You know that moment when your client's eyes glaze over with a complete lack of comprehension? There you are, merrily making your way through a mortgage application. You have explained the deposit, the interest rate, redemption charges and what they should and should not budget for.
Then you hit a snag. Mortgage indemnity guarantees – one of the most expensive single-premium policies that anyone ever buys and it does not even protect them. You can see why potential borrowers cannot get their heads around the concept.
So, in early January, Clark Conway took the lenders to task. How much does the policy cost? Why the difference between lenders? Why can't borrowers choose their own policy on the open market? Why can't lenders accept the risk as a normal part of their commercial operations?
Simple questions but obviously difficult answers. Only one of the lenders that we surveyed managed to come up with the true cost, including interest, of adding a MIG to loans. Others fudged with the "commercially sensitive" reply.
But from among the scant answers, several important issues emerged. Why do different lenders charge a MIG at different rates when their levels of arrears and repossessions are all roughly equal?
When asked whether MIG premium rates had fallen in the last few years as the repossession crisis has receded, why did they claim it was a competitive market and that they could not divulge information?
This situation was clearly not good enough and we decided to have a rant. We wrote to the Building Societies Association and the Council of Mortgage Lenders. Unfortunately, they could not manage a reply.
Lest the lenders forget, IFAs sell a lot of mortgages on lenders' behalf. It is not uncommon for more than half of all lending new business to be channelled through the IFA sector. So the need for better service, responses to our worries and for better products is clear.
Next, we tried the MIG insurers. They liked the idea of selling a competitive policy – hardly surprising as the number of lenders who self-insure rises every year and cuts into their own lucrative block policy markets.
The insurers like the idea of a portable MIG policy. The average homeowner moves home every seven years or so but why if a MIG policy is priced for the life of the whole loan, do you then have to take out another policy on your next house? We await further details from them.
OK, so the insurers have not launched a new product yet. But at least they are willing to listen.
The second half of our campaign kicked off with some cunning statistics culled from the lenders themselves.
From our research, we established that well over half of first-time buyers add the cost of a MIG to their loans. Yet under 0.5 per cent of them get repossessed.
The maths seems extraordinarily lopsided, so why does everyone pay? Comparing the total cost with provision against losses, the numbers did not make sense. Lenders were raking it in, insuring it and losing relatively little. Someone somewhere obviously has to fund this and we guessed that it was the customer.
Our next step was to ask the press to turn up the heat and get justification from lenders. Many lenders remained mute, refusing to comment or just trotting out the same old lines.
So, we tried the human angle. Evidently, we are not alone in having a handful of customers who have received shock demands years after handing in their keys. Case studies such as these are worth their weight in gold as they have got all the right ingredients – misery, fear, emotion and, of course, "the big faceless banking institution that really does not care".
Coverage in The Times, Independent on Sunday and the Mail on Sunday stung the lenders even more. Then, something began to give. At last, some positive development.
Last Thursday, Halifax, the UK's biggest lender, ditched MIGs on loans of between 75 per cent and 90 per cent of valuation. A step in the right direction but still not far enough.
I still have a mortgage customer who got a bill for £24,632.03 on a property she left over seven years ago. It cannot be right that, even after paying a MIG policy to protect her lender from losses on the property she left behind, she still faces uncertainty and possible financial ruin.
Although we are too modest to claim victory against the Halifax as our own, we wait with crossed fingers to see who will be the next to fall into line – Abbey National and Northern Rock have already made their moves.
Will Halifax still pursue people for losses on sale? No answer on that one yet. Will other lenders now ditch this unjust mortgage tax that costs borrowers thousands and gives them nothing? Who knows?
Even if they do all fall into line for loans up to 90 per cent, I will be trying to get lenders to ditch MIGs altogether. After all, Cheltenham & Gloucester does not charge it and, if it can cover costs, I am sure that others can too.
With housing minister Hilary Armstrong already worried about 100 per cent lending and, with one of her researchers going through the Clark Conway survey findings, it will be interesting to see what the Government does.
The new year resolutions are going well. What is next? IFA pressure, with some well- targeted research and a little bit of press relations, can go a long way. I would love to see other IFAs play the game too.
It certainly adds value to the service we provide. Clark Conway has had letters and calls from new and existing borrowers who are glad to see that we are fighting their corner. Even if they do not fully understand the products and issues we are fighting, it is the point that counts.
We welcome some assistance to rid the market of MIGs altogether but, if we can't do that, we would settle for:
Lenders to make it clear to clients what the cover protects and what it does not. They should also show the true cost of adding a MIG to the loan.
Lenders should stop pursuing borrowers. After all, that is why we pay the MIG in the first place.
Increasing the LTV from 75 per cent to 90 per cent defeats the object as clients with no money still get caught.
The product needs to be balanced. Customer pays, bank gets commission and protection, yet the customer gets nothing.
Surely, none of this is beyond the intellectual capabilities of our great lenders? If you would like to lend a hand or if you have clients who are in the same boat, we would love to hear from you. You can call us free on 0500 120000.
If you ever have problems selling poor products to your customers, whether mortgage, investment or protection, ask yourself if you could design it better. Get it right and you might just have an easy fight on your hands.