Haunted by the ghost lenders behind string of repossessions

Published 30th Jun 2009

Of the 250 home repossession orders granted in the courts every day - where judges give companies the right to seize properties where the owner has fallen behind with the mortgage - a disproportionately high number of cases are brought by 'ghost' lenders.

These are shadowy organisations that bought existing home loans from other lenders in the mortgage-trading frenzy of 2006 and 2007. They now 'own' the mortgages, including the right to set interest rates, collect repayments and repossess and sell properties if borrowers default.

These ghost lenders are repossessing aggressively and, frequently, unfairly. Specialist solicitor Daniella Lipszyc of Ultimate Law in Altrincham, Cheshire, says: 'This type of lender is particularly difficult.

'We see cases of borrowers being harassed by agents who turn up at workplaces or unannounced at home. In one case a lender sought to repossess a borrower's home for arrears of just £750.'

At the outset, the mortgages were provided by offshoots of major, and supposedly reliable, banks such as Merrill Lynch, Lehman Brothers or Bradford & Bingley. But many of these institutions have since collapsed or been rescued, due largely to their ruinous mortgage lending.

The mortgages themselves, meanwhile, have been bundled up and sold on to anyone that will buy them, including hedge funds or other investors whose identities are difficult to determine.

Peter Tutton, policy officer at Citizens Advice, whose court officers give legal advice to borrowers in repossession hearings, says: 'The number of repossessions being brought by these lenders is disproportionate to their size in the wider mortgage market.

'And our advisers tell us these lenders are also more difficult to deal with. They either refuse to negotiate or make impossible demands on borrowers.'

Alan Dickson, a mortgage broker with Ethical Finance in Renfrew, near Glasgow, has experience of many ghost lenders. 'Riskier borrowers were targeted towards the end of the boom,' he explains.

'Mortgages were set up and then sold on.' Some ghost lenders are in financial trouble themselves, Dickson maintains. 'They don't care what the properties fetch at auction,' he says. 'They are simply after what they can get now.'

Dickson cites one case where he is helping a distressed borrower whose mortgage is administered by a little-known company called Oakwood Home Loans.

The mortgage itself belongs to a Swiss bank. Dickson says: 'The borrower offered to pay off his arrears by doubling his monthly mortgage payment, but Oakwood refused and the repossession order is proceeding.'

Oakwood refused to comment. Last week, the Financial Services Authority found 'continued weakness' in companies' handling of repossessions, including 'pushing customers towards repossession without considering alternatives'.

Four companies were identified, the FSA said. They are likely to be among the list Financial Mail has identified (see above), but the FSA will not name them.

Dominic Lindley of consumer group Which? says this refusal to name firms could result in county courts continuing to order repossessions where borrowers have been wronged by lenders.

'It's disgraceful that the FSA is protecting the identity of the mortgage lenders that are treating consumers unfairly,' he says.

'How many chances does the FSA want to give these firms? Judges will be hearing repossession cases from these lenders over the coming months and they have a right to know which lenders the FSA is concerned about.'

The FSA told Financial Mail its policy was never to name companies still subject to investigation.

Housing charity Shelter polled 1,200 homeowners typically borrowing from ghost lenders - and an alarming one in five said they were struggling or already behind with payments.

Like Citizens Advice, Shelter urges borrowers to seek advice. 'There have been changes to court processes that could help, but borrowers need to attend court hearings and seek the help in the first instance,' a spokeswoman says.

Shelter's mortgage arrears helpline is 0300 330 0515.
American firms preying on UK mortgage misery

Today at 11am, 39 repossessed homes - mainly in Birmingham, South Wales and East Anglia - were being auctioned at the Metropole Hotel in Marylebone, central London.

Using records lodged at the Land Registry, Financial Mail sought the identity of the lenders that forced the repossessions in 20 of the 39 cases.

Of the 20 files analysed, only two cases involved mainstream UK lenders - Nationwide Building Society and Royal Bank of Scotland.

The other 18 cases all involved specialist lenders, most of which lent to riskier, or 'sub-prime', borrowers who might have had variable incomes or existing credit problems.

In nine of the 18 cases the repossessor was Mortgages 1 Ltd, a mortgage investment vehicle set up by U.S. investment bank Merrill Lynch.

Other repossessors included HFC (two cases), Capital Home Loans, GMAC RFC (two cases), GE Money, London & Scottish, Mortgage Express and Southern Pacific Home Loans.

None of these companies except GE is still lending. Most are U.S.-owned, or closely connected to mortgage-trading businesses in America, many of which are now bust.

One of the companies - Mortgage Express - is now controlled by the UK taxpayer as part of the failed Bradford & Bingley.

Source: ' This is Money '

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