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FOS calls rise over mortgage underfunding

The Financial Ombudsman Service has warned of a rise in the number of calls about miscalculated mortgage payments by lenders.

The FOS says the issue of “mortgage underfunding”, where borrowers are making repayments that are too low, is a long-standing one but notes a recent increase in the number of enquiries about how the ombudsman would deal with these complaints.

The FOS gets 100-200 mortgage underfunding cases a year, which typically account for 1 to 2 per cent of the total mortgage complaints received.

A spokeswoman says: “We have seen more enquiries of late about mortgage underfunding but we are waiting to see how that translates into actual cases.”

When it comes to deciding appropriate redress, the FOS will look at whether the lender is entirely to blame or if the borrower could have reasonably known that they were not paying enough. It says the recent increase in the number of complaints may stem from a greater awareness among consumers about lenders miscalculating mortgage payments.

The spokeswoman says it cannot comment on individual firms but the fact that a lender recently made errors in some of its mortgage calculations may explain part of the increase.

Yorkshire Bank and Clydesdale Bank wrote to 18,000 variable-rate customers in July apologising for an error which meant that the banks collected less than the agreed minimum monthly payment.

A spokeswoman for Yorkshire Bank and Clydesdale Bank says that of the total number of affected customers, only a small proportion complained and an even smaller number reported to the FOS. She says: “Looking purely at the data we have, it would not seem that as yet this would have caused an increase in the number of complaints that have gone to the FOS.”


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. Incompetent Regulators Awards Team 1st September 2010 at 4:01 pm

    How would anyone know at the FOS?

    When I was dealing with a specific adjudicator they didn’t understand how one couldn’t have a ‘no loss’ in a case of an upheld endowment complaint.

    FOS staff know little about what they are doing!

  2. The complaints system is in fact the ultimate perpetual motion machine.

    The ultimate get out clause for all of the ‘consumer’ ills?

    You name it and the FOS is ready and waiting to accept that call and even encouraging more complaints.

    The ‘Matrix’ of today, all the Mr Smiths are willing and able to disregard reason and logic.

  3. Surely this is a TCF issue, isn’t it ~ errors on the part of lenders leading to borrowers effectively accumulating payment arrears and not paying down their mortgages at the rate they’d been led to expect?

    Were I an FOS adjudicator, I’d decree that the underpayments must be made good by the lender whose blunder caused them to arise in the first place.

    Then again, Hector Sants has declared TCF to have been yet another in the long litany of costly FSA flops, so perhaps it doesn’t apply any more. But what do I know? The FSA’s buggering about with everything under the sun on such a constant basis that it’s hard for real people in the real world to keep up. In between studying for all those exams on things that have very little to do with what I actually do every day, I really must pay more attention to those 80 page regulatory updates that the FSA so considerately posts on its website at regular intervals.

    That aside, how incompetent does a lender have to be to be unable even to collect the correct payments on a mortgage? It’s hardly bloody rocket science, is it?

  4. Sadly it is rocket science. In days gone by lenders and customers did actually talk to each other.

    Compromise was king.

    Now they just chuck it upstairs to th e FOS. To highlight the extreme incompetence @ the FOS I will present a recent case AJUDUCATED on by the FOS.

    Client had decreasing term life and CI policy written over 25 years by adviser and mortgage (repayment) written over 28 years. Cancer payout by insurer over 25 years. Mortgage (repayment) over 28 years. FOS decision incorprated belief that difference in tern of mortgage and decreasing term life and ci policy was not relevant.

    My call on this is incompetents (FOS) did not have ability to work out loss.

    By the way they upheld complaint on the grounds that adviser did not incorporate the arrangement fee into the policy Sum Insured.

    Well beggar me that’s what we have to pay for.

    Posted anonymously to preerve the payout for my clients and to highlight the fact that there should be a need to post anonymously despite the comments to the contrary by idiots who post on this site and claim piously that ther should be no anonymous posts.

  5. Re Anon. 1/9/10 9;35

    Interesting, I am helping with a case currently at the FOS where lender sold decreasing term assurance, kept mortgage on interest only basis but continued to send client letters about his ‘Endowment’ policy.

    The FOS seem to have difficulty in understanding the basics.

    Ref. the Anon. bit. Obviously much more to this but cannot go into details as this is ongoing.

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