Mortgage company son of Lehman makes profits from harsh charges and waves of repossessions

Published 07th Nov 2010

A secretive British mortgage company established by failed US investment bank Lehman Brothers is back in profit – thanks in part to the scores of repossessions it pushes through the courts each week.

Capstone, which has 80,000 UK borrowers with mortgages totalling £7 billion, also profits from punitive charges it repeatedly inflicts on customers, vastly inflating their arrears.

These charges include hundreds of pounds applied on top of arrears and interest under the guise of ‘arrears management fees’ (£85), ‘litigation management fees’ (£115), ‘referral to solicitors fees’ (£50) and others.

Capstone, whose Mortgage offshoot profits from harsh charges and waves of repossessions aggressive staff reportedly bombard borrowers with as many as 15 phone calls a day demanding payment, also sends ‘financial advisers’ to knock on their doors – sometimes without a person’s knowledge or permission – and then bills them up to £250 for the ‘service’.

The Financial Services Authority sought to restrict such practices with rules introduced in June. It appears Capstone then altered certain processes. But Financial Mail is aware the FSA, which will not comment on individual firms, continues to receive complaints.

Capstone employs 430 and has offices in London and High Wycombe, Buckinghamshire. Most customers were borrowers with Southern Pacific, Preferred or London Mortgages, which had all stopped lending by 2008. It is now part-owned by its management, which includes at least one former Lehman banker (see below).

The number of repossessions sought by individual mortgage companies is difficult to pin down because courts publish case details just before hearings and records are not collated. But based on information from court workers, Financial Mail believes Capstone is responsible for about 70 repossession hearings a week, roughly one in
ten of all repossessions sought, even though its mortgages represent only 0.5 per cent of the entire market.

To make matters worse, Capstone’s administration is shambolic, with interest rates and terms frequently altered, sometimes without notification. Borrowers’ statements include arbitrary charges that are not explained.

Capstone customers also allege it routinely loses documentation and fails to respond to requests for statements and other information, even when made by courts.

Danny Bovill, a successful landlord with seven properties who also runs his own construction firm, has one mortgage with Capstone dating from 2006.

After a year, Danny, 34, from Canvey Island, Essex, realised it was wrongly charging him for insurance he did not need. He repeatedly sent Capstone the information it required to give him a rebate of the premiums, but it ignored him.

Danny and his broker logged 126 calls to Capstone on the subject. In disgust, he eventually withheld payments to recoup what he calculated was £1,460 owed him. But its collections department slapped hundreds, and then thousands, of pounds of charges on to his account, saying he was ‘in arrears’.

Danny resumed his payments, but Capstone pursued him for the charges, seeking to repossess the property on four occasions. Possession was not granted by the courts, but the legal actions triggered thousands of pounds of costs that Capstone wanted Danny to foot.

Capstone has now conceded some of the charges were wrong and that money is owed to Danny. But its records are so slapdash and contradictory he will not trust its calculations. The matter is with the Financial Ombudsman Service.

While Danny is confident enough to fight Capstone in court, there are worries that other borrowers will succumb to its aggressive tactics and lose their homes, perhaps unnecessarily.

Danny says: ‘Capstone has added charges to my account, accepted overpayments without telling me, failed to notify me of rate changes and generally mismanaged my account to the degree that I cannot accept any of its figures.’

Capstone said: ‘We work hard with all customers in financial difficulty to come to a mutually acceptable arrangement whenever possible to pay their arrears over time.

‘Where arrangements on arrears accounts are maintained, fees are not applied. It is inappropriate to comment on individual cases. We do all that we can to help customers in financial difficulty and repossession remains a last resort.’

Source: ' This is Money '

View All Latest Articles