| Many
complaints from domestic mortgage borrowers involve a dispute
about what was – or was not – said during the mortgage interview.
Often, the borrowers allege that they chose a specific mortgage
deal on the strength of some particular comment or assurance from
the lender’s employee.
Usually,
the point at issue is one that should have been covered in the
mortgage offer, so our first step is to ask for a copy of this.
The lender’s position is strengthened if it can produce a copy
of the mortgage offer, endorsed with the borrowers’ signed acceptance.
If
the lender can produce a copy of the offer, signed by the borrowers,
then the borrowers cannot dispute having seen it. And, with limited
exceptions, customers who sign a document such as a mortgage offer
letter are bound by what it says – whether or not they read it.
But
some lenders don’t ask borrowers to sign mortgage offers. House
buyers have to deal with a multitude of papers and if mortgage
offers are not given sufficient importance, it is more understandable
that borrowers may fail to spot problems at the time. Requiring
borrowers to sign and return a copy of the mortgage offer emphasizes
the importance of the document. And, as we have said before, it’s
not good enough for the lender to try and shift the responsibility
on to the conveyancer.
Things
are made even worse if the lender doesn’t keep copies of mortgage
offers as a matter of routine. Such lenders expect us to rely
on what they say would have been sent to the borrowers – and they
then send us sample copies of what their documentation looked
like at the time. That can backfire on the lender, as the following
case study illustrates.
| case
study – signature and retention of mortgage offers
06/01
When
Mr and Mrs A applied for a mortgage, the lender gave them
a detailed two-page mortgage illustration, produced by its
computer system. Mr and Mrs A proceeded with the mortgage,
but decided to repay it after a couple of years. The lender
then claimed that since they were repaying the mortgage
within five years, they would have to pay an early repayment
charge. The lender said the early repayment charge was explained
in the mortgage offer, and in its instructions to the conveyancer.
However, the lender did not have a copy of either document.
It asked us to rely on the documents it said its computer
would have produced in respect of the particular product
code.
Mr
and Mrs A said they had not expected to receive any documents
other than the illustration, and that they had not, in fact,
received a mortgage offer.
The
conveyancer still had a copy of the lender’s instructions
on file and provided us with a copy. This document explained
the early repayment charge, but we were not satisfied that
the conveyancer had explained the charge to Mr and Mrs A.
That failure counted against the lender, rather than the
borrowers. In completing the mortgage, the conveyancer was
acting for the lender. Indeed, the lender’s instructions
to the conveyancer specifically said ‘please act for us
in the transaction’.
The
lender asked us to assume that Mr and Mrs A must have received
a mortgage offer, and that (like the instructions to the
conveyancer) that offer must have referred to the early
repayment charge. We were not prepared to make that assumption.
The offer should have been produced by the same computer
system that produced the detailed illustration. But the
illustration did not mention the existence of an early repayment
charge. So the system was not infallible. Or did the lender
want us to assume its computer was designed to produce detailed
illustrations that did not mention the early repayment charge
that would suddenly appear in its mortgage offers?
|
|
