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ombudsman news

issue 6

June 2001

signature and retention of mortgage offers

case study 06/01 signature and retention offers

Many complaints from domestic mortgage borrowers involve a dispute about what was - or was not - said during the mortgage interview. Often, the borrowers allege that they chose a specific mortgage deal on the strength of some particular comment or assurance from the lender's employee.

Usually, the point at issue is one that should have been covered in the mortgage offer, so our first step is to ask for a copy of this. The lender's position is strengthened if it can produce a copy of the mortgage offer, endorsed with the borrowers' signed acceptance.

If the lender can produce a copy of the offer, signed by the borrowers, then the borrowers cannot dispute having seen it. And, with limited exceptions, customers who sign a document such as a mortgage offer letter are bound by what it says - whether or not they read it.

But some lenders don't ask borrowers to sign mortgage offers. House buyers have to deal with a multitude of papers and if mortgage offers are not given sufficient importance, it is more understandable that borrowers may fail to spot problems at the time. Requiring borrowers to sign and return a copy of the mortgage offer emphasizes the importance of the document. And, as we have said before, it's not good enough for the lender to try and shift the responsibility on to the conveyancer.

Things are made even worse if the lender doesn't keep copies of mortgage offers as a matter of routine. Such lenders expect us to rely on what they say would have been sent to the borrowers - and they then send us sample copies of what their documentation looked like at the time. That can backfire on the lender, as the following case study illustrates.

case study - signature and retention of mortgage offers


When Mr and Mrs A applied for a mortgage, the lender gave them a detailed two-page mortgage illustration, produced by its computer system. Mr and Mrs A proceeded with the mortgage, but decided to repay it after a couple of years. The lender then claimed that since they were repaying the mortgage within five years, they would have to pay an early repayment charge. The lender said the early repayment charge was explained in the mortgage offer, and in its instructions to the conveyancer. However, the lender did not have a copy of either document. It asked us to rely on the documents it said its computer would have produced in respect of the particular product code.

Mr and Mrs A said they had not expected to receive any documents other than the illustration, and that they had not, in fact, received a mortgage offer.

The conveyancer still had a copy of the lender's instructions on file and provided us with a copy. This document explained the early repayment charge, but we were not satisfied that the conveyancer had explained the charge to Mr and Mrs A. That failure counted against the lender, rather than the borrowers. In completing the mortgage, the conveyancer was acting for the lender. Indeed, the lender's instructions to the conveyancer specifically said "please act for us in the transaction".

The lender asked us to assume that Mr and Mrs A must have received a mortgage offer, and that (like the instructions to the conveyancer) that offer must have referred to the early repayment charge. We were not prepared to make that assumption. The offer should have been produced by the same computer system that produced the detailed illustration. But the illustration did not mention the existence of an early repayment charge. So the system was not infallible. Or did the lender want us to assume its computer was designed to produce detailed illustrations that did not mention the early repayment charge that would suddenly appear in its mortgage offers-

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.