Struggling mortgage holders warned fake loophole claims could worsen problems
Mortgage holders who are struggling with their payments are being warned they could make problems worse by acting on fake claims about legal loopholes and conspiracy theories claiming they cannot be held liable for their debts.
The Financial Conduct Authority (FCA) said that people in financial difficulty and at risk of losing their home should beware of misleading claims that they are not legally bound by their mortgage contract.
It urged struggling borrowers to instead speak to their lender, who could offer various options to support them.
The FCA has updated its consumer web pages to warn people about false and harmful information.
The regulator said it is aware of mortgage holders in financial difficulty being misled by online misinformation, often with serious financial consequences.
Claims may use arguments dating back to the Magna Carta and people may also attempt to apply them to other types of debt or taxes.
In a bid to stop their home being repossessed, mortgage holders may end up paying others a fee to take their claims to court.
But, as well as being unsuccessful due to claims not being legally valid, people could also risk losing a big chunk of the equity they had in their home (the difference between the outstanding mortgage balance and the value of the property), the FCA said.
This is due to increased costs related to repossession, legal fees and the impact these activities can have on the value of their homes.
Even if someone cannot afford to stay in their home, their lender may be able to help them sell.
This would at least mean that money left over from the sale is not spent on legal fees or other arrears and repossession costs.
Greg Sachrajda, head of department in retail banking market interventions at the FCA, told the PA news agency: 'There is a risk that people who are in financial difficulty, and at risk of risking losing their home, are particularly susceptible to arguments that make things sound better.'
He said: 'If something seems too good to be true, it usually is.'
He continued: 'If you borrow money, you're required to repay it, and you only make the situation worse by trying to rely on false arguments which the courts are rejecting.
'We know people are desperate and can be struggling with their mortgage, and they may feel that things can't get any worse. But the reality is that unfortunately they can get worse.
'We've seen examples of people not only losing their home but also then getting less back from the proceeds of the sale of the home.'
He said that is because lenders are incurring additional costs, which are then passed on to the consumer.
Mr Sachrajda said that 'real help is available', adding: 'Our message to consumers is: 'Don't fall for these false, misleading arguments but instead speak to your lender who can help with real options to make things better.''
He said that lenders are required to treat borrowers who are in financial difficulty sensitively and fairly.
Some options can prevent people from losing their home, by extending the term of the loan or temporarily switching to an interest-only mortgage, or agreeing a payment holiday, for example.
In some situations, selling the property may be the appropriate next step, he said, adding: 'But even then they can help, because many lenders offer what we call an 'assisted voluntary sale' and that essentially gives the borrower more time to sell the property and the lender can help with both the costs of that process and also how to navigate the sales process to make that easier.
'And that can then help maximise the amount of money the customer makes from the sale.'
As well as contacting their lender, people could also consider contacting a trusted service that can provide free help, Mr Sachrajda suggested.
Organisations providing free support include the National Debtline (run by the Money Advice Trust), StepChange, Citizens Advice and the Government-backed MoneyHelper service.
A spokesperson for banking and finance industry body UK Finance said: 'Struggling with mortgage payments can become overwhelming, however it's important to beware of advice circulating online which could put your home and finances at serious risk.
'It's always worth seeking independent legal advice before acting on information you find online, as understanding your legal position fully will help protect you from costly mistakes.
'If you're struggling with mortgage payments it's important to speak to your lender as early as possible, as they'll be able to offer a range of tailored options to help you. Lenders have dedicated teams who can work with you to find a way forward – whether that's adjusting repayment plans or exploring alternative solutions.'
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