West Bromwich `sold defective mortgages'
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Your support makes all the difference.West Bromwich Building Society provided dangerous, risky and defective mortgages to unwary elderly borrowers - even though it was clear they could be left with mounting debts and little chance of repaying them, a court heard yesterday. Andrew Verity reports.
Months after being warned by regulators that the mortgages were dangerous, West Bromwich went on selling them to hundreds of vulnerable customers, the High Court heard.
The Investors Compensation Scheme is suing West Bromwich for at least pounds 35m over the sale of Home Income Plans (HIPs) to 750 borrowers. The plans offered the prospect of a lifetime income and lump sum by releasing the equity in the house.
Two groups of investors, collectively titled "Alford" and "Armitage", are separately suing West Bromwich in an effort to abolish the mortgages.
Under the plans, investment income would repay the mortgage unless the loan, together with interest, amounted to more than 40 per cent of the house value.
Geoffrey Vos QC, for the ICS, said West Bromwich knew, or should have known, that borrowers would be left with mounting debts they could not repay if house prices went down.
Mr Vos said: "The society did not care whether the eligible applicants [for the HIPs] had any means or not. In fact it was always clear to West Bromwich Building Society that borrowers had no, or very little, income from which they could make mortgage repayments if that became necessary."
"West Bromwich knew from the very beginning that property values do not necessarily keep on rising," Mr Vos said.
Nicholas Padfield QC, for West Bromwich Building Society, said there could be no claim against the society because the responsibility lay with the independent financial adviser which sold the mortgages in 1989, Fisher Prew Smith, which went into liquidation in 1991.
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