Families suffer home loans torment that watchdogs failed to stem

By Richard Dyson 
The Financial Services Authority fined mortgage company Swift 1st £630,000 earlier this month and ordered it to compensate borrowers with £2 million of refunds.
It was the fifth sub-prime lender so far to be fined for the same wrongdoing. The lenders had unfairly charged borrowers who were in arrears, said the watchdog.
Although five businesses have been fined, there are others whose practices appear similarly harsh but which have yet to be censured.

 Complaint: 'Sheila James' lost her home after falling into mortgage arrears

One is Acenden, formerly known as Capstone, a mortgage business that adminsters thousands of mortgages originally provided by offshoots of failed US investment bank Lehman Brothers.
Financial Mail has highlighted numerous cases where Acenden has applied large, repeated and unexplained charges to borrowers in arrears. In some cases these charges are blamed for the homeowners losing their properties.
Sheila James (not her real surname) first fell into arrears in December 2007, a year after she and her partner remortgaged for £120,500 at a high rate of ten per cent – later falling to about five per cent – on a modest 1936 two-bedroom maisonette in Whetstone, north London.
Sheila, 57, lost her job that year and her partner, who also wishes not to be identified, suffered a drop in his earnings too. The couple could not keep up with the mortgage payments of about £1,100 a month and started slipping behind. Some months they managed to pay the full amount but sometimes they simply couldn’t find the money.

In a panic they sent off several cheques of between about £50 and £100, but because Acenden was levying repeated penalties, in some cases of more than £100, these payments had little effect.
Over the next two years, until their home was finally repossessed, Acenden billed the couple a total of £6,409 in penalties and charges. To make matters worse, it applied interest of between five and ten per cent to the penalty charges. The pages-long list of charges includes repeated fees of £25 and £50 for unpaid direct debits and cheques, eight charges of £50 each applied for ‘arrears management’ and 16 charges of £115 each for ‘litigation management’ or ‘repossession management’.
There were also numerous undetailed ‘legal costs’ totalling more than £1,800 and further one-off costs not explained on Sheila’s statements. ‘The relentless increase in charges, plus interest on charges, meant  that once we had fallen into arrears there was no hope of clawing back,’ says Sheila.
After being repossessed in July 2010, the maisonette was sold in October 2010 for approximately £110,000, triggering a £63,375 shortfall – money potentially still owed by Sheila and her partner. When Financial Mail checked with the Land Registry, it emerged that the property was sold again just three months later in January 2011 for £180,000.
It is believed the value was increased so dramatically by extending the lease, but the cost of this is unknown. Acenden has refused to answer either Sheila’s or Financial Mail’s questions.
The FSA has received numerous complaints about Acenden, but it will not comment on individual firms.
It told Financial Mail: ‘We continue to focus closely on the way firms treat customers who get into arrears. The industry as a whole can expect continued, intensive scrutiny of arrears-handling processes.’
Sheila says she has not been told of the property’s sale and says she has not been sent a final statement or given any indication as to whether she will be expected to make good the shortfall.
She has lodged a complaint with the Financial Ombudsman Service and says: ‘Looking back, I think the penalties and charges were structured in such a way that as soon as we fell behind there was only going to be one outcome, losing the property.’
Debt advice: Finding help in mortgage crisis
Sub-prime lending – giving mortgages to people with less than perfect credit histories – dried up after the credit crunch.
But hundreds of thousands of borrowers remain saddled with sub-prime mortgage debts where interest rates are often high, service poor and documents impossible to understand or at worst misleading.
In most cases the original lenders have gone bust and the loans are now administered by other, little-known firms such as Acenden.
Wherever possible, it is best  to move your mortgage to reputable, mainstream lenders. If you can’t, and you face difficulties and are likely to fall into arrears, explain this to your lender at once in writing or by email.
Keep meticulous records of all correspondence and ensure you understand all the documents you are sent. Ask in writing for an explanation if necessary.
If your situation deteriorates get support from housing or debt charities such as Shelter (shelter.org.uk or 0808 8004444) or the Consumer Credit Counselling Service (cccs.co.uk or 0800 1381111) or Citizens Advice (citizensadvice.org.uk). Your MP might also be able to help if, for example, your lender is refusing to provide information or explanations.

Lender stays silent on its loan rates and bills

Acenden, formerly Capstone, administers mortgages originally lent by British subsidiaries of Lehmans. Financial Mail contacted Acenden to put questions to it about the case of Sheila James, above.
Acenden said it could not respond because the ‘lender’ – the Lehmans-founded subsidiary Southern Pacific – ‘would not give permission.’
Acenden and Southern Pacific have been secretive before when asked questions by Financial Mail and clients.
They have refused, for example, to provide information about mortgage rates currently paid by their borrowers. Nor have they justified charges they have applied to borrowers in arrears.
The two companies are technically separate entities. But in practice the role of ‘lender’ and ‘mortgage administrator’ are intertwined. The FSA register of companies shows that the contact details for Southern Pacific are also those for Acenden.
Acenden’s current chief executive, the former Lehman banker Amany Attia, was a director of Southern Pacific until last year.
Acenden says: ‘We cannot comment on or for our lender clients.’ Emails sent directly to Southern Pacific were not answered.