How I lost my house for the price of a second-hand car
It's every family's nightmare. You remortgage your house - and are then are struck down with a serious illness. You are insured - but this proves woefully inadequate and riddled with restrictive clauses in the 'small print.' You appeal to the lender for help in rescheduling your debts - but all to no avail. You are summoned to appear in the High Court in the week before Chr
MICHAEL still cannot believe it has happened. His family home of 32 years has been sold, and he and his wife are now living in a rented house as he approaches retirement.
He has very serious health problems, but these do not seem to bother him as much as the financial nightmare he has just endured.
He can get very emotional when he talks about it, and admits that he is still "very bitter. "They broke our hearts," he said. A few years ago, all of this seemed inconceivable.
Business was booming and he decided to do what lenders were, and still are, urging everyone to do - remortgage, or as they put it 'release the equity' that's 'tied up' in your home.
They make it sound like there's a pot of gold buried underneath the floorboards. All you have to do is dig it up and spend it.
But there is no 'pot of gold'. Only a spiral of debt. "They (Irish Life Homeloans, later taken over by IIB) kept sending me letters telling me to top up my loan. So I did."
When asked what the money was for, Michael replied: "To tell you the truth, I don't even remember what we spent it on." He borrowed an extra ?15,000 - a pittance by today's standards. The total monthly repayments of £795 were onerous, but not unmanageable.
The following year, disaster struck: Michael was diagnosed with a very serious illness. "I was in hospital for a month,and didn't get out of hospital until Christmas Eve and in physio for nine months."
Semi-paralysed down one side at one point, Michael gets "tired very, very easily" and his speech is impaired. He put a lot of work into recovery. At first he was able to concentrate on it - financial problems seemed to be least of his worries. But the legacy is still obvious.
Concern was also eased as he had taken out an Accident, Sickness and Unemployment (ACU) policy when he borrowed the money. This is designed for just such a situation, so there was nothing to worry about. Or so he thought - until he studied the small print.
The policy doesn't kick in until you are incapacitated for at least two months - and then it lasts for just 12 months in total.
If you work at all during that time, it becomes null and void, so a partial recovery is no good.
Then, you must wait at least six months without any payments before claiming again for the same illness.
Worse, it covered less than half of the mortgage payments (£375 a month). "The insurance was a joke," said Michael.
The policy, Homeguard, is typical of its ilk, according to IIB. "ASU is an optional policy available from IIB Homeloans, any broker in the marketplace will be able to give a customer details on alternative products available to them, " a spokesman said.
A spokesman for policy-provider Royal & Sun Alliance said ASU insurance provides a level of cover, the limits of which are explained to clients. "It was very popular in the late Eighties and Nineties as it is a very cost-effective way to provide a certain level of cover.
"This policy can also be an add-on policy in addition to serious illness cover."
Des Kelly, underwriter with Irish Life, agreed that the policy appears to be a run-of-the-mill form of ASU cover. "I'm not sure that (with some of these policies) if you can claim at all after 12 months are up. They are designed to partly replace your income for a set period in the event of certain events, such as breaking your leg."
However, they are not much use for potentially devastating conditions such as a heart attack or stroke. "Serious illness cover would clear your mortgage completely. I think that would be the better option."
In retrospect, Michael agrees, but he did not understand this at the time. Irish Life agreed to a three-month moratorium on repayments between December 1999 and March 2000. But then communications broke down and debt mounted.
The family continued to pay much of the monthly repayment demanded - but, alarmed at the mounting arrears, they engaged a solicitor to communicate their plight to IIB, which had taken over at this stage.
Michael furnished a file, bulging with increasingly frustrated solicitor's letters. He says that he continued to pay large portions of the monthly mortgage bill as his solicitor wrote to IIB pleading for them to reschedule the loan.
During this period, the insurer paid £375 a month towards the mortgage, which was topped up by another £125 to bring the total to £500.
At this stage, he was prepared and able to work part-time, but if he did so, the insurance would become void. Instead, his wife was forced to go back to work to make ends meet.
By November 3, 2000, the solicitor wrote to Michael: "I have asked IIB many times if they would be prepared to extend the repayment period, but to date I received no answer. I have again written to them today."
On March 13, 2001, she wrote to IIB again: "We refer to previous correspondence to which we have not received a reply. We enclose herewith a copy of our letter to your solicitors dated 12th of September."
On April 4, the solicitor wrote again in a similar vein, stressing that: "...Mr xxxxx is suffering from a serious illness and is most anxious about the position."
On May 3, IIB wrote back in a terse three-sentence letter, stating that it was "not in a position to agree with this request." We note that your client has defaulted on his payment arrangement with us, and would request that full payment be resumed to avoid any further action."
The solicitor wrote again on May 22 and June 12, stressing that IIB continued to receive partial payments from the insurance policy and her client.
In the second letter, she relates her intention to write to the customer services section, which she also did on June 12.
She stated: "Mr xxxxxx's doctor has now stated that it is unlikely that his condition will improve further. . .it seems that the difficulties concerning the repayment of the loan are of enormous concern and are exacerbating his condition."
In November, IIB solicitors wrote back stating: "We are instructed. . . to secure all monies due to IIB Homeloans. . . Because of default in the payment of monies due. . . IIB Homeloans hereby requires and demands possession of the said premises."
Further extensive correspondence ensued between both sets of solicitors culminating in IIB getting a date in the High Court to seek repossession of the property.
"It was coming up to Christmas, a truck came up to the house and a fella got out of it (to present the summons). The wife didn't know what it was. I had to tell her - she was roaring crying.
"The (case) seemed to castigate me as a person who couldn't care less. That was far from the truth. I did everything humanly possible."
"All I wanted was a year's extension. I have no letter to show from them to say they were sympathetic, or ask if we had any ideas on how to sort it out."
"The advice I got was that they were legally in the right. All I owed them (in arrears) was £10,000. The house was worth a quarter of a million. There seemed to be no choice. We had to sell."
"I still can't believe it. We lost our home over a sum that would just about buy a second-hand car."
Michael complained to the Ombudsman for Credit Institutions, who did not take up the case as it has already been the subject of legal proceedings.