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.
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.