Mortgage Express Right to Consolidate

Mortgage Express Right to Consolidate

16:19 PM, 14th February 2013, About 9 years ago 53

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Mortgage Express give landlords good reason to worryI have been a buy to let mortgage broker for several years and recently heard the most alarming story in my career regarding the Mortgage Express Exit strategy and their “right to consolidate”.

I was contacted by a long-standing client recently as he had had a disturbing conversation with  Mortgage Express.  After calling them in relation to a Compulsory Purchase Order on one of his properties he had been told that redeeming one mortgage would mean Mortgage Express could exercise their “Right to Consolidate” – basically force him to redeem all of his mortgages with them.

When we discussed their revelation I found it highly unlikely that such a clause would exist, and even if it did no lender would enforce it, but even if they should try then our Ethical Guardian, the Financial Services Authority, who have placed Treating Customers Fairly at the heart of their regulations would never allow such a thing to happen.

It had to be a conspiracy theory.

I was wrong!

I called Mortgage Express and they confirmed what they had already told my client.

I then called the FSA, apparently this is a “business decision” and they don’t regulate buy-to-let mortgages.  “But what about the ethical implications” I naively questioned.  The FSA do not see this as an ethical issue.  They are quite happy for Mortgage Express to force a customer in to redeeming 20 mortgages despite the fact the accounts have never been in arrears.

With the help of some resourceful contacts I have been provided with Mortgage Express’s Right to Consolidate Definitions and Q&A Document.

It makes for some grim reading.

They hold all the cards.

If you hold any Mortgage Express mortgages then now would be a sensible time to investigate your position with them and put in place a contingency plan.

Looking to the future: spread your risk.  Ease of use, low rates, sensible fees are all attractive reasons to use a lender, but avoid complacency.  Use a number of lenders to provide your funding and insulate yourself as far as possible from being left in a similar situation, because sometimes, you are not being paranoid – they really are out to get you.

I’m obviously fighting this for my client so if you are in a similar position or would just like to discuss mortgages in general please complete the contact form below to get in touch. I have not disclosed my identity in this article for legal reasons, but my first name is Matthew.

PS – I’m also a member of The GOOD Landlords Campaign.

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Comments

by

5:00 AM, 1st July 2013, About 9 years ago

Remember you can sell your TMW property for just the outstanding mortgage.
The MX charge then dies with the sale.
MX can't force you to achieve the best possible price if you sell via an online EA and then one of your associates buys it on seeing the AD!!!
You just sell for the price your associate is prepared to pay; which happens to be the outstanding TMW mortgage amount!
But I reckon you will really struggle to have anyone buy these properties irrespective of the value you have added over the years.

by neils26

12:16 PM, 1st July 2013, About 9 years ago

Would you like to expand on this Paul ? How did he retain assets in bankruptcy, and then come out in only 6 months ? How is the system 'easy to beat' ?

>> I know of someone who did this and is free and clear after 6 months and
>> enjoying life and he has assets; system is easy to beat.

You’d be better chucking it all in and go bankrupt.
You’d be free and clear in about a year.
I very much doubt whether if you sold all your properties you would have any equity remaining; so why bother carrying on.
Don’t spend anymore money on the properties; just get rid of them.
If MX refuse a short sale; just advise them you will file for personal bankruptcy; they can’t stop you.
I know of someone who did this and is free and clear after 6 months and enjoying life and he has assets; system is easy to beat.

by Mark Alexander

13:04 PM, 1st July 2013, About 9 years ago

WORD OF CAUTION

Paul Barrett is straying into providing unqualified and highly regulated financial and legal advice here. Providing such advice without the necessary qualifications is illegal, therefore Property118 can not condone it.

We urge all readers to take professional advice and to consider unqualified opinions shared on forums as the would consider the same advice from a taxi driver or a stranger in a pub.

by Brian Smart

10:08 AM, 2nd July 2013, About 9 years ago

Thank you everyone for these comments. I appreciate that I cannot treat this as actual advice but I am looking for ideas for an exit strategy. My brother is now embarking on property investment for the first time and my experiences will serve him well.

I got into the mess in 2008 when several deals that were going through got pulled at the last minute, deposits were lost and I became broke. It was a dual problem: I no longer had cash to subsidise negative cashflow deals until they came out of fix, and MX refused to lower tracker rates in line with BBR despite Gordon Brown saying at the time that all banks in government control would do so. The end result was that my original GMAC mortgages that MX had acquired were costing me a fortune with an inevitable result.

And of course once your credit file is shot there is no real way to climb out. I had always believed that I could sell my properties at a price to clear the mortgage, and I have tenants who would like to buy them off me in 3 cases, but I attended a seminar run by Matthew Moody two weeks ago and one of his solicitors that I chatted to seemed to cast doubt on whether I would be allowed to do this.

by

3:41 AM, 3rd July 2013, About 9 years ago

Absolutely correct; under NO circumstances could anything I mention be considered advice.
It is OPINION that I would give down the proverbial pub!
If you wish only to seek regulated advice than you will not be told about all the options that are available to you.
Because regulated advice has to conform with industry norms.
What I do and other associates do is outside industry norms.
So the only way you will get full info is down the pub!!
You do what you have to do.
The conventional way won't work; but that is the advice you will receive from regulated advisers.
I know what I did has prevented MX from stitching me up; but i think Brian was caught out by the speed MX moved to put charges on his non-MX mortgages.
A warning to all LL who are having or may have difficulties; make sure voluntary charges of interests are applied on those non-MX properties BEFORE the problems start.
As for my distant associate he has no assets in his name in the UK as far as the OR is concerned; but he has a very good lifestyle.
Better than me and I'm NOT bankrupt!..............................................yet!
I think Brian will struggle to come out of his debacle with any equity.
Clearly he needs to seek advice as to how he can offload his properties and repay all that is owed and exit the LL business for many years.
It would take 6 years to get back in and that would only be if ALL debts were paid off.
It seems from what he states that there is little chance of that.
However his experience is a timely warning that you have to move quickly to beat lenders taking properties or equity that they don't have a mortgage for.

by Brian Smart

8:42 AM, 4th July 2013, About 9 years ago

Thanks for all the advice Paul. I live near Chester so it would be a long way to your pub. However I also have time on my hands and I do travel to meet other landlords so it is not out of the question.

I am left with properties that cashflow and I need that trickle of income until my state pension kicks in in a few years time. I fully accept now that I will never get the future capital appreciation in my remaining 5 properties but I haven't ruled out learning about options, rent to rent etc. In the mean time I will help my brother to get started and he is totally resistant to using finance even though he would undoubtedly get it. He has read all the stuff about leverage as a tool for growth but he doesn't care. He wants to be beholding to no-one. With what we've been through, who can blame him?

"Own nothing, control everything"

by

9:36 AM, 4th July 2013, About 9 years ago

Brian; if after all your troubles you have positive cashflow; I wouldn't concern yourself too much.
There are hundreds of thousands of LL in a similar position.
Yes in your own mind write off any capital appreciation; just try and squeeze everything you can out of the assets you have and squirrel them away where MX can NEVER find them!!
I am effectively in the same position as you!
I will keep taking the cashflow and hiding it and if and when MX want my properties; they can have them probably at an unrecoverable loss ,from me!
Certainly worthwhile investigating the alternatives as you allude to.
Sweating the asset is I think the key thing for your position; get as much as you can out of what you have got.
Capital appreciation that will come to you is extremely unlikely unless we have a house price boom.
It would have to be a b----y big one to clear your debt position!!
I think a conversation with a truly independent mortgage broker and also an EA who dabbles in this sort of situation.
I'd go on PT and put your case.
They have quite a few thinkers on there who can think outside the box!!

by James Leavesden

21:32 PM, 4th July 2013, About 9 years ago

I have just come across this blog after googling MX mortgages. I have 5 BTL MX mortgages all taken out before 2003. I have been overpaying 2 of them since interest rates dropped and am on track to pay them off in 2 years ( not selling, just paying the mortgage down). Should I do this, can MX force me to redeem the other 3 mortgages
Thanks
James

by Mark Alexander

21:56 PM, 4th July 2013, About 9 years ago

Hi James

Three quick questions:-

1) are the MX mortgages your most expensive form of debt in terms of interest rates?

2) Is there any chance that you will ever need to borrow money again?

3) Is there no way you could invest your money to make a better return than you are paying for the MX debt?

by James Leavesden

22:40 PM, 4th July 2013, About 9 years ago

1) Yes, these are my only debt. I may have to sell one to raise capital, I am wondering if I pay it off first, if I will be of the risk of MX forcing me to use the proceeds to pay off the other mortgages. I don't intend to pay it off completely If I am not going to sell.

2) The overpayments are on the the Choices scheme ( all my mortgages are interest only) so I can borrow it all back if needed. I intend to keep a small balance to keep the mortgage running if I don't need to sell, so I have access to the overpayments. As I am on base rate+ 1.75, it's a cheap way to borrow.

3) Probably. Prior to 2008 I had virtually no income with rental just covering mortgage interest. I was banking on house prices continuing to rise, as my get out strategy. I am concerned that If I would be able to manage if rates started to go up again. Remortgage rates with other lenders are considerably higher at the moment and I fear will be higher still if base rates go up. I am hoping that rental income from these properties will be my pension. Also one of the BTL is actually my main home and we don't intend to move ( I don't have a residential mortgage, only BTLs). I am concerned about mortgage payments on my home if interest go up and what would happen at the end of term if it was not paid off as I may not be eligible for a regular residential mortgage in the current lending climate. Hence I may have to sell one of the BTL ( equity would be enough to pay off the mortgage on my main home - hence I was wondering if I would be better off paying down this mortgage completely before selling).


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