Aibu to wonder how the hell it was deemed appropriate to sell my parents this mortgage

[pud1]

Quick back story. My mum dies last April and my dad died last October. Both aged 59. Both cancer. No wills. Mortgaged property. I have got grant of probate and have had the house on the market. Not been paying mortgage since dad died. This was agreed by lender dad left about 25k. This was mums death in service ( part time cleaner for nhs ). No life insurance ( think he cancelled it). I love them dearly but they were a financial nightmare.

The mortgage on the house was for 80k. The unpaid payments have mounted to about 4K so I owe about 84k. Out of this 25k I have paid for 2 funerals and paid utility bills as well as some renovations that were desperate on the house. Got 15k left.

As I have said they were a nightmare. They had an iva due to credit cards debts. My they had been paying this for about 3 years and there was 8k left on it. My uncle came to an agreement with iva company after mum died and they accepted 4K on full and final settlement.

Now to the point. The mortgage was up to full value of house if not a bit more. The mortgage was taken in 2007 and is an interest only. They had no means of paying it off once the term had finished. They would have been credited up to the eyeballs at the time the mortgage was taken out. I know that they are grown ups and they chose to take on the mortgage but I honestly can't see how it was allowed.
I have now had an offer for 77k so I can afford to accept the offer and pay it off with the money from mums death in service so sells well that end well but I can't shake the feeling of anger that this situation was even allowed to happen.

Tbf I know iabu but al I hear about is miss sold ppi and bank accounts. Surely this is also a form of miss selling

ILs*

The way mortgages are sold now is hugely different to the situation in 2007 and the mortgage market review in 2014 hugely tightened up affordability tests.

A lot of people who took out interest only mortgages said that they will downsize to clear the mortgage and the problem comes when the mortgage has to be redeemed and they don't actually want to move out of the family home. This is due to be a much bigger problem when more interest only mortgages are due to be redeemed over the next few years

OP you could make a complaint of miss selling to the mortgage company on behalf of you parents estate and then they would have to look into your concerns. If you aren't happy with the outcome then you can take the complaint to the financial ombudsman service.

I am sorry that you lost your parents in quick succession and that you are now left with this difficult situation.

Could the Financial Ombudsman help? Like you it seems to me a rather high-risk mortgage to offer by the lender. Interest only to 50 year olds??
I have no idea about the legalities of it, but I'd seek more expert advice there.

Did they buy the house in 2007? If they were in financial difficulty they may have changed the mortgage to interest only when they went into the IVA as an alternative to repossession, or previously remortgaged to interest only to try and clear other debts before failing to do so and ending up with an IVA. Their other creditors might have taken a dim view to them paying off capital while writing off their unsecured debt. They would presumably have thought that house prices would rise (lots of people would have assumed in 2007 that house prices can only rise) and that they would have plenty of earning years to clear the mortgage and other debt. It sounds as though financial management was not your parents talent.

On the other hand in 2000-7 lots of people in their 40s and 50s were building up credit card debt giving their families a nice life and a good start then remortgaging against a constantly rising asset and expecting to carry on earning and downsize and cash in in their 60s/70s. Lenders would have insisted on life insurance, but wouldn't have stopped them from cancelling it when cash was tight.

I'm so sorry for your loss, OP, and that your parents have left you with the mess to clear up.

It was a sub-prime mortgage: you know, the ones that tipped the world finance industry over the edge. I had one from 2000 - 2005. The vendor positively encouraged me to self-certify my earnings as higher than they were (I was earning a good whack anyway) so as to borrow 125% and have the money to do it up. All went well for three years, then the interest rate tripled as stated, in a very small sub-clause, that it might. I ended up selling the place for the amount outstanding, or I'd have had to hand it over to the bastards.

It sounds as though you've got everything well in hand; not easy to do when you've suffered a double bereavement and the finances are less than optimal. Wishing you the best of luck and a smooth enough recovery

Sorry for your loss OP.

To echo what someone said upthread, might it be worth using some of the capital you still have left to pay off the arrears and then letting the property for a while. It might be interest only but there's almost certainly a provision to pay down a certain amount of the capital each year. It might be a better get to do that and sell later rather than take a low offer just to get shot. You would need consent to let from the mortgage lender though but they're often OK about that.

Good luck.

I just remembered, I also had to take out a life insurance policy as a condition of the mortgage, so if I died before the mortgage ended it would be paid off. Is it possible they had one of those?

We've had two interest-only mortgages. The first one we took out in the late 80's and we had to assign a policy (endowment) to cover it - the policy would originally have been paid out to the lender. When we redeemed that mortgage and got another one 7 years later (so mid-nineties) we duly got another endowment to cover the larger mortgage and were quite surprised to find that the lender didn't want a charge over it - the letter from them just said it was our responsibility to pay it back at the end. They didn't care how we did that.

I remember checking with the first endowment policy that the original lender had removed their charge on it, they had and it paid out to us in the end!

Sorry for your losses and stressful situation

However, 2007 was another world for credit. It sounds so recent but everything in financial services has changed since then and the regulations are far stricter now. Back then, it was easy to get credit, banks didn't do the stringent affordability checks that are standard now, people assumed property values would keep rising, debt was normal.

Having said that, it is worth making a complaint to the selling company. If you're not happy with how they resolve it then you can go to the financial ombudsman (I think... There are rules about eligible complainants, I think you're covered but double check). I think if companies can't prove it wasn't missold they'll settle in your favour a lot of the time to avoid the hassle of the ombudsman. Your parents won't have been the only ones in that situation and they will have established guidelines within the company for their complaints staff to follow.

Given your parent credit history and IVA I'd definitely complain of mis-selling. I'd be quite surprise if they don't agree and settle under the circs.