Bank files expose dubious mortgage-loan practices
Legal challenge to stop all home repossessions likely in a few months
Published 12/12/2010 | 05:00
A GROUP acting for troubled mortgage holders has found cases of alleged fraud, of incomes being massaged and of dubious documentation, after examining bank files of homeowners struggling to pay their loans.
The files show how people were given interest-only loans that ended in their 70s. In one case a man suffering a debilitating illness was given a 35-year mortgage.
The details emerged in hundreds of loan files now being examined by New Beginning, a group providing free legal representation for mortgage holders who are facing repossession.
Ross Maguire, senior counsel for the group, said: "The rationale behind it (the lending) was all based on the same concept, which was that property prices were going up. It wasn't based on ability to pay."
He added that some loan files revealed "ridiculously low levels of information about people in order to give them very large amounts of money relative to what they earn. I think you will see coming out over the next couple of months, instances of both massaging of income and of cases of alleged fraud, I suppose is what you would call it," he said.
Mr Maguire said New Beginning was preparing to mount a legal challenge in the High Court early in the New Year aimed at stopping all home repossessions.
The action will draw on European law to argue that the rights of lenders to getting their money back should be balanced against the rights of families to a home.He said the case would be argued on the principles of proportionality. "Orders for repossession should not be seen as automatic. Courts always have discretion.
"There is of course the right of the lender to his security but that is only one side of the equation. On the other there are the important social rights and protections given to the family and the home.
"Also, the only purpose of repossession is to allow for sale of the property. But is this the right or reasonable time to sell? Clearly not. So why should the property be sold now when the only result will be that the borrower will be left with the remaining debt and be homeless."
Mr Maguire has called on solicitors who are acting for homeowners in repossession cases to contact the group. "One of the things we want to get out is there has been an attitude among borrowers and among lawyers that there is no hope in these cases. And we say that is not true," he said.
A number of unemployed solicitors have lent their services for free to the group. They are now considering establishing their own practice specialising in repossessions and acting on a 'no fee basis' for clients.
In recent weeks, New Beginning has won the right to mount a legal challenge on behalf of a client as to whether a sub-prime lender was properly authorised to lend money. It will also mount a challenge to the power of county registrars to issue orders for repossessions.