Grandparents house repossessed - any legal minds around please?

[onemorecakeplease]

I'm not even sure that's the right title really

Mid 90s my aunt persuaded my gps to remortgage their house and used the money to pay off an outstanding business loan. Her business was struggling and before the first mortgage payment was due, the business was made bankrupt.

Gps bank knew what the funds were being used for and that neither of them had an income beyond pension.
They were lent £130k in 1993.

The bank allowed my gps to stay in the house until they died and froze the interest I believe.

No payments were ever made to the mortgage by my aunt or gps as nobody could afford to.

I've recently found out about this and am just so surprised the bank would lend money to pay the debts of a clearly failing business (was hundreds of thousands in debt)
And that they would lend the money to my gps who would have not been able to pay it back.

Have I cause to complain and ask the bank to explain where it's duty of care to its customers went that day? And if so, how do I go about it after all this time

I have statements and account numbers etc so that's a good start I suppose.

Thanks for reading - I'll try to answer any qs I can.

GPS were never involved in the business other than this loan.

I've just looked up life time tenancy mortgages

Basically you but the house half price and the life time tennant pays no rent etc and are responsible for the up keep as if it's their own property's

It transfers to the owner on death with no duties paid - as they own the house

Interesting reading

2 pensioners were granted a 25 year mortgage? On which the mortgagee was willing to forgo monthly repayments, even of interest? Seems unlikely.

My guess is that this will turn out to be an equity release.

We (my mum and I) want her to move

She lives in a cold house with heating that barely works. Single glazing, rooms she never uses, damp etc.

All her friends are dead so she lives near no-one

I would love her to buy a wee bungalow near us (200 miles away) so we could take our turn looking after her.

My aunt wants to move to wales so that would allow her a break. At the moment she can't move as gma relies on her every day.

My gps could never have afforded to pay the mortgage which is why they haven't.

It was always supposed to be the business that paid

So my aunt and her dh should have been paying it, but they didn't, they declared bankruptcy and let the bank take gps house.

However you look at it the bank lent money to people unable to pay it back - seriously bad lending

Let us know how you get on

I agree with GreenTulips, it sounds like a lifetime mortgage.

This is the description of it from Aviva:
"A lifetime mortgage is a popular type of equity release. It's a long-term loan which is secured on your property. The amount you can borrow depends on your age and the value of your property.

Unlike a regular mortgage, you won't have to make any repayments before the end of the plan. Instead, each year we'll add interest onto the loan and any previous interest. The loan and the interest are repaid in full, usually from the sale of your property, when you die or have to go into long-term care..."

It would explain the fact that no repayments have been made - none would ever have been due. And it is called a mortgage.

Okay so update time

Mum had some paperwork that wasnt in the original file from 1996 and you are right, when the business failed and the mortgage payments could not be met, a new agreement was signed.
I haven't seen this but the gist of the letter says
You still own the house and can sell it
You can clear the debt at any time by paying 130k
If you sell the house we will recover the backdated interest up to the value of the property
You can stay in the house until you die

I'm waiting for Gma to send me all the documents so I can see this agreement - altho I don't think it's there I don't remember seeing it.

So going to have a rally round and see if between us all we can raise the £130k to get it paid off

Otherwise if she dies and we have to sell the house, the whole lot goes to the bank. She also can't move unless we do this.

Unsure what's on land registry yet but will send off request and see.

Also going to ask for a data subject access request from the bank to see what paperwork they have if we don't have the agreement. Just so we know exactly what's been agreed.

Mum says the original mortgage was in gps name and they were due to make the payments, not the business.
So in their 70s they were granted a mortgage to take them into their mid 90s. Just bloody crazy lending why on earth didn't the bank say erm no because there is no way you can afford to repay this. Arghh

Is it possible that the original mortgage was interest only, OP? Did your grandparents have really good pensions that could have been considered enough to cover the interest payments?

Good idea to try every way of getting a copy of the second agreement. I wonder would the bank really accept just the £130,000 to clear the debt, charging no interest? And yet it would take the principle and the accrued interest if the house were sold?

It might have been interest only? I won't know until the documents arrive.

No, I don't think much in way of pensions? - gma never really worked and gdad was self employed.
State pensions though and they did have some savings as were both really careful with money (which seems ironic)

Aunt requested a settlement figure early this year and it came through with same figure, £130k

Does seem odd doesn't it. I wonder if they realised they had ducked up entirely by lending to people who couldn't afford it?

I think you need to take the paperwork to a solicitor as the terms of 'you pay off £130k and keep the house' or 'we get the house and take £130k plus interest from the value of the house' seem very odd.

Doesn't it seem odd! The letter was very vague and said
The society 'may' recover the interest accrued if the property is sold.
When I added it up, the interest plus the loan is more than the house is worth.

Well, you'd expect a recent settlement figure to be correct. If any interest and/or fees were owing, it would include them.

It is, after all, the sum needed to settle the debt.

Perhaps someone cocked up when the agreement was drafted. Financial institutions are not infallible, as we all know.

Yes perhaps. I did think it was odd that the settlement figure made no mention of interest owing.

Then they followed up with a letter asking when/ if she was going to repay it?

Was that definitely the settlement figure and not the balance of the loan? How reliable is your aunt, given her previous involvement?

Yep definitely the settlement figure. She phoned and asked for it.

I'll check that when the docs arrive
but yearly statement shows the same figure too.

OP, can you get a look at or a scan of the follow-up letter?

If it says settlement figure = £130,000 in black and white, I don't see how they could add interest.

Yes I hope it will all be in the file when it arrives.

Like waiting for Christmas 🎄

It still looks like it was not a favourable deal for your DGPs and could be worth questioning bank's behaviour in selling them this.

I have no advice but have to admit I have found this fascinating. Thank you for sharing and updating and I do hope it all works out for you.

Following your update OP, it still sounds like a form of equity release to me (in substance rather than form).

Good luck raising the £130k,it's your only hope.

I would suggest it is looking more than likely the bank don't have the paperwork so are not able to charge interest as there is no paperwork to show what the interest should have been charged.

Yes, you need to look at all the paperwork. English law is very protective of people like this so they were advised to have their own solicitors. They had their own solicitors. Their own solicitors advised them not to sign it and they chose to sign it. We don't treat adults who make those decisions like children and later say the transaction should be undone as people make silly decisions every day of the week - taking out too big a pay day loan, buying that dress they can't afford. It sounds like it would be a valid transaction but worth checking and you need the actual contract and variation as you know before anything can be sorted out -sounds like if £130k is paid that pays it all off. Presumably morally that is the aunt's responsibility so can she raise £130k? She might have gone bankrupt in the past but she has caused this issue. If she cannot raise it could she work for the next 10 years and all the money go to family members to pay back the £130k raised for example or is the family going to let her off the hook? She should be paying (morally) not other bank customers bearing the brunt of a defaulted loan.

I am afraid that possibly your Aunt asked for what the current balance was which is £130k and not for a redemption figure. So it shows the balance owed but the interest is calculated when it is going to be paid off.

You state above (14 Aug at 20.35) "The documentation states: If you sell the house we will recover the backdated interest up to the value of the property
You can stay in the house until you die"

This suggests that the interest will be added at the point of sale or upon her death and they will recover only interest up to the value of the property and nothing more than that.

So if on redemption the interest is lower than the value she'd get the difference but if higher they won't charge any over the value of the property.

But it definitely allows for interest and it definitely is calculated when it is going to be paid back.

As regards the solicitor addressing them as Dear Fred and whoever - if I a writing to people I know but in the course of my business I would still address them by their first names - I wouldn't formalise it by saying Mr and Mrs X. Likewise they'd address me as Allthe best not Mrs Namesareused.

My take is : they received independent legal advice.

The documentation found recently suggests interest will be calculated and charged when property sold or when Gran dies (but they would not pursue payment while she is living there) - classic equity release.

That Aunt just asked for current balance rather than the amount that would be required for redemption if the mortgage were to be redeemed that day.

I suggest asking for that figure.

The good thing is that any interest will be limited to the value of the house and that any shortfall will not be due from Grandma's estate

All the best - thanks for your input

Yes aunt asked for a settlement figure for if we were to pay off the loan and that's what came back. The bank then wrote again asking do we want to pay it off quoting the same figure again.

She didn't ask for a balance but a settlement/redemption figure.