Discussion
I'm hoping someone knows about these and can clarify for me.
Grandparents in Law took a SAM mortgage out in 1997 for £50k on a valuation of a £200k home.
Theyve just sold the house and thinking they owed the Bank 25% of the sale price.
This turns out to be wrong and in fact owe the original £50k Plus 75% of any appreciation.
House sold for 700k and the bank has taken £425k of that.
Thats quite some chunk of change.
Also. The crap solicitors have had £435k of that £700k in their client account for over 4 months.. But haven't said anything about the interest when supplying their Invoice.
Any thoughts guys
Grandparents in Law took a SAM mortgage out in 1997 for £50k on a valuation of a £200k home.
Theyve just sold the house and thinking they owed the Bank 25% of the sale price.
This turns out to be wrong and in fact owe the original £50k Plus 75% of any appreciation.
House sold for 700k and the bank has taken £425k of that.
Thats quite some chunk of change.
Also. The crap solicitors have had £435k of that £700k in their client account for over 4 months.. But haven't said anything about the interest when supplying their Invoice.
Any thoughts guys
Question one, that will have been reasonably clear in the original contract. They could always try a complaint to the bank, then onto the watchdog WHEN that fails. I would regard equity release as the next PPI, but they may be a bit early.
Question two, they need to ask the solicitor if the client account is interest bearing,and if so, where's the money? There's another thread running about client accounts.
Question two, they need to ask the solicitor if the client account is interest bearing,and if so, where's the money? There's another thread running about client accounts.
Never heard of a SAM mortgage, but the first google link shows the definition from Investopedia:
Investopedia said:
A shared appreciation mortgage (SAM) is when the borrower or purchaser of a home shares a percentage of the appreciation in the home's value with the lender. In return for this additional compensation, the lender agrees to charge an interest rate that is below the prevailing market interest rate.
What did the grandparents think that they were signing up to?More importantly, what do the mortgage T&C's actually say?
It's an interesting area as the product is pretty self explanatory and back in the mid 90s the great house appreciation hadn't been started so even if the purchaser understood the product they probably had a very different view on the risk of their home increasing massively in value.
However, going in the buyers' favour is how retail financial products were sold by banks' highstreet branches in the 90s. Pretty much everything they sold, regardless of whether the product was good or bad, was sold by commission cowboys rewarded for signatures and who could and would say whatever it took to obtain those signatures.
However, going in the buyers' favour is how retail financial products were sold by banks' highstreet branches in the 90s. Pretty much everything they sold, regardless of whether the product was good or bad, was sold by commission cowboys rewarded for signatures and who could and would say whatever it took to obtain those signatures.
At the time they were dealing with the death of their Mother and looks like they were pressured a bit. ie. this is a time sensitive deal etc etc.
We've been in touch with the firm of lawyers that has an active case going at the moment. Its too late to jump in on the class action right now but were on the list for either another one. Or if this current one goes in against the Banks then that may set a precedent. Providing the Bank of Scotland doesn't do a Barclays and settle out of court.
It just crazy that the bank got a larger share of the sale price than the owners. Not something an 87 year old widow needs to be worrying about...
We've been in touch with the firm of lawyers that has an active case going at the moment. Its too late to jump in on the class action right now but were on the list for either another one. Or if this current one goes in against the Banks then that may set a precedent. Providing the Bank of Scotland doesn't do a Barclays and settle out of court.
It just crazy that the bank got a larger share of the sale price than the owners. Not something an 87 year old widow needs to be worrying about...
The problem is that those criteria are very clear and back in the early/mid 90s the crash was still unwinding and the property market was stagnant. As humans we have very short term perspectives however hard we try to predict the future so many buyers of the SAM product would have considered the terms excellent with some estimating that they would get one over on the scummy banks. It's worth remembering that in the early 90s there were big house repos going on and any adult walking into a bank would have been 100% aware of the risks.
At the same time, the banking sector would not have been predicting a massive deregulation of their lending criteria by New Labour so as to create uncontrolled asset inflation and an artificial spending boom.
The banks, in turn, would have structured the product to avoid being loss making using market predictions and no one was or could have predicted what ended up happening.
One must remember that any looking back today is at risk of being done through eyes that may consider the period of extreme asset inflation to be almost normal or predictable as well as a perception that money lenders are wicked but in all likelihood the product was absolutely fine. The customer also wasn't a little old lady but a grown up at the peak of their wisdom and understanding. After all, in 2022, the customers wouldn't have much of an issue if properly values hadn't risen much. That was after all, the bet that they all took out against the bank.
What goes in your favour is that this was the era of the commission salesman inside the bank branches where the regulatory oversight was insufficient in over coming the lure of the commission fees. But ultimately all the product was doing was ensuring long term security in exchange for trading away future inheritance and the end customers made that choice to protect their immediately family then as opposed to predicting some extreme scenario 30 years into the future.
At the same time, the banking sector would not have been predicting a massive deregulation of their lending criteria by New Labour so as to create uncontrolled asset inflation and an artificial spending boom.
The banks, in turn, would have structured the product to avoid being loss making using market predictions and no one was or could have predicted what ended up happening.
One must remember that any looking back today is at risk of being done through eyes that may consider the period of extreme asset inflation to be almost normal or predictable as well as a perception that money lenders are wicked but in all likelihood the product was absolutely fine. The customer also wasn't a little old lady but a grown up at the peak of their wisdom and understanding. After all, in 2022, the customers wouldn't have much of an issue if properly values hadn't risen much. That was after all, the bet that they all took out against the bank.
What goes in your favour is that this was the era of the commission salesman inside the bank branches where the regulatory oversight was insufficient in over coming the lure of the commission fees. But ultimately all the product was doing was ensuring long term security in exchange for trading away future inheritance and the end customers made that choice to protect their immediately family then as opposed to predicting some extreme scenario 30 years into the future.
Edited by DonkeyApple on Wednesday 23 November 07:13
DonkeyApple said:
The problem is that those criteria are very clear and back in the early/mid 90s the crash was still unwinding and the property market was stagnant. As humans we have very short term perspectives however hard we try to predict the future so many buyers of the SAM product would have considered the terms excellent with some estimating that they would get one over on the scummy banks. It's worth remembering that in the early 90s there were big house repos going on and any adult walking into a bank would have been 100% aware of the risks.
At the same time, the banking sector would not have been predicting a massive deregulation of their lending criteria by New Labour so as to create uncontrolled asset inflation and an artificial spending boom.
The banks, in turn, would have structured the product to avoid being loss making using market predictions and no one was or could have predicted what ended up happening.
One must remember that any looking back today is at risk of being done through eyes that may consider the period of extreme asset inflation to be almost normal or predictable as well as a perception that money lenders are wicked but in all likelihood the product was absolutely fine. The customer also wasn't a little old lady but a grown up at the peak of their wisdom and understanding. After all, in 2022, the customers wouldn't have much of an issue if properly values hadn't risen much. That was after all, the bet that they all took out against the bank.
What goes in your favour is that this was the era of the commission salesman inside the bank branches where the regulatory oversight was insufficient in over coming the lure of the commission fees. But ultimately all the product was doing was ensuring long term security in exchange for trading away future inheritance and the end customers made that choice to protect their immediately family then as opposed to predicting some extreme scenario 30 years into the future.
Good post, I agree with all of that.At the same time, the banking sector would not have been predicting a massive deregulation of their lending criteria by New Labour so as to create uncontrolled asset inflation and an artificial spending boom.
The banks, in turn, would have structured the product to avoid being loss making using market predictions and no one was or could have predicted what ended up happening.
One must remember that any looking back today is at risk of being done through eyes that may consider the period of extreme asset inflation to be almost normal or predictable as well as a perception that money lenders are wicked but in all likelihood the product was absolutely fine. The customer also wasn't a little old lady but a grown up at the peak of their wisdom and understanding. After all, in 2022, the customers wouldn't have much of an issue if properly values hadn't risen much. That was after all, the bet that they all took out against the bank.
What goes in your favour is that this was the era of the commission salesman inside the bank branches where the regulatory oversight was insufficient in over coming the lure of the commission fees. But ultimately all the product was doing was ensuring long term security in exchange for trading away future inheritance and the end customers made that choice to protect their immediately family then as opposed to predicting some extreme scenario 30 years into the future.
The only counter I would offer is that the commission scale, the clarity of the % that would be taken and how the product was sold will be the deciding factors. A few years ago the bank would have probably lost this but the mood has swung a little.
(Edited to remove my assertion that there were similar schemes being offered by banks other than Barcs and RBS)
Edited by Andy 308GTB on Wednesday 23 November 08:08
https://www.teacherstern.com/shared-appreciation-m...
Quick google show cases already being won …..sounds as though there is hope.
Hopefully your grandmother in law gets it settled quickly.
Good luck.
Quick google show cases already being won …..sounds as though there is hope.
Hopefully your grandmother in law gets it settled quickly.
Good luck.
Edited by tighnamara on Wednesday 23 November 08:22
Thanks Guys.
We are hopeful that something positive comes out of this.
We've read about people that had been stuck in their houses unable to sell as they wouldn't have enough to buy somewhere else after the Bank took their money.. That might be the way it worked but its hardly fair
But then life isn't
Time will tell
We are hopeful that something positive comes out of this.
We've read about people that had been stuck in their houses unable to sell as they wouldn't have enough to buy somewhere else after the Bank took their money.. That might be the way it worked but its hardly fair
But then life isn't
Time will tell
matty g said:
Thanks Guys.
We are hopeful that something positive comes out of this.
We've read about people that had been stuck in their houses unable to sell as they wouldn't have enough to buy somewhere else after the Bank took their money.. That might be the way it worked but its hardly fair
But then life isn't
Time will tell
I think it's important to not forget that this isn't about fairness as the customers were in their intellectual prime at the time that they took the deal, not the elderly folk they are now and they obviously completely understood that they were giving away the upside so as to get the deal today. We are hopeful that something positive comes out of this.
We've read about people that had been stuck in their houses unable to sell as they wouldn't have enough to buy somewhere else after the Bank took their money.. That might be the way it worked but its hardly fair
But then life isn't
Time will tell
The actual way to look at it is that they've had 25 amazing years raising a happy family in a much, much nicer home and environment than they could ever have dreamed of thanks to the deal they did. Or that they've been able to stay forever in their beautiful family home in retirement despite not having the savings to have been able to do so.
Ultimately, it was an equity release type product and the name of the product made it very overt that you were getting money today and handing over your property to the lender when you snuffed it.
All you can hang hope on is that there is enough belief that the then salesman would have been statistically acting in a manner not appropriate for a financial services professional. One of your risks is that many of the complaints are being driven by the children who had planned to get the house and have been upset to find out that mum or dad had already sold it and spent all the money so I would make sure that you do your research on any solicitors as some of them will be representing a book of kids who have zero rights as opposed to the actual customers who may well have been missold. How you do that, I'm honestly not sure.
matty g said:
Theyve just sold the house and thinking they owed the Bank 25% of the sale price.
This turns out to be wrong and in fact owe the original £50k Plus 75% of any appreciation.
Maybe they misremembered (or misunderstood or were mis-sold) the 25/75 the wrong way round.This turns out to be wrong and in fact owe the original £50k Plus 75% of any appreciation.
Too late now, but perhaps they could have sold the house for £50K to one of their children, the bank gets their £50K back but no appreciation, child sells it back to the parents for £50K... honours even, bank gone
Mandat said:
Never heard of a SAM mortgage, but the first google link shows the definition from Investopedia:
More importantly, what do the mortgage T&C's actually say?
Reading the OP, it seems they thought they would owe the bank 25% of the sale price. So for the bank's investment of £50k, the bank gets £175k back. That seems like a more reasonable contract.Investopedia said:
A shared appreciation mortgage (SAM) is when the borrower or purchaser of a home shares a percentage of the appreciation in the home's value with the lender. In return for this additional compensation, the lender agrees to charge an interest rate that is below the prevailing market interest rate.
What did the grandparents think that they were signing up to?More importantly, what do the mortgage T&C's actually say?
That would also fulfil the criteria you have posted above.
https://en.wikipedia.org/wiki/Shared_appreciation_...
I worked in a Bank of Scotland branch at the time - they weren't sold in branches, but instead via brokers, and as I recall, independent legal advice was necessary before any loan was advanced. BoS versions had varying terms, so it would be important to find out exactly what contract was signed at the time by your in-laws, if the lender was one of the BoS SAM companies.
I worked in a Bank of Scotland branch at the time - they weren't sold in branches, but instead via brokers, and as I recall, independent legal advice was necessary before any loan was advanced. BoS versions had varying terms, so it would be important to find out exactly what contract was signed at the time by your in-laws, if the lender was one of the BoS SAM companies.
Edited by phpe on Friday 2nd December 10:43
Simpo Two said:
Maybe they misremembered (or misunderstood or were mis-sold) the 25/75 the wrong way round.
Too late now, but perhaps they could have sold the house for £50K to one of their children, the bank gets their £50K back but no appreciation, child sells it back to the parents for £50K... honours even, bank gone
Their percentage would always be tied to the market value of the property.......Too late now, but perhaps they could have sold the house for £50K to one of their children, the bank gets their £50K back but no appreciation, child sells it back to the parents for £50K... honours even, bank gone
Thats not far off 9% interest compounded per annum, Mortgage interest rates were not far about that for a serviced debt.
200k property in 1997 would have been a very decent family home.
Also depends on the purpose of the 50k to continue a roof over heads, home improvements or paying off a hardship such as bankruptcy.
Op, in the 90's mortgages were (mostly) unregulated, in summer 1997 for lenders (direct) and in spring 1998 for intermediaries they would have fell under the lenders mortgage code which was subsquently then taken into an updated consumer credit act (2006), and MCOB (2004).
Check the dates! Also if it was borrowed in one lump, or did an additional advance take it beyond those dates and into regulation.
Interestingly BOS withdrew this product in spring 1998..when the regs changed.. Barclays were still issuing these into the 00's hence why they settled.
Barclays guide..
http://www.dumville.org/info/money/sam_booklet_01....
Bos guide..
http://www.dumville.org/info/money/bos_sam_4_sales...
The BOS guide does mention that you could have paid interim sums (Interest & Capital up to 10k pa). (Also come out with a lower sum too at 60% appreciation + original debt = 350k payable) Also it was in the T&C that they should have formally valued the property on exit, check they did, otherwise breach of T&C.
I hope you get to the bottom of it.
Edited, 90's and 00's muddled!
200k property in 1997 would have been a very decent family home.
Also depends on the purpose of the 50k to continue a roof over heads, home improvements or paying off a hardship such as bankruptcy.
Op, in the 90's mortgages were (mostly) unregulated, in summer 1997 for lenders (direct) and in spring 1998 for intermediaries they would have fell under the lenders mortgage code which was subsquently then taken into an updated consumer credit act (2006), and MCOB (2004).
Check the dates! Also if it was borrowed in one lump, or did an additional advance take it beyond those dates and into regulation.
Interestingly BOS withdrew this product in spring 1998..when the regs changed.. Barclays were still issuing these into the 00's hence why they settled.
Barclays guide..
http://www.dumville.org/info/money/sam_booklet_01....
Bos guide..
http://www.dumville.org/info/money/bos_sam_4_sales...
The BOS guide does mention that you could have paid interim sums (Interest & Capital up to 10k pa). (Also come out with a lower sum too at 60% appreciation + original debt = 350k payable) Also it was in the T&C that they should have formally valued the property on exit, check they did, otherwise breach of T&C.
I hope you get to the bottom of it.
Edited, 90's and 00's muddled!
Edited by Deesee on Friday 2nd December 11:00
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