The MisSelling Epidemic

Written by admin on December 30th, 2011

Article by Timothy Capper

As more information that comes to light over the extent to which bankers and financial brokers participated in the mis selling of mortgages, the more i become outraged as to the scale of this fraud. If you or i got caught defrauding the public out of hundreds of millions of pounds, would we be still allowed to wonder the streets as free men, i think not. Why have politicians simple handed out fines, slaps on the wrists and allowed them to carry on, surely allowing these people to face prosecution would prevent further global crises es arising form bankers greed ? So what is mis selling of a mortgage, this article en devours to shed some light.

This trend of mis-selling mortgages has been on the rise particularly in the last two years, and with it the number of complaints by home owners has sharply risen as well. From 2006/2007 to 2008/2009 the number of mortgage complaints in general rose by almost 50%, signaling that perhaps the problems in the mortgage problem go deeper than simply mis-sold mortgages.

Many officials and market watchers place the blame for these mis-sold mortgages on irresponsible lenders and brokers, arguing that if they knew what they were doing and were intent on running businesses responsibly, they would never have sold these doomed mortgages in the first place. Many homeowners complain that their mortgage brokers convinced them that their mis-sold mortgage would be a sensible investment. Often lenders would convince would-be homeowners that their mortgage would be lucrative in the long run, eventually pressuring said homeowners into a mortgage that the lenders knew they could not afford and causing them to be unable to pay back their mortgage.

But why do lenders employ this practice of mis-selling mortgages when they lose money in the long run? The fact is that these lenders are often looking to create big, quick money. The larger the mortgage they are able to sell, the higher the interest they can collect over the years and the bigger the payoff.

Various governments have recently become involved in this epidemic. The government has begun to investigate various mortgage lending companies. In some countries like the UK, they have even started fining brokers for deliberately mis-selling mortgages. Specifically, many brokers and lenders have come under fire recently for their poor risk assessments. This means that the lenders either ignored or did not properly determine what a client could and could not afford when selling them a mortgage, which often saddled the client with a mis-sold mortgage.

While we all like to think that we are smart enough to avoid this kind of fate, how many people are actually knowledgeable enough to determine for themselves the type and amount of mortgage they can afford? I expect that few of us would be able to do so, and thus the real risk of mis-sold mortgage is obvious: many clients rely on their brokers or lenders for guidance and advice when buying mortgages. These clients trust that the lender has done their job correctly by investigating how much the client can afford, and will thus recommend to them a sensible mortgage offer. When this doesn’t happen problems obviously arise as clients find themselves unable to pay back their mortgages, causing untold financial problems for both the firms and the individual clients.

Mis-sold mortgages have increased rapidly in the past few years and have grown to be a real problem. While they are not the only problem with the mortgage market recently, they are one of the significant, primary problems.

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