Mortgage Insurance- what do the lenders claim for?

[IanM]

Does anybody know anything?

When you take out a mortgage, the lender takes out an insurance policy to cover their losses in the event of a repossession that results in a shortfall, but what are they allowed to actually claim from the insurance company?

Has anybody ever been chased by the lender, or the insurers, for a shortfall due when they have been repossessed?

If you are repossessed and you owe £100k and they sell the property for £80k leaving a shortfall of £20k, do they claim £20k from the insurance or do they claim £20k plus all the unpaid fees and charges they have secretly added to your account when you go into arrears?

Any input would be welcome as I have no idea as yet and can't find any info on Google!

Thanks.

[PlanB]

Re: Mortgage Insurance- what do the lenders claim for?

This insurance product is known as a MIG (Mortgage Indemnity Guarantee) or a HLC (Higher Lending Charge). The borrower pays the premium but the lender gets the benefit.

When a property is repossessed the lender makes a claim off the insurance policy for the shortfall and then the insurer chases the borrower. And they chase very hard too for up to 12 years.

I've always thought this was a reason why lenders can be so quick to repossess properties with negative equity because they can't lose

[PlanB]

Re: Mortgage Insurance- what do the lenders claim for?

Does anybody know anything?

I do hope you weren't implying we all talk a load of nonsense on here :doggieyes:

[IanM]

Re: Mortgage Insurance- what do the lenders claim for?

This insurance product is known as a MIG (Mortgage Indemnity Guarantee) or a HLC (Higher Lending Charge). The borrower pays the premium but the lender gets the benefit.

When a property is repossessed the lender makes a claim off the insurance policy for the shortfall and then the insurer chases the borrower. And they chase very hard too for up to 12 years.

I've always thought this was a reason why lenders can be so quick to repossess properties with negative equity because they can't lose

I understand the MIG but need to know what the lenders actually claim and whether the insurance companies double check every claim to make sure they are paying out the correct amount that is owed by the borrower etc., or do they just pay-out?

Do the insurers not have a duty or something to make sure the lenders are not railroading borrowers into repo just so they can make a claim?

Surely if the borrowers had more time and options to sort things out before being repossessed then the insurance companies wouldn't keep having to pay out and then spend years chasing someone for a debt that they could possibly never repay.

The system is totally corrupt I believe!

[wales01man]

Re: Mortgage Insurance- what do the lenders claim for?

Think its confidential between lender and insurance company .the lender can make a repo claim but the courts have the fnal say

[IanM]

Re: Mortgage Insurance- what do the lenders claim for?

Think its confidential between lender and insurance company .the lender can make a repo claim but the courts have the fnal say

The court does get the final say in making a repo but I didn't think the court had any jurisdiction over the sale of the property or the shortfall created after a repo, so it may be possible that the lenders are creating repo's just so they can claim their losses from negative equity from the insurers and adding all the hidden fees and charges to the shortfall when making a claim.

Are the lenders defrauding the insurers by claiming more than what the borrower is told is the shortfall when repossessed?

[wales01man]

Re: Mortgage Insurance- what do the lenders claim for?

I can see your question but don't think you will find the answer there are supposedly rules on the sale of repossessed property but I think with estate agents and solicitors involved in this that is more likely where the fraud is occurring with the aid of the lenders no doubt

[des8]

Re: Mortgage Insurance- what do the lenders claim for?

It's sometime since I dealt with MIG, but you should realize that the indemnity doesn't necessarily cover all the shortfall that the lender has incurred.
For example on a £250,000 mortgage the indemnity may only be £30000.
So if the default is for £100,000 the insurance co will pay out £30,000.
The Ins Co however can and probably will, under subrogation, pursue the borrower for £100,000, and any recovery in excess of £30,000 is credited to the mortgagor.
If the borrower feels that the amount claimed includes unfair charges and fees, he will have to contest these in the normal manner (whatever that may be)

[FlamingParrot]

Re: Mortgage Insurance- what do the lenders claim for?

I can see your question but don't think you will find the answer there are supposedly rules on the sale of repossessed property but I think with estate agents and solicitors involved in this that is more likely where the fraud is occurring with the aid of the lenders no doubt

There certainly ARE rules that say lenders must obtain the best price when selling your home, and you can take it to the FOS after complaining to the lender.

Can I dispute the amount my lender says I owe?
The FSA's MCOB rules say that all lenders must obtain the ‘best price that might reasonably be paid’ when they sell your house. If you do not think they have done this, it might be possible to dispute the amount they say you owe. You have six years from the date of sale to make a claim against the lender. You will need proof to support your case, such as valuations for your house at the time.

• The house was sold for a lot less than the market value at the time of sale.
• The house was not marketed well enough to obtain the best price.
• You arranged a sale which was refused by the lender, but after repossession the house was sold by the lender for a much lower price.
• If the house stood empty for a very long time, you may be able to argue that the mortgage company should have rented it out and therefore off-set possible rental income against the shortfall balance.
• Check who bought the property. Your lender should not have sold it to a related company.

Who do I complain to?

On 31 October 2004 the Financial Services Authority (FSA) took over the regulation of mortgage lending and problems with existing mortgages. This applies to all mortgages where the lender had a first charge over the property, and at least 40% of the property is lived in by you or your immediate family. It does not apply to secured loans regulated by the Consumer Credit Act 1974.

If you are not happy about the way in which your lender has dealt with the mortgage shortfall, complain to them first. If you are still not happy, you could make a complaint to the Financial Ombudsman Service (FOS).