and a deed that does not mention E&W. There is no detailed terms and conditions contracts signed by both parties. Important disclosure was not released by the application under the Freedom of Information act and by two subsequent applications of an Unless order and a second disclosure order would also prove contempt of court orders and perverting the course of justice.

    I have been trapped by a predatory VOID mortgage and was dragged into court due to their serious failings only to be fobbed off by the Courts of Law who have been put in place to protect victims. As they shed their skins like snakes and change company names and hands to cover and continue to re-sell their companies to their sister companies to cover their tracks.

    It is very hard to digest the shock of what I have had to go through as a lay person trying to protect my home as I am not giving charity for the next twenty years. I still have not got over this psychologically and will not be able to put this behind me until Justice is served.

    Home mortgagors are not giving or expecting charity. People like me want to feel secure in our own homes and have equal rights that the Mortgage Conditions 2004 E& W does not protect. This is an instrument that condones conflict of interest as the Property Law 1925 and 1989 is slowly being eroded.

    To add fuel to the fire of inequality to obtain justice is the changes in the legal aid system. Prime Ministers come and go and leave a great legacy for their kids and the country.

    I need help to take this matter further, and cannot do so on my own due to health reasons. I cannot forget the smile on the Judges faces as they mocked me and cannot forget the evil smiles of victory as the Barrister loudly chatting to my broker who also sat in the court room as though she had won another job done and dusted, as I walked out of the court room knowing I was set up to lose the case.

    The people of this beautiful country deserve more and have been taken for a roller coaster ride by the Bankers. The protection of Human Rights should begin at home and of Homeowners have to be protected at all costs, not forgetting the Democratic right to a fair hearing and neutral grounds to litigate as a litigant in person.

    Julie de Souza:
    juliedesouza@yahoo.co.uk

  • Robert Williams 10th January 2012 at 4:35 pm

    The case is a straightforward claim on the basis of valuation. To extract the headline you have from the facts defies logic. If you read the details of the case, the experts found that the valuation itself wasn’t negligent. The judge said that had it been and that they found against the valuer, then the extent of the damages would have been reduced by virtue of the less than adequate underwriting. OK, that might mean that some lenders will think twice before making a claim, but the majority won’t. And, more to the point, 60% (and few will be reduced by this much anyway) is better than nothing, esepcially when you take into account costs etc. I don’t think that this case will have any impact at all on whether lenders make claims.

  • Grey Haired Underwriter 9th January 2012 at 9:30 am

    It was bound to happen and in itself reveals the weakness of the credit scoring systems that so many lenders continue to rely upon.

    In some ways it is also a vindication of some of the aspects of MMR inasmuch as human intervention will be required in respect of the affordability process. Much as I hate to laud some of the things the FSA has done there is little doubt that a lot of lenders contributed to their own downfall by the lax way they proceeded with cases and the consequence was a need to return to some form of prudential assessment of the loans process. I wonder who will be the next lender to see the same result notwithstanding that I think there are new lenders who still see the GMAC model as the wat forward