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FOS getting 500 underfunding cases a year

The Financial Ombudsman Service says it is getting 400-500 mortgage underfunding cases a year, where borrowers complete the term but have not cleared the loan.

The FOS warns that it can often be several years before anyone realises that something is wrong and by then borrowers may have paid off much less of their mortgage capital than they thought.

Mortgage underfunding is where borrowers have been paying the full repayment amount stated by their lender but subsequently find the lender quoted an insufficient monthly amount. Len-ders are then legally entitled to demand the shortfall from borrowers.

The ombudsman says cases often come to them when lenders have not followed the correct procedures.

The four most common areas of difficulty in cases referred to the FOS are using out-of-date compensation tools, accounting for periods of mortgage arrears, accounting for capital repayments and overpayments and changes in a customer’s circumstances.

Spokeswoman Emma Parker says: “While this is not a massive figure when one considers the number of mortgages out there, it is important for those involved.”

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