HOME 2017-10-03T11:04:30+00:00

Mortgage Audit

Reporting Software

specialist mortgage auditing service with particular expertise in the compliance requirements relating to residential mortgage contracts.

Mortgage Audit Reporting Software, or M.A.R.S for short, is a specialist mortgage auditing service with particular expertise in the compliance requirements relating to residential mortgage contracts.

We offer a professional nationwide service to legal advisors who represent claimant homeowners with mortgages including claims management companies and solicitors.

The experience of the M.A.R.S team includes mortgage advisors, lawyers, regulatory compliance experts and mortgage underwriters.  This makes M.A.R.S the obvious choice as a mortgage auditing partner.

Our combination of expertise, experience and holistic approach to auditing ensures the right outcome for claimants and their representatives.

Mortgage Audits

The purpose of the audit report, which is white labelled for the instructing firm, is to highlight potential breaches and high risk related issues for regulated mortgage contracts.

Since 2004 brokers recommending mortgages to owners of residential property (where the mortgage is a first legal charge on a residential property) has been an activity regulated first by the Financial Services Authority and then by The Financial Conduct Authority (FCA) from 1 April 2013, through the Authority’s Mortgages and Home Finance: Conduct of Business sourcebook (MCOB).

MCOB contains a series of rules which authorised brokers and lenders are required to comply with in their performance of recommending suitable mortgage products to consumers or otherwise assessing a consumer’s ability to repay any recommended mortgage. The purpose of the rules is to ensure that consumers make informed choices about the mortgages they enter into.

Rule 4.7 of MCOB states that mortgage advice must be “suitable for that customer” and that advisers “must make and retain a record” of it being suitable.

The primary areas of breaches highlighted in the report are typically:

  • Clients being recommended unaffordable Interest only mortgages or re- mortgage, or where there’s an inadequate repayment vehicle

  • Clients in financial difficulties who have been advised to consolidate debt when they should have entered IVAs or debt management instead

  • Clients who have been advised to consolidate debt which has proven to be more expensive overall than if left unconsolidated Clients recommended unaffordable mortgages who then get repossessed

  • Clients recommended unaffordable mortgages past retirement

  • Clients recommended an inappropriate more expensive subprime lender, particularly Right To Buys

  • Capital raising on residential home for BTL investment or investment into foreign investment

  • Self-certified for self employed

  • Self -certified applications for employed applicants

  • Clients who have taken payment holidays

The audit report will form the basis of the solicitor’s claim work and may be used in evidence.

A client took out a repayment mortgage with a high street building society with initial borrowings of £160,000 and a subsequent further advance of £30,000.

Case Summary

The client’s lender had mis-calculated the interest payable by not appropriating the repayments in the proper manner. This had resulted in significant over-charging of interest which the client was completely unaware of. It was only upon an interrogation of the information provided under the DSAR that the overcharging was discovered.

Result Of Claim
The claim was submitted to the lender and redress was paid to the client of £20,092.50 plus £9,429.15 statutory interest.

In the following example case, a number of breaches to the Mortgage Conduct of Business rules were identified and highlighted in the report.

Case Summary
The broker advised the clients to remortgage in April 2006.
At the time of the advice the clients had a capital repayment mortgage with Preferred with an outstanding balance of £76,847 including arrears. This mortgage had completed only 12 months earlier and had a remaining term of 16 years.

The clients were experiencing financial difficulties and wanted to reduce their monthly outgoings.

The DSAR included the lender application form indicated erratic mortgage payments and arrears throughout the preceding 12 months.

Assuming the broker undertook a fact-finding exercise before his recommendation, It ought to have been clear to him that the clients should not increase their secured indebtedness and should have sought independent debt advice regarding their unsecured debts, and have prioritised their mortgage payments.

The broker recommended an interest only remortgage over 21 years at a marginally higher rate than the existing by 0.5%

The broker exacerbated the situation by recommending consolidating £8,000 of unsecured debts and adding the inevitable fees and charges which would be incurred in this situation.

The new mortgage amount represented an increase on the existing by £16,903.
Of the £16,903, £9,769.85 was the total of associated fees in respect of the new mortgage, £8,000 was unsecured debt consolidation. Within the £9,769.85 the broker fee charged was £3,595 and £4,789.85 the early redemption penalty applied to the existing mortgage incepted 12 months earlier.

Mrs xxxx was aged 57 at the time of the advice and will be aged 78 at the end of the recommended term, her partner will be 77. Within the DSAR there is no indication of anticipated retirement ages nor how the mortgage payments would be met in retirement.

The best advice would have been to advise the clients to seek independent debt advice regarding the two unsecured accounts and not increase their secured borrowings by remortgaging, consolidating previously unsecured debts and incurring large fees and charges in the process.

They should not have been advised to switch from a repayment mortgage to an interest only mortgage without any suitable repayment strategy in place.

Result Of Claim
As the advising broker is no longer trading, the solicitor acting submitted this complaint and report to the FSCS resulting in an offer of compensation of £60,224.96.

The FSCS offer letter states “The compensation aims to put you in the financial position you would have been in if you had not received the firm’s mortgage advice. The compensation covers losses already made and settlement of the mis-advised mortgage, including any penalties payable to the lender. It does not aim to cover future or assumed losses”

Route To Redress

FAQs

Is a report completed on every case for which a DSAR is applied for? 2017-09-22T15:00:23+00:00

The initial filtering stage, prior to any DSAR request being made, will remove the majority of unviable cases.

It is only upon reviewing the information contained in the DSAR that we can identify whether a claim is likely and we issue a report in all cases as we are required to act with diligence and demonstrate our findings. It should also be remembered that clients who are over indebted and who have been in arrears, are more likely to have been missold a mortgage than most other client groups and consequently we expect a higher than average of winnable claims from these cases.

Even where there has been no actual mis-sale of the mortgage there is a strong possibility that the client may have been overcharged interest particularly where mortgages have fallen into arrears or defaulted. This is likely to substantially increase the number of clients who have a claim.

How long does it take before a report is completed? 2017-09-22T14:59:41+00:00

We expect to complete the reports within 2 weeks of receiving the DSAR. The organisation providing the DSAR information has 40 days in which to respond to the DSAR request.

The criteria provided for the mortgage claim seems vague. Why isn’t more specific criteria being applied? 2017-09-22T14:59:13+00:00

The range of mortgage mis-selling criteria is broad and likely not to be immediately available within the data held in respect of clients. This information would only be found on receipt of the DSAR.

What is the turn-around time for the completion of the audit report to claim completion? 2017-09-22T14:58:45+00:00

From the return of the Data Subject Access request (DSAR) documentation to settling a claim we would expect around 5 to 6 months on average.

Our clients won’t be able to remember who advised them on their mortgage several years ago so how would you obtain the relevant information? 2017-09-22T14:57:52+00:00

We will apply to the lender for a DSAR and the documents therein will identify the information required in respect of the mortgage claim although it is important to remember that the claim is unlikely to be brought against the lender.

Is this similar to PPI mis-selling? 2017-09-22T14:47:33+00:00

It is similar to PPI in the sense that the client has been mis-sold a financial product and service and that the claim is brought under the Financial Services and Markets Act 2000. However mortgage mis-selling is not as wide spread as PPI mis-selling. Mortgage breach of contract claims are established through contractual liability.