Banks Face 'Unfair' Mortgage Legal Action

[Mochamoo]

Banks Face 'Unfair' Mortgage Legal Action


Breaking News

11:05am UK, Tuesday October 06, 2009

A group of more than 300 homeowners has won the right to sue Barclays and Bank of Scotland over what it claims were unfair mortgages.




The borrowers have been granted a Group Litigation Order against the banks over Shared Appreciation Mortgages (SAMs) taken out more than 10 years ago.
The schemes, only available from 1997 to 1998 before being withdrawn from the market, allowed borrowers to take out loans secured against their homes, at a zero or reduced fixed rate of interest.
However, on repayment of the loans, they had to pay back an additional charge of up to 75% of the increase in the value of the property during the lifetime of the loan.
Their repayments ended up rocketing because of the sharp rise in house prices in the decade to 2007.
BOS - now part of the part-nationalised Lloyds Banking Group - and Barclays tried to block the move, which allows the homeowners to sue on a group, rather than an individual basis.
More follows...

[EXC]

Re: Banks Face 'Unfair' Mortgage Legal Action

Well spotted Mocha - you beat me to it.

[Mochamoo]

Re: Banks Face 'Unfair' Mortgage Legal Action

1:00pm UK, Tuesday October 06, 2009
A group of more than 300 homeowners has won the right to sue Barclays and Bank of Scotland over what it claims were unfair mortgages.


Bank of Scotland - now part of Lloyds - developed SAMs for UK market in 1990s


The borrowers have been granted a Group Litigation Order against the banks over Shared Appreciation Mortgages (SAMs) taken out more than 10 years ago.
BOS - since swallowed up by the part-nationalised Lloyds Banking Group - and Barclays tried to block the move, which allows the homeowners to sue on a group, rather than an individual, basis.
BOS continues to maintain the terms of the loans were made clear at the time, and disagreed with the decision paving the way for group action.
The schemes, only available in 1997 and 1998 before being withdrawn from the market, allowed borrowers to take out loans secured against their homes, at a zero or reduced fixed rate of interest.
However, on repayment of the loans, they had to pay back an additional charge of up to 75% of the increase in the value of the property during the lifetime of the loan.
Their repayments ended up rocketing because of the sharp rise in house prices in the decade to 2007.

With a zero interest SAM, the lender's share of the appreciation is now an average of 4.4 times the amount borrowed.
This is equivalent to an average interest rate of 35-40% per annum on a simple interest basis.
With fixed interest SAMs, the average interest rate is even greater at 42-52%.
In a typical case - such as a house worth £100,000 in 1998 and now worth £300,000 - this would leave a homeowner who borrowed £25,000 at a zero rate of interest having to repay a total of £175,000.
It is estimated that a total of 12,000 SAMs were sold in the UK, of which around 7,000 may still be unredeemed.
Hilary Messer of RWP solicitors, which is representing the borrowers, said: "We are delighted the Chancellor of the High Court has consented to these cases being dealt with on a group basis, as this is the only practicable way that ordinary homeowners can take on the banks in litigation which is likely to raise complex issues of law and fact."
A spokesperson for BOS said: "Bank of Scotland believes the terms of the mortgages were clear to customers when they took out their loan but does recognise that the arguments the SAMs borrowers wish to raise should be brought before a court as quickly and efficiently as possible.
"However, given the very different circumstances of the individual borrowers, the bank does not believe that the "one size fits all" nature of a group litigation approach is appropriate."
The bank said it continued to "respond appropriately to cases where genuine hardship has arisen".

[Amethyst]

Re: Banks Face 'Unfair' Mortgage Legal Action

Excellent