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Guardian Unlimited, September 30, 2008 Borrowers could sue over equity release loans Thousands of older homeowners who took out shared appreciation mortgages (Sams) could take Barclays and HBOS to court over unfair terms following a change in the law, it emerged today.
The mortgages, which were offered by the Bank of Scotland and Barclays in the 1990s, were designed to allow homeowners to release equity from their properties but some have been left owing many thousands of pounds to the banks in return for relatively small loans.
Around 15,000 people are thought to have taken out a Sam during the brief period between 1996 and 1998 they were on the market.
Last year, we wrote about a severely disabled 93-year-old man who had borrowed £17,000 in 1998 and had to pay back Barclays a total of £116,000 when he was forced to sell his property to meet care costs.
A recent change to consumer credit laws means those borrowers who still have a Sam could sue the banks to change the terms of their contracts and reduce the amount of they need to repay.
If successful, the case could cost the lenders hundreds of millions of pounds, according to law firm RWP.
The firm plans to act on the borrowers' behalf in a group action to take the banks to court.
Hilary Messer, head of litigation at RWP, said: "If the courts accept our argument that the relationship between debtors and creditors is unfair it opens a door for the courts to revise the terms."
Two schemes
There were two types of Sam scheme, one offering interest-free loans and one with a fixed rate of interest.
Under the interest-free scheme, homeowners were able to borrow up to 25% of the value of their property. This was to be repaid, along with up to 75% of the appreciation of the value of the property, when the home was sold.
With the fixed-interest scheme, people were able to borrow up to 75% of the value of their property. They would then typically owe the bank 75% of the value of the property as well as the repayment of the loan capital, as well as the interest on top.
If house prices had fallen borrowers with zero-interest products could have been left with just the capital to repay, but property prices have rocketed over the past 10 years. According to the Nationwide, a house worth £100,000 in 1997 would now be worth £282,251.
A homeowner who borrowed 25% of £100,000 interest free, with the promise to repay 75% of appreciation, would now owe the bank £136,688 on top of the £25,000 they initially borrowed.
Faced with having to pay off the loan if they move, many homeowners are stuck in their properties.
Barclays has implemented a Hardship Scheme for customers who need to move or alter their homes. However, it is only open to people with financial difficulties.
People wishing to join the group action need to register at the Shared Appreciation Mortgages Group Action website before the end of October.
Press Association Newsfile - September 29, 2008 Monday 5:24 PM BST
LENDERS TO BE SUED OVER SHARED APPRECIATION MORTGAGESBYLINE: Nicky Burridge, PA Personal Finance Correspondent SECTION: HOME NEWS LENGTH: 440 words
Two major lenders are set to be sued by homeowners who took out so-called shared appreciation mortgages a decade ago, it emerged today.
Solicitor Hilary Messer is organising a class action against Halifax Bank of Scotland
and Barclays over the loans, which she claims are ``unfair''.
Under shared appreciation mortgages (Sams), interest on the loan is typically frozen in exchange for the banks receiving up to 75% of the appreciation in the value of the property during the past 10 years when it is sold, as well as having the original sum borrowed repaid.
In other cases fixed interest is charged on the mortgage which also has to be repaid, along with the original sum advanced and up to 75% of the property's appreciation when it is sold.
The mortgages were sold in large quantities throughout the UK in 1997 and 1998.
But 10 years later, following strong house price appreciation throughout most of the period, many people find themselves trapped in their homes, as they would not be able to raise enough money to buy a new property if they sold their current one, once they had paid the banks.
Ms Messer, head of litigation at RWP Solicitors, is hoping to take advantage of recent changes in the Consumer Credit Act to sue the banks.
Under the new act, which is retrospective, if a court determines that the relationship between a creditor and a debtor is unfair to the debtor, it has wide powers to vary the terms of the loan agreement.
Ms Messer said: ``Leading Counsel has advised that there are strong grounds for contending that the relationship between the bank and the holder of the Sam was 'unfair' for the purposes of these new provisions.
``He has also advised that certain of the terms of the loan agreements were in themselves 'unfair' and that the terms of the brochures issued by the banks were 'misleading' in a number of respects.''
The action will seek a reduction in the percentage of the appreciation that is payable to the bank, or a cap or limitation on the amount payable to the bank as its share.
It was not possible to contact Ms Messer to find out how many people had already signed up to the class action, but BBC Radio Four's Moneybox programme reported that the Sams pressure group Struggle Against Financial Exploitation (Safe) was asking its 1,500 members to pay £5,000 each to fund the action.
Know as the Rottweiler to her clients, Ms Messer has previously taken on big corporations such as Eagle Star, and she also acted for the victims of the Paddington rail crash.
Both HBOS and Barclays declined to comment.
People who want to join the class action need to register at www.samgroupaction.com by the end of October.
Bankingtimes.co.uk - October 1, 2008 New SAMS compensation challenge to HBOS and Barclays
by Gill Montia
Story link: New SAMS compensation challenge to HBOS and Barclays As Lloyds TSB considers its takeover terms of HBOS, it should be aware that the latter may be liable for millions of pounds in compensation to the holders of Shared Appreciation Mortgages (SAMS).
HBOS, which comprises Halifax and Bank of Scotland, sold the interest free loans back in the 1990s but recent changes in the Consumer Credit Act 1974 mean that holders of the controversial SAMS may be able to obtain compensation.
SAMS provided a loan secured against the future equity growth of a property.
Under the arrangement, the SAMS provider is only repaid if the property is sold or on the death of the mortgage holder.
The majority of the loans were made on a zero interest basis, with banks typically receiving up to 75% of the appreciation in value of the property as well as repayment of the original loan, in return for having lent only up to 25% of the property value.
According to the SAMS action group, a house worth £100,000 in 1997 could now be worth £282,251, meaning that a homeowner who borrowed 25% of £100,000 interest free, with the promise to repay 75% of appreciation, would now owe the bank £136,688 on top of the £25,000 they initially borrowed.
The group has been calling for compensation for the thousands of people who took out the loans and recent changes in the law pose the possibility of a group action.
UK Courts now have more freedom to rule on whether the relationship between a creditor and a debtor is “unfair” to the debtor, plus wider powers to vary the terms of the loan agreement.
Around 15,000 people are estimated to have taken out a SAM between 1996 and 1998 and law firm RWP has been instructed to bring a group action.
Barclays was the only other High Street bank to sell SAMS during the 1990s.
Thelawyer.com
Barclays, HBOS face £850m law suit
3-Oct-2008
Ben Moshinsky
Barclays and HBOS are about to be hit by mortgage litigation costing a possible £850m, following changes to the rules on consumer loans. Hilary Messer, a partner at South East firm RWP Solicitors, is drawing up plans to sue the two major banks on behalf of the 8,500 people who took out zero interest housing loans in the 1990s.
HBOS and Barclays launched mortgage products called shared appreciation mortgages, which saw the banks take up to 75 per cent of the appreciation in value of a property in return for providing a zero or fixed-interest loan.
Some homes have appreciated £300,000 in the 10 years since the loans were made, meaning the homeowners have had to pay more than £200,000 on loans as low as £25,000.
Messer says that the terms were too harsh and changes to the law could mean that the homeowners are in a position to renegotiate the terms in court.
She said: "We've taken advice from eminent leading counsel that homeowners should take action and take action quickly. We want to take on the banks and we have 100 people committed to going forward already."
Messer added that if all 8,500 homeowners came forward, cutting an average of £100,000 off each of their repayments, the banks could lose hundreds of millions of pounds in expected revenue. Some properties have seen more than £1m added to their value.
The firm has set up a website, www.samgroupaction, to encourage people to sign up to the litigation. Messer is waiting for more homeowners to come forward and has not yet instructed counsel or informed the banks.
The Lawyer, October 6th 2008
Source: Edinburgh Evening News (web)
Date: Wednesday 8, October 2008
Homeowners to sue HBoS and Barclays
A recent change in the law has opened the door for potentially thousands of homeowners to claim damages from the banks over their Shared Appreciation Mortgages.These mortgages were sold in large quantities throughout the UK in 1997 and 1998, and the loans were made on a zero interest basis or on a fixed interest basis, with the overwhelming majority being zero interest.In the zero interest cases, when the homeowner comes to sell today, the banks typically receive up to 75 per cent of the appreciation in value of the home over the last 10 years, as well as repayment of the original loan in full, in exchange for having lent only up to 25 per cent of the value of the home 10 years ago.The result is that more than years later thousands of homeowners are currently trapped in homes which when sold will not realise sufficient value for them to purchase a suitable replacement home.The problem is so severe that Barclays has introduced a ’Shared Appreciation Mortgage Hardship Scheme’, but lawyers are warning this is
inadequate because it does not provide compensation or change the terms of the original mortgage.Hundreds of homeowners are now taking advantage of recent changes in the Consumer Credit Act 1974 to sue HBoS and Barclays in a Group Action.The Group Action is being conducted by Hilary Messer of Reading-based RWP Solicitors. Ms Messer, head of litigation at RWP, who has acted for victimsof the Paddington rail crash, said: ’The previous provisions in the Consumer Credit Act 1974 applied in relation to ’extortionate credit bargains’. They were seldom invoked and rarely successfully because the courts applied the provisions in a
restrictive manner. The new provisions which have been substituted and now have retrospective effect operate on the basis of a lower and more flexible threshold. If the court determines that the relationship between the creditor and the debtor is ’unfair’ to the debtor, it has wide powers to vary the terms of the loan agreement. ’Leading counsel has advised that there are strong grounds for contending that the relationship between the bank and the holder of the SAM was ’unfair’ for the purposes of these new provisions. He has also advised that certain of the terms of the loan agreements were in themselves ’unfair’ and that the terms of the brochures issued by the banks were ’misleading’ in a number of respects.’Ms Messer said the court will include a reduction in the percentage of the appreciation payable to the Bank, or alternatively the introduction of a cap or
limitation on the amount payable to the Bank as the Bank’s share of the appreciation. Hundreds of homeowners are set to sue HBoS and Barclays over their ’unfair’ mortgages in a move which could eventually cost the banks hundreds of millions of pounds.
Source: BBC 1 North - Leeds
Date: Wednesday 8, October 2008
News - 07-10-2008 18:29:47
BBC 1 North (Leeds and Sheffield)
00:04:42
A COUPLE IN THEIR EIGHTIES TAKE OUT MORTGAGE WITH 20% INTEREST RATE –
Reporter(s) : [Sima Meir] Ten years ago Brian and Pat Knowlman borrowed £21k for their house in Poppleton. If they sell the house they have to pay the Bank of Scotland more than five times that amount. They are among hundreds launching a group legal action against both the Bank of Scotland and Barclays. Reporter - It’s been their family home for forty years. INTERVIEW: BRIAN KNOWLMAN, HOUSE OWNER - We owe the bank ?105,000 which is three quarters of the Appreciation. It wasn’t a fair Scheme. INTERVIEW: PAT KNOWLMAN, HOUSE OWNER - We just feel that we’ve been sucked in. Reporter - Pat and Brian are among hundreds of people who are taking legal action to try and reduce the amount they have to repay. STUDIO INTERVIEW: HILARY MESSER, SOLICITOR, LEADING GROUP ACTION AGAINST BARCLAYS AND BANK OF SCOTLAND - As far as we are aware there are
about 8,500 of these Shared Appreciation mortgages that are still in existence. We’re looking to start action hopefully by the end of this year. Presenter - We’ve contacted both Barclays and the Halifax Bank of Scotland but neither have given us their response.
Source: BBC Radio Berkshire
Date: Wednesday 8, October 2008
BREAKFAST - 08-10-2008 08:24:14
BBC Radio Berkshire
00:04:49 CONTROVERSIAL MORTGAGE PRODUCT - Sarah’s story is about a particular mortgage product that was sold in the 90s by the Bank of Scotland and Barclays. It was the Shared Appreciation Mortgage, so that she could try and get some equity out of her house. You don’t pay any interest on the loan, but you do have to give the bank 75% of any future increase in your property when you sell it. House prices have risen so much, that it has meant she can’t afford to move. We have got people like Sarah who are living in houses that are crumbling around them. She also lost her partner. INTERVIEW: SARAH - I have a roof that is leaking, my boiler is dead, I daren’t switch on any of the lights, I go to bed about eight because that is the warmest place. It is not the way I expected old age to be. STUDIO INTERVIEW: ELAINE WILLIAMS [PHONETIC], STRUGGLE AGAINST FINANCE EXPLOITATION – we have got many members in this situation. We have disabled people who are trapped in unsuitable homes. HBOS are being totally inflexible about this, and not helping them move. We are going to court to try and revisit the contract, and come up with a solution. Most people didn’t understand the contract. This was a generation that trusted the banks. 15,000 families have been affected by this.
Source: BBC Radio WM (Birmingham)
Date: Thursday 9, October 2008
TELL ED - 09-10-2008 10:09:12
BBC Radio WM
00:11:14 HOMEOWNERS MAY TAKE MORTGAGE PROVIDERS TO COURT - Those with a shared appreciation mortgage taken out in 1997 and 1998 are being asked to join a campaign. STUDIO INTERVIEW: HILLARY MESSER, SOLICITOR - a shared appreciation mortgage is marketed by Bank of Scotland and Barclays. We are willing to run a group action to take legal action against the banks. There is only a 12 year period to challenge the banks. These people are of a generation where they trusted he banks. This was a new and innovative product. WEBSITE PLUG. This is a change to the Consumer Credit Act of 2004. We are looking for a Group Litigation Order.
Source: BBC Radio York
Date: Wednesday 8, October 2008
BREAKFAST - 08-10-2008 08:06:42
BBC Radio York
00:05:34 BRIAN KNOWLMAN HAS A SHARED APPRECIATION MORTGAGE - He and hundreds of others are taking on the banks. INTERVIEW: HILLARY MESSER, SOLICITOR - the brochures were misleading. People thought they were getting a different deal.
There are, as far as we know, 8,500 of these mortgages unredeemed. People can still register with me to get into the group action.
Source: BBC Radio York
Date: Wednesday 8, October 2008
BREAKFAST - 08-10-2008 08:31:01
BBC Radio York
00:00:56
HOME OWNERS WHO TOOK OUT SHARED APPRECIATION MORTGAGES ARE TAKING OUT A GROUP ACTION SUING BANKS -
INTERVIEW: BRIAN KNOWLMAN, HAS SHARED APPRECIATION MORTGAGE - we couldn’t sell the house now. We would not make enough to make it worthwhile to move
Source: BBC Southern Counties Radio
Date: Thursday 9, October 2008
Breakfast - 09-10-2008 07:49:31
BBC Radio Southern Counties
00:02:10 PHONE IN: SHARED APPRECIATE MORTGAGE - CALLER: ELIZABETH, SHARED APPRECIATION MORTGAGE HOLDER - because of my family’s situation, I’ve got a son that’s not well and I want to get things sorted out.
ITV NEWS&VIEWS http://www.itvlocal.com/west/programmes/?player=WST_Prog_15&void=252833 News starts at 2.4 min |
