Barclays, HBOS face £850m law suit
Barclays and HBOS are about to be hit by mortgage litigation costing a possible £850m, following changes to the rules on consumer loans.
Hilary Messer, a partner at South East firm RWP Solicitors, is drawing up plans to sue the two major banks on behalf of the 8,500 people who took out zero interest housing loans in the 1990s.
HBOS and Barclays launched mortgage products called shared appreciation mortgages, which saw the banks take up to 75 per cent of the appreciation in value of a property in return for providing a zero or fixed-interest loan.
Some homes have appreciated £300,000 in the 10 years since the loans were made, meaning the homeowners have had to pay more than £200,000 on loans as low as £25,000.
Messer says that the terms were too harsh and changes to the law could mean that the homeowners are in a position to renegotiate the terms in court.
She said: “We’ve taken advice from eminent leading counsel that homeowners should take action and take action quickly. We want to take on the banks and we have 100 people committed to going forward already.”
Messer added that if all 8,500 homeowners came forward, cutting an average of £100,000 off each of their repayments, the banks could lose hundreds of millions of pounds in expected revenue. Some properties have seen more than £1m added to their value.
The firm has set up a website, www.samgroupaction, to encourage people to sign up to the litigation. Messer is waiting for more homeowners to come forward and has not yet instructed counsel or informed the banks.
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Readers' comments (14)
Anonymous | 10-Aug-2009 6:08 pm
I am a S.A.M holder and went in with my eyes open and being given the nod by a solicitor .But no way was it envisaged that the house prices would rise at such a rate.
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Anonymous | 26-Nov-2009 4:56 pm
NOT SCROUNGERS
This was NOT an investment product, but a MORTGAGE. It was a service, provided for a fee. If there was a gain for the pensioner there was a remote chance the house price rise might be lower than an interest repayment. But the upside potential for this was extremely small.
By contrast, the banks would have known that the upside potential on theior side was almost without limit - at the expense of the elderly customer.
These were elderly pensioners with no access to borrowing by other means because their incomes were so low - some borrowing for health treatment.
Whilst they could clearly understand the bank would be repaid from the equity, the devil is not in the nature of the arrangements but in the detail of the gearing.
A pensioner may well not have foreseen the circumstances in which that this gearing would suck most the value out of the house, leaving them a minority share. A bank most certainly would.
A responsible retail bank should have introduced caps into the terms to safeguard its customers.
The fee is massively out of proportion to the service provided. The banks have not earned this level of remuneraton. Their case may be based on having obtained a signature - but so was Shylock's.
Are retail banks to behave as service providers or con men?
In which of these manners were they behaving when they sold these mortgages?
The generation to which these products were sold respected bank managers the same way they did vicars and doctors.
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K Baker | 16-Apr-2010 8:43 am
THE DREADED SAMS (Shared Appreciation Mortgages)
Twelve years ago I arranged a SAM, a BOSSAM No 6
Recently I decided to look into 'getting out' of the BOSSAM.
Having made a few enquiries about current equity release schemes and lifetime mortgages i have now, thru very helpful agencies, satisfactorily refinanced myself, redeemed the BOSSAM and obtained some further living capital.
At this time because of the recent fall in house prices (valuations) and interest rates the whole excersise has beem achieved with better results than may have been expected.
These SAMS have come in for considerable 'stick' over recent years not in the least due to SAFE whipping up much fervant opposition to the schemes.
I must say that I agree to some extent with the view that when people went into these schemes they should have had their eyes open and if it wasn't for them should have spotted any socalled pitfalls and stayed out. For me, although the eventual borrowing rate turned out higher than expected, the whole process has come to a satisfactory conclusion.
With regards to SAFE and in my own case they were particularly unhelpful and unresposive. They are more interested in obtaining contributions (very small ones in my case thank goodness) to their tacky organisation than investigating the extraction possibilities from the schemes.
The recent request for BOSSAM holders (approx. 7000?) to lob in £5000 each to enter a questionable lengthy litigation astounded and appalled me.
The only ones who will see a return from this will be the legals with vast fees and the probability of no successful outcome for the SAM holders
Additionally it will be years before any government will do even the minimum to assist those holders.
BOSSAM holders should now come out of SAFE and look at the alternatives and not put any more £5000's in or bung any more cash to SAFE. Their latest bullitin now admits that they are heavily out of pocket by going down the legal route.
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Anonymous | 6-Aug-2012 11:20 am
These mortgages were sold to elderly people who grew up trusting bank managers as they did vicars and doctors (and probably lawyers). The implications of these terms over time was unclear not because of the sharing - which is easily understood - but of the pernicious gearing assigned to the sharing which requires careful scenario projections. It is clear from the case studies that intelligent people trusted reputable banks to have constructed a fair product only to discover the relationship was otherwise. The banks were prepared to offer products that severely disadvantaged purchasers with usurous rates. If they could get the signature, that's all their consciences required. Shakespearean parellels come to mind.
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