Mortgage mis-selling. Does law offer any protection in Ireland?

dynamick

I notice that in the UK there have been successful cases taken against lenders for mortgage mis-selling
http://www.guardian.co.uk/money/2009/mar/22/repossessions-mortgages

Is this possible in Ireland?

Does the consumer credit act 1995 or amendments offer any protection against mortgage mis-selling such as a provision that lender or broker must offer appropriate advice? Are there any other rules that lenders must abide by?

I am thinking of the kind of case where you have very young buyers (20-23yrs) on a 40yr mortgage, 100% LTV, interest only, 6X multiple of salary and unskilled jobs. Now in negative equity and chained for life to a stupid decision.

macy9

We need a test case to go before the courts. Have you got deep pockets?

I have heard of a case were a married couple, both retired doctors took their bank to court on a similar issue and won. It was in the Times but I haven't been able to find the article since.

My parents were completely mis-sold their endowment policy in the 1970's, assured there would be a lump sum, zero mention of risks. Ultimately it fell €15,000 short.

Despite my protestation they did nothing in the end and just paid up.

Maximilian

Generally, the CCA governs consumer finance and the Banks have a number of obligations and duties arising out of it. Provided they complied with that, I can't see how they can be held responsible for what now appears to be poor judgement by some borrowers. Nobody forced them to borrow the money at the end of the day.

It's a different matter if there has been some misfeasance by banks. There's obviously a possibility that a person might have a cause of action against a Bank in a particular instance but there's also the Financial Ombudsman, who has more power than you might think. There is a list of case studies here that gives a flavour of some the scenarios that come within its remit.

dynamick

Is there an argument that the while the borrower acted irresponsibly in borrowing such a large sum of money that the lender
* was negligent in estimating too high a value for the property being mortgaged
* was unwise to lend such a large salary multiple to a young person with poor education and earning prospects
* ought to have known better than the borrower given its disproportionate wealth and experience when compared with the borrower
* acted contrary to traditional cautious practice in offering 100% LTV loans
* acted contrary to traditional cautious practice in offering interest only loans

There were two sides to the trade and both sides acted foolishly. Could it be argued in law that the bank should bear some of the costs arising from the borrowers inability to repay? Unfair contract? Equity?

Also why was the bank not insured for the eventuality of negative equity given that banks used to ask borrowers to pay a 'mortgage indemnity bond' to insure against bank exposure to negative equity?

Maximilian

dynamick wrote: »

Is there an argument that the while the borrower acted irresponsibly in borrowing such a large sum of money that the lender
* was negligent in estimating too high a value for the property being mortgaged
* was unwise to lend such a large salary multiple to a young person with poor education and earning prospects
* ought to have known better than the borrower given its disproportionate wealth and experience when compared with the borrower
* acted contrary to traditional cautious practice in offering 100% LTV loans
* acted contrary to traditional cautious practice in offering interest only loans

There were two sides to the trade and both sides acted foolishly. Could it be argued in law that the bank should bear some of the costs arising from the borrowers inability to repay? Unfair contract? Equity?

Also why was the bank not insured for the eventuality of negative equity given that banks used to ask borrowers to pay a 'mortgage indemnity bond' to insure against bank exposure to negative equity?

If both sides act foolishly, they both pay the price for it. The foolish borrower defaults on his loan and loses his home and foolish bank loses the money it lent.

fliptzer

I personally know a number of people who applied to various banks for ‘interest only’ mortgages for investment properties. During the height of the bubble some banks gave it for the full term of the loan (eg. 30 yrs) while others claimed that in order to get interest only for the full term (e.g. again say 30 yrs) they would give the client interest only for 5 years and then keep extending it every five years until the term is completed (eg. 5yr interest only x 6 (extended 6 times) = interest only for 30yrs.)

The clients who took out the 30 yr interest only mortgages are ok but those who took out the interest only for 5 years (to be extended every 5yrs until end of term)…

Guess what a number of the banks are now claiming ….

That they never offered/sold:
1. Interest only mortgages for full term (which is crap as I’ve seen the documents myself)
2. To keep extending interest only until end of term (after each 5 yr period) Numerous people were caught out on this one.

This is just one of the examples of the banks bending over backwards and blatantly lying to get customers into mortgages - now that the bubble’s burst someone’s going to challenge their ‘arrangements’ and then the floodgates with open.