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IFAs challenge Ocwen over massive fees

IFAs are challenging Ocwen to justify why it is paying brokers up to £7,500 commission on its mortgages which all have eight year redemption penalties.


The sub-prime lender is under fire for tempting brokers with exorbitant procuration fees and locking borrowers into mortgage rates which can be as high as 5 per cent above base rate for eight years.


It also charges borrowers 10 per cent arrangement fees which add an extra £5,500 to its average sized £55,000 mortgage. The average arrangement fee is £295.


Ocwen, which has 46,000 loans on its books, has an early settlement policy that charges borrowers 6 months interest if they redeem in the first three years, reducing by one month thereafter to eventually allow the borrower to leave the loan without penalty in the ninth year.


The lender has seven mortgages in its range and the introducer receives 1.5 per cent of the loan for recommending &#39Phoenix 1&#39, rising to 4 per cent of the loan for recommending &#39Phoenix 7&#39.


The 4 per cent fee compares to 0.75 per cent paid by Future Mortgages and 2.25 per cent being paid by The Money Store.


Ocwen has incurred the wrath of IFAs amid the launch of its trade press advertising campaign which run the strap line &#34mirror mirror on the wall who is the fairest of them all&#34.


Baxter Investment Services partner Nick Baxter says: &#34It seems as if they are trying to make as much money as they can out of people who desperately need help and assistance.&#34


Ocwen claims its charges are transparent, fully explained and based on a sliding scale. It says: &#34The early settlement charge is simply a reflection of the need to recoup initial set-up and financing costs. The arrangement fee is a point of negotiation between the borrower and the broker.&#34


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