Insurance Policy To Cover Balance of Interest Only Mortgage

[the2nineteens]

Back in 1988, the backlash of the recession caused a massive reduction in the size of our family business, and my parents were advised to sell the family home and buy a smaller property. Moreover, to get an Interest Only Mortgage in case of the liquidation of the company whereupon should they be left unemployed the total of their mortgage payments would be covered by the DSS as it was in those days. To do this a separate insurance policy ie like an endowment needed to be set up alongside the mortgage to cover the balance of the money owed upon completion of the mortgage. The business did fold and as suggested, the DSS covered the mortgage payments until such time that they moved the goal posts on mortgage interest, and now my parents, who are now both sick and claiming non guaranteed pension credit have to pay from what little money they do have to live on. This however is not my main gripe.

 

A financial adviser, who was known to the family and company was employed to find such an insurance policy. He was never suspected of any foul play as he had been in and around us and other friends and business colleagues for years. Unfortunately, the policy that he sold us falls almost 2 thirds short of the balance that will have to be paid in around 18 months time.

 

We have been in contact with the financial ombudsmen who say they cannot assist as they need evidence that the policy was mis-sold. The afore mentioned financial adviser needs to be contacted to clarify this they say however to all intense and purposes he was last seen heading in the direction of the Sahara Desert on the back of a camel !!

 

They are now left in a position where they cannot get legal aid any more for some mad reason that I cannot explain and also facing the possibility of eviction from their home in the near future as they will be in the position of owing a large chunk of money to their building society which they will not be able to pay.

 

They are both past retirement age so the likelihood of the society agreeing another mortgage with them is fairly remote so we are now at a loss as to what to do. All payments to the policy and the mortgage are paid up to date and their credit history is good if not excellent as they seem to manage what little money they do have rather well.

 

Any mortgage requires life insurance which will be impossible for them to gain as they both have medical conditions that would load any life policy beyond reasonable affordability.

 

A barrister has looked at the case and has said he cannot help, but I suspect that this is because he is obviously privy to their financial situation and has assumed that they will not be able to afford his fees, should the case go against them and there seems as mentioned to be no legal aid available.

 

Has anyone any ideas on how I can help them. I am a well educated man with lots of experience of life, dealing with people and so on however, I am an early retired IT consultant due to the need to look after my mentally handicapped son and not a lawyer!

 

I have the time but not the finances nor the know how in order to assist.

Edited November 2, 2011 by the2nineteens

[rebel11]

Thread moved to the correct forum.

[newstarter]

Firstly who are the insurance company,secondly have you got the endowment contract,and is there in that contract a mortgage promise?

[the2nineteens]

I am acting as a third party here so I'll contact them and put the question to them. Back soon, thanks.

[the2nineteens]

The insurance company is AXA and ye they have the contract. There does not seem to be any promise however I am awaiting them to bring me the file on this now that we have some feedback and I can continue

[the2nineteens]

Ok. I now have all the paperwork. There does not seem to be anything in the policy suggesting a mortgage promise, however we do have a part letter from the financial adviser that the multiplan policy is designed to repay the mortgage in the long term.

[the2nineteens]

Attachments changed to .pdf

Edited November 3, 2011 by the2nineteens

[newstarter]

Hi the 2nineteens, those documents you have posted up,im having trouble reading them,the images are almost unreadable in present form.

[the2nineteens]

Been in IT all my life and this is a very poor unuser friendly site. I've converted the files to.pdf so you can see everything clearly

 

Thanks

R

Edited November 3, 2011 by the2nineteens

[newstarter]

Hi there thanks for converting those files for me,right it wouldnt hurt to give you just a little background to endowment policies so you get a basic jist of the situation.Endowmments became big business during the 80 and 90,s right through to around 2003 when there began a fall-off.They became very attractive to people because of their high return valuefor example,a50 quid a month investment over 25 years =15k that would have meant a return (at the height of these policies) of something like 100k,you can see how these endowments became so popular with borrowers,so what changed?

 

To answer that you have to look at the reason behind the high payouts of these policies at their maturity.What insurance companies were doing was inflating the payouts by paying in large terminal bonuses,in other words using their own cash to inflate the maturity value which in turn dangled the carrott to other investors,in other words sucking in joe public.Once joe public had been sucked in out went the bonus payments which inflated the payout value at the end of the term,hence the payouts fell sharply.There are still some terminal bonuses payed but these are discretionary.So what to do if you have an endowment which is performing poorly and wont cover the mortgage at its maturity.

 

Well first option of course would be to cash in the policy,surrender it ,however doing that would mean a pittance of a payout,i wouldnt insult you by saying how much you would get.

 

Second,you could sell it to a third party,but first you would have to find someone daft enough to buy it,a tall order to say the least.

 

Thirdly you could sell through a broker,that way you would get the best price for the policy,however these options are really not options where the mortgage payers in question are concerned.We know that there will be approx 2 thirds shortfall thus is there grounds for complaint and compensation for miss-selling.

 

 

First off,you cannot complain about the performance or the shortfall,you can only complain about the advice given by the broker.There are three main areas around which complains can be forwarded,

 

Endowment policy not suitable

 

Inthis case your broker would not have explained how the endowment would be invested,and of course explained the risks involved,did he explain the poor return if cashed in early ?

 

 

Endowment sale did not follow the rules and guidlines

 

Your broker should have explained all the charges and fees and provided a fact find before the sale

 

 

Payments not discussed

 

 

Your broker said that this sale would be ok and would cover the mortgage at maturity.

 

 

OK,so whats the next step if you think that there are grounds to complain.First-off you need to complain to the company that your advisor worked for,if that company no longer exists then you can complain to the Financial services compensation scheme who will look at your case.If the company still exists then its the financial ombudsmen who will look at the case,that said there is always the option of court action but this would be costly,personally i think you have a case and as such you should be going along the above route,sorry about the lengh of the post but i was just including as much info as possible to give you a clear picture.

Edited November 3, 2011 by newstarter

[silverfox1961]

Attachments changed to .pdf

 

Can you please remove all personal details from everything and then repost.

I have unapproved the ones above as they contain personal information