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Pensioners sue mortgage lender over self-cert interest-only loan

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Coventry Building Society’s specialist lender Godiva Mortgages is being sued by two pensioners for more than £400,000 over a controversial self-certified interest-only mortgage deal.

The loan was taken out on a £650,000 house in Surrey where Norma Mason, 79, and her husband Robert Mason, 78, say they have lived for 40 years.

On 1 February 2008, the Masons got a £487,500 interest-only self-cert remortgage with Coventry Building Society buy-to-let arm Godiva, according to High Court documents seen by Money Marketing sister title Mortgage Strategy.

The Masons got the deal through broker Access Business Finance.

The couple kept up the monthly interest payments, but when the mortgage ended in 2013 they claim they had no way of repaying Godiva the bulk of the mortgage.

Self-cert struggles

The couple qualified for a self-cert loan because they were classed as self-employed due to owning property development company Mason Homes.

Godiva says the Mason’s application form says they earned £200,000 a year joint income from Mason Homes the year before the mortgage, qualifying them for the large loan.

However, the Masons claim Mason Homes actually made no profit in the period, that Godiva should not have lent to them and that they are now out of pocket.

The couple says the lender did not check their ability to repay and did not account for their age or their status as retirees.

The couple say Godiva owe them a duty of care and should act in their best interests.

The court papers say Godiva “failed to exercise all proper skill and care, diligence and competence that was demanded of it as a reasonably competent lender”.

The Masons are suing Godiva for around £400,000. This figure includes the original mortgage amount, plus interest.

Godiva’s defence says it believed the Masons were property investors with a joint income of £200,000 in the year before the loan and that it had no reason to doubt this.

It adds: “Since the remortgage application was a self-certification application, the defendant was not obliged to verify this income.”

Godiva adds that is ran credit and bankruptcy checks on the Masons, and was satisfied with the results.

The lender also says that the Masons could sell the property and repay the loan, and that the couples’ loss is their fault.

The lender says the Masons took out the loan with advice from Access Business Finance, and that the couple signed a form stating the broker was not an agent of the lender.

Arms length advice

Godiva’s defence papers say the lender was not responsible for the advice the Masons received.

Additionally, the Masons say an electronic application form listed their income as £200,000 a year but that a hard copy left the field blank, which Godiva did not pick up on.

But Godiva says it did not get a hard copy until the Masons filed a claim against it in 2013.

Godiva’s defence concludes by saying the lender reserves the right to start possession proceedings against the Masons if the couple does not repay the cash owed under the mortgage contract.

The Masons started suing Godiva in April 2013 and the case has its first court date on 9 May.

Coventry Building Society had not responded to requests for comment by the time of publication.

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Comments

There are 16 comments at the moment, we would love to hear your opinion too.

  1. what about borrowers taking some responsibility then?

  2. I am right that this was a BTL loan but the clients lived in it and it very was or became a BTL ?

    I think the Masons knew what they were doing by saying it was going to be a BTL so why fo they not sell it.
    What have the done with all that money in 5 years
    And anyway it is the broker who has arranged the deal not the lender
    It all stinks and I do not often stick up for lenders

  3. So what happened to the £487,500 they originally borrowed?

  4. Re arrange this sentence “smell I rat a”

  5. If this income was self certified but not correct is it not fraud?

  6. Terry Mullender 12th April 2017 at 4:57 am

    Whatever happened to accepting individual responsibility, (applicants) honesty and ethical behaviour?

    The age of the mortgage applicants is no excuse, and should be no “shield” in which to try to hide behind.

    A sad example of the “compensation culture” society that we now live in.

  7. Who is paying their legal costs? Surely not us poor bloody taxpayers? They can’t win but given that it’s taken four years to come to court, it’s put off the evil day of payment and their property must have rocketed in value. Whatever happens they’ve won!

  8. How does this make any sense? They have not lost £400k, it is in the equity of the property and the lender has every right to repossess it now. It was a self-cert mortgage, so it is the applicants who are responsible for what they put as their income. I can’t see their claim winning but regardless of the outcome it’s a clear sign that the UK’s compensation culture is out of control and needs to be addressed urgently by the government.

  9. Jennifer Arsington 20th April 2017 at 12:12 am

    These poor, poor elderly people. People need to show more compassion. The lender could very easily write this loan off at the click of a mouse. Absolutely disgraceful to make them suffer in this way in the twilight of their years.

  10. Surely as they lived in the property for 40 years either they extracted the capital and used it elsewhere or had other debts which they then consolidated on to the loan. The money didn’t magically disappear, it was spent, on what is the only question to be asked. If it went on asset purchases then sell them and repay the debt as they should have had increases in asset values over the last 7 years. If it was simply spent then tough luck. In addition surely the clue is in the “Self Certification” part of the loan. Why, if they felt this loan wasn’t for them, did they sign the paperwork and borrow the capital. No sympathy unless the paperwork was forged and they aren’t arguing that. If you don’t like or understand the contract don’t sign it.

  11. I’m not a mortgage broker though I’d thought that, by definition, self cert is effectively Execution Only and absolves the lender from establishing, amongst other things, affordability. Or is my understanding of self cert incorrect?

  12. Hard to see even FOS finding for them.

    But in this crazy world you never know.

  13. This couple are gaming the system. No sympathy. Pay what you owe.

    Jennifer – are you their daughter?

  14. The words ” bloody chancers ” spring to mind.

    I wonder who is paying their legal costs

    • The banks legal bill is £240K, but still are NOT good enough to repossess the property for their client. The pensioners are represented by a family member not even legally qualified! I think the bank will pay everything!

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