The once booming buy-to-let market epitomised the greed of some lenders that threw money at this sector as if it was a one-way bet. It will be the tenants of those landlords that will pay the price of this unfettered greed by losing their homes.
Braintree, Essex (PRWEB) December 19, 2008
Mortgage brokers could leave themselves open to possible legal action in the wake of a wave of projected home repossessions, warns Burgesses.
New figures from the Council of Mortgage Lenders (CML) predicts that those standing to lose their home will jump from 45,000 this year to 75,000 next - a huge hike of 67 per cent.
But Burgesses believes that the situation has been made worse by the failure of many mortgage brokers to give 'best advice' to their clients.
Sara-Ann Burgess managing director of the independent protection insurance specialist explains:
"The Financial Services Authority (FSA) placed with mortgage advisers and other financial services intermediaries an onus of 'treating customers fairly' in their dealings with clients. Any advice given by a broker to a client must therefore include identifying and offering solutions to any scenario where the client cannot afford to make the repayments demanded by the lender.
"The obvious solution to avoid possible repossession because the client is unable to make payments because of accident, sickness or unemployment would be to recommend the client take out insurance cover in the form of mortgage payment protection insurance (MPPI) or another income protection policy.
"It seems obvious from the poor take-up of these insurances, and the predicted massive rise in repossessions, that brokers were not doing enough to impress upon their clients the need to guard against the unexpected - such as an economic slump.
"If brokers cannot prove that they brought the existence of this cover to the attention of their clients, even if it was rejected, then it is conceivable that there may be grounds for legal action on behalf of the consumer against the broker since it could be argued that they had not been 'treated fairly'."
She added that the CML must shoulder some of the blame too.
"When the numbers of repossessions started to noticeably increase last year the CML maintained that it was nothing to worry about as it was rising from a very low base. That might well have been the case, but it ignored the rising trend to the point where it is now warning that it will reach 75,000 by the end of this year and might possibly rise even further.
"It is a bit late now to flag up the perils of recession and subsequent repossessions for stretched homeowners. CML members were guilty of reckless lending and to hell with the consequences. They are always guaranteed to get some return on the home loans they issue. But it is a different story for those that home loans were loaded on to. They stand to lose everything - job, home and possibly even their family unit because lenders made access to cash too easy in a rush for sales volume.
"The once booming buy-to-let market epitomised the greed of some lenders that threw money at this sector as if it was a one-way bet. It will be the tenants of those landlords that will pay the price of this unfettered greed by losing their homes."