Monday, 15 September 2014

The SAM scandal - BBC Inside Out South



The above investigation into Shared Appreciation Mortgages was broadcast by BBC Inside Out South on 8 September 2014.

It came about because of an email my colleagues received in March this year from a Mr Brian Dawtrey. Mr Dawtrey told us about a financial product he had taken out which is slowly ruining him.

It's known as a Shared Appreciation Mortgage or SAM. These products were sold in their thousands by Barclays and the Bank of Scotland between 1996 and 1998. Nearly half are still active. 

The deal is simple. The bank gives you 25% of the value of your property as an interest-free cash loan, in return for 75% of your home's future increase in value. The only way to redeem the mortgage is to sell the house.

For example: 

The owner of a £200,000 house in 1998 would sign up to a SAM and be given £50,000 cash. 
If that house were sold in 2014 for £600,000, the owner would be required to hand over £350,000 to redeem the mortgage. 

So:

Sale price: £600,000
House value when SAM taken out: £200,000
Increase in value: £400,000
75% of increase in value: £300,000
Original loan: £50,000
Total repayable: £350,000 (a return for the bank of 600%)

SAMs are equity-release products. They were offered to mainly retired people who had paid off their mortgages and were looking to release some of the value (equity) tied up up in their home.

Brian Dawtrey's case

Mr Dawtrey is 85 and lives near Lymington in Hampshire. He is quite upfront about the way he was sold his Shared Appreciation Mortgage. He was a financial naïf. He needed cash to live on, and when he heard the Bank of Scotland was handing out interest-free loans, he wanted a piece of the action.

To put this in context, Mr Dawtrey spent the first ten years of his career as a tenant farmer in Norfolk, living off the land in austerity Britain. In 1960 he took a job as part of the British overseas aid programme, moving his family to Africa to help newly-independent governments build houses, agricultural systems and transport infrastructure.

As a British guest worker of an impoverished foreign government he was never given a pension, and no one told him that if he didn't pay his National Insurance stamps back home he might be in trouble. 

In the 1970s Brian had the good sense to buy a bungalow in the New Forest with his savings. When he retired there in 1985 he found (because of his non-stamp-paying years overseas) he only qualified for a reduced state pension. 

Times got tight. In the nineties a neighbour told him about these interest-free loans the Bank of Scotland were throwing about, so he applied directly, without speaking to a lawyer or financial advisor. All the paperwork was done, and in 1998 he found himself the recipient of £35,000 cash from the Bank of Scotland on a home valued at £140,000. He had let a trojan horse into his home.

As Mr Dawtrey tells us in the film above: "a property value... is just something in the air, but giving us cash to live on, was a great idea."

Now he sings a different song. His property is worth £450,000. If he sells it tomorrow he will have to give Bank of Scotland £267,500. A return for the bank of 664%.

You may lose sympathy for Mr Dawtrey at this point, and on the face of it, that's fair enough. Many of those who took out SAMs consider themselves fools. I've seen and spoken to SAM holders in turmoil at their own stupidity, constantly beating themselves up about a financial decision taken by them or their partner nearly two decades ago, which has now ruined their lives.

You might think banks are perfectly entitled to take whatever they can, legally. Banks exist to make money for their shareholders, customers are there to be fleeced. Right? No one forced Mr Dawtrey, or the thousands like him, to grab the interest-free carrot dangling in front of them. It was their own greed. 

Well, yes, but... does that make it okay?

Trust

"They were toxic. They were poisonous. They should never have been issued." 
Julian Lewis, Brian Dawtrey's MP

Mr Dawtrey was 69 years old when he took out his SAM. It seems hard to believe now, but banks in the eighties and nineties had a rock solid reputation for safety, probity and looking after their customers' interests as much as their own. People trusted them. 

Older people, who may have known their bank manager for years, trusted them even more. The idea a bank would sell a product which could slowly and deliberately eat away your children's inheritance was unthinkable. A bank was supposed to be interested in looking after your assets for your mutual benefit, not stripping them from you.

"It usury. It's a form of lending which is exploiting the ignorance of the customer."
 Ian Fraser, financial journalist.

Regulation

SAMs are perfectly legal. They could still be sold today. But the rules governing the way they could be sold are very different. 

In the nineties, mortgages were not really regulated. There was some loose oversight. Banks operated under the (voluntary) Banking Code and mortgage lenders operated under the (voluntary) Mortgage Lenders Code. The FSA (now the FCA), didn't regulate mortgages until 2004.

As a condition of operating under the Banking Code, banks had to sign up to the Banking Ombudsman, which has the statutory power to tell the bank to fix things, if it decided a bank had broken the Code, made an error or acted unfairly.

In the case of Shared Appreciation Mortgages, although Barclays and Bank of Scotland marketed them under their usual company branding, they set up separate companies to administer and issue the mortgages. These separate companies weren't signatories to the banking code, so the Banking Ombudsman had no powers to even investigate whether customer complaints about SAMs were valid. Essentially Barclays and the Bank of Scotland hung their customers out to dry.

The legislators

After getting nowhere with the Banking Ombudsman many complainants went to their MPs. It seems between 2002 and 2008 a fair head of steam was built up at parliament. The Shared Appreciation Mortgage Action Group (SAMAG) was created by SAM holders. They joined forces with the Struggle Against Financial Exploitation (SAFE) group to work with members of parliament to see what could be done. 

I've seen some excellent correspondence from MPs to Barclays and Bank of Scotland spelling out exactly how unfair they think these SAM products are and demanding to know what the banks were going to do about it.

The campaign did get some movement in the middle 2000s as pressure on Barclays led them to set up a hardship scheme. This either allowed customers a grant to make good problems with their home (eg buy a new roof) or it allowed them a special loan to buy a new property if they needed to downsize or move into special accommodation.

The former provision is fairly straightforward. If the roof is falling in and you need some money to fix it, Barclays will give you the cash on condition you never ask for anything again. 

After all, as they are slowly taking over the ownership of your home, they need to get a decent price for it when it is sold. Paying the customer to keep their appreciating asset in good nick is good business. I spoke to one very bitter SAM holder who refused to use the Barclays scheme. She said "I should just let the place rot. Why should I keep the place looking nice the way I do, just so they can take the benefit of the hard work I've put into maintaining my home all these years?"

The latter provision of the Barclays SAM Hardship Scheme is a little more complicated. If you are getting on - perhaps unable to climb the stairs, or prone to falling - you may need to move into more suitable housing. 

If your home is worth £500,000 and Barclays are due to take £300,000 of that when your property is sold, you are going to be left with £200,000 to buy a new property. This may not be enough. The Barclays hardship scheme provides interest-free loans, repayable on the sale of your new property (most likely when you die) to make up the difference between the cash you have and the cash you need, up to 50% of the value of the new property.

In this way you are still shafted by the SAM, but at least you can maintain your quality of life by moving into suitable accommodation.

Whilst Barclays was recognising there was a serious problem with SAMs, Bank of Scotland (which had mutated into HBOS) was at the very height of its  "dangerously out-of-control and riddled with fraud and alleged criminality" phase. 

It is perhaps unsurprising, therefore, that the chancers in charge of this soon-to-be-taxpayer-supported enterprise felt able to ignore MPs and the anti-SAM campaign and refuse to set up or join any formal hardship scheme. 

One of the Bank of Scotland's PR people did tell me recently that they assess every hardship case on its merits. If a SAM holder contacts them in need, BoS may offer them a special mortgage or "be able to provide them with a grant for a stairlift."

The lawyers

Unable to win redress via the regulators or using political pressure, some of the campaigners took a legal route, which ended disastrously.

One firm of solicitors believed the contracts customers signed when taking out their SAMs could be considered fundamentally unfair. And unfair contracts are unlawful under the Consumer Credit Act. 

If I ask you to sign a deal which has very little potential downside for me, but which has a huge amount of potential downside to you, it doesn't actually matter if you willingly sign it. If the contract is unfair and can be proved to be so, you can get out of it.

In 2009, anti-SAM campaigners raised £1.5m in legal fees for a class action. They took it to court, fighting the banks' lawyers who felt their clients had no case to answer. In 2010, a judge agreed the case could be heard. The banks appealed that decision. A different judge partially sided with them and agreed to shift the goalposts a bit. The campaign lawyers had to regroup and think up a new strategy. 

Before they could do this, the £1.5m ran out, so the campaign lawyers had to go back to the litigants and ask for more money. The campaigners couldn't do it. They withdrew their case and were hit with the banks' costs, which ran to several million pounds.

To avoid paying the banks' costs, a deal was struck. The litigants had to sign stringent gagging orders which stopped them ever complaining about their SAM to anyone ever again. 

At a stroke the campaign collapsed, everyone was several thousand pounds poorer and the banks could continue their legal right to slowly take peoples' homes away from them. 

But at least every lawyer involved got paid.

Why this affects you

"It's a fundamentally unfair product." Barry Taylor, SAM victim's son.

Edna Robson lives in Chelmsford. She also features in the film embedded in this blog post. In 1998 she took out a £15,000 SAM on her house. Two years ago Edna's dementia got so bad she needed to go into a care home. With the help of her son, Barry, Edna sold her house for £183,000. Because Edna had a SAM, Barclays helped themselves to more than half of it, leaving Edna with £87,000 in savings. 

Since 2012 Edna has been paying £640 a week from her savings to fund her care. Now her savings have fallen below the means-testing threshold, the state will pick up the bill. So taxpayers will start paying sooner for Edna's care because the money she would otherwise use has gone to Barclays shareholders. There will be many more cases like Edna's.

Conclusions

I put it to both Barclays and the Bank of Scotland that by selling Shared Appreciation Mortgages in the way they did, they broke the Banking Code, specifically the sections noting a bank will:

a) “help you understand the financial implications of a mortgage”
b) “ensure all services and products comply with this code”
c) “act fairly and reasonably in all our dealings with you”

With regards to a), I can't help thinking if any customer were aware of the real financial implications of a SAM, they wouldn't go near one.

On the subject of b) - the product was being marketed by Barclays and Bank of Scotland (signatories to the Banking Code) but administered and issued by companies (eg BoSSAM No.1) which were not signatories to the Banking Code. That seems to be a direct breach of the code.

On the subject of c), one of the defences the banks fall back on when discussing SAMs is that they were shouldering a risk when issuing these products. If house prices went down they would lose money. Also, they say, no-one knew house prices were going to go up in the way they did. I would like to see their modelling on that.

Either they knew the risks to the customer (which queries how fair and reasonable their dealings were at the time), or they didn't. If the latter is the case, and they are now making profits in excess of expectations (ie excessive profits), wouldn't it be fair and reasonable to cap, time-expire or, heaven forfend, cancel their customers' SAM mortgage contracts?

I got this from Bank of Scotland:

"Bank of Scotland acted in line with normal codes of practice in place at the time when SAMs was launched.

It is worth noting that in the fourth paragraph of the SAM application form it reads "In return for a fixed interest rate for life you agree to the outset to surrender a known percentage of any future increase in the value of your home. Consequently, we strongly recommend that you consult your own Financial Adviser or Solicitor before making an application to ensure that SAM is suitable for you.

Customers then sign the application form declaring "I / We confirm we have received and read a copy of BOSSAM 5 brochure and fully understand the nature of the product." There is therefore not any need for the bank to help a customer "understand the financial implications of [the SAM] mortgage" as they have declared they already do."

And I got this from Barclays:

"Barclays recognised at the time it was offering SAMs that they would not be suitable for everyone, and we therefore ensured that:
1.       The mortgage seller was required to explain the mortgage to the customer and evidence this by completing a Confirmation of Discussion Form, a copy of which was given to the customer.
2.       Confirmation was required from the customer’s solicitor/legal advisor that they had obtained independent legal advice about the terms of the mortgage.
This complied with and exceeded our obligations under the Mortgage Code.
Barclays took extensive legal advice and Counsel relating to all aspects of the SAM scheme, including the contents of the brochure promoting it.  Against this background, we are satisfied that the brochure was accurate and did not result in any mis-selling of this product.” 

Both banks also tell me all their SAMs have been securitised and sold on. They cannot simply release people from their contracts as the future mortgage redemption proceeds have been bundled up into "securities" which are owned and traded by multiple investors on the financial markets.

Conclusions

Many SAM customers are decent people. They worked hard all their lives and put what they earned into their homes. They were never rich. Rich people do not need to raise cash by releasing the equity in their property at usurious rates.

Do these people deserve to be in this situation? Would you turn around to Brian Dawtrey, shrug your shoulders and say "them's the breaks, old man!"

What if you end up paying for Brian's care because the Bank of Scotland have taken the lion's share of his only real asset? 

Nearly 12,000 SAMs were sold between 1996 and 1998 by Barclays and Bank of Scotland, and nearly 6,000 are still active. Many customers are now in their eighties and nineties. Some are consumed by the stress these products have caused. Far from being over, this is a live issue.

.

69 comments:

  1. My parents are tied into one of these monstrosities.

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    1. Hi - I've just had a chat with my editor about this and we might do a follow up. Is there any chance you can contact me via twitter or facebook or via my agent? Many thanks. N

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    2. Mum is terminally ill, Dad died recently and she cannot live there as its out in the sticks
      with no gas supply, the only form of heating is solid fuel. She is a prisoner trapped inside her
      own home with not enough money for fees for nursing home.
      Am sure when Nick see's this document there will be a follow up on Inside out
      http://www.teacherstern.com/Documents/Shared%20Appreciation%20Mortgage%20Mis-Selling.pdf

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    3. My parents took one of these loans from Barclays to settle a guarantee that Barclays were calling in - double whammy! The bank also vastly undervalued the property so they will effectively steal £142K. We are taking legal steps so if anyone wants to join in ..................Hope you continue to publicise and keep the pressure on. By the way no evidence of a Confirmation of discussion form and their idea of independent legal advice is to use their solicitor!

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    4. My father took out a SAM with Barclays. When he told me about it he said it was 25% of the appreciation of the house. After reading the documentation I had to tell him that it was in fact 75%. He was devastated, I have never seen him with tears in his eyes until that day. We joined SAM action group, but as written above they were not successful. Because of the distress it caused my father we stopped discussing it. My father has just died and my mother is trying to contact Barclays regarding this SAM but has been unable it get any help. She is still waiting for a promised phone call. Accorded to Mum there was no Confirmation of Discussion Form (hence my fathers initial confusion on the amount he would have to pay back), and no independent legal advice. Surely another challenge could be made for this 'money grabbing' scheme.

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    5. Hi my mum is tied up in a SAMs Moorgate and has been she didn't realise the implications of it all was struggling a bit and coming to terms with losing her husband she has tried to get out of this and get advise but not everyone is aware of these morgatages and how to fix them. It's a scandal she's 76 and still paying a mortgage it's ridiculous how this has been done. She was with the bank of Scotland

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  2. My late father also took out one of these dreadful mortgages in the 90s and regretted it to his dying day. He had just become ill when Bank of Scotland approached him with regards selling him the SAM. Our family is still in turmoil over having to pay back roughly £350k to BOS for a £50k loan when we need to sell my parents' house.

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  4. my parents in law also took one of these mortgages out. Father in law now has late onset Alzheimer's, their house was purchased for £94k, with a £20k SAM. As they have to pay a whopping 75% of any increased value back when selling, they are stuck unable to move in the middle of nowhere. Yes, their fault, they didn't even tell us at the time they were taking this type of mortgage out. Contrary to what BoS say, their mortgage agreement does not state that "we advice you take independent legal advice" nor that "we fully understand the terms" etc - in fact the solicitor acted for my parents in law and the mortgage company and we can find no information that any written warning over the type of mortgage was provided - certainly my mother in law had no idea of the implications - as for father in law we cannot ascertain what he knew of it as he no longer has sufficient mental capacity to query this. Good luck in any future investigation

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  5. I am about to put my mother's house on the market. Barclays Bank are going to receive in the region of £220000 for a £28500 loan. Her solicitor, who she trusted and considered her independent legal advice, was also the solicitor for Barclays. She also was from the generation that trusted their bank manager. She was a widow and did not consult her family. The house was the result of her husbands working life and he would be heartbroken that his children were not inheriting the house. Obviously the house must be sold because of the amount that is owed to Barclays. Surely these mortgages were missold morally if not legally?

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    1. same situation here

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    2. My aunt is also in this position. The house has been sold after 6 months on the market. Barclays Bank are insisting that my aunt pays for a second valuation of the house and if the second valuation is higher than the price she has been offered she has been told that she will have to pay Barclays the shortfall - utter rip off

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    3. Maybe a conflict of interest is the key t solve this bad deal for those people, am not sure just a thought i am not a solicitor or anything, just a ex - letting agent for awhile .. have a read of this tho, a answer could be in here somewhere???
      conflict of interests - info
      http://www.sra.org.uk/documents/code/rule-3-conflict-of-interests.pdf

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  6. My aunt has recently died. she was in the early stages of dementia when she took out a total of £17,000 to include fees and costs, in 1997 with the Bank of Scotland. she had no paperwork apart from the solicitors letter and transfer payment,and assumed she would be paying the 'mortgage' back. The money paid for repairs to her home and new kitchen and bathroom. She spent the rest of her life watching cars drive by terrified saying the Bank wants their money and she has none to pay the mortgage' she was petrified they would turn her out of her home. The house is valued at 179,000 and the bank shall be taking nearly £112,000. It doesn't stop there. There is an added payment every three months of an up to date valuation of approx £250. Then other hidden costs no doubt. Trying to deal with the Bank of Scotland is a nightmare. constantly chasing them up, no landline or 03 number either. It took 4 months to arrange a valuation because she needed to go into a nursing home. nothing but stress. The valuation lasts 90 days but it took over 4 weeks to receive it after the actual valuation. After informing them of my aunts death and showing the certificate at a branch of Halifax, 20 days later still not heard from them as promised. all other organisations took approx 2-3 days. Every time I phoned it was marked as 'urgent' and would be sorted straight away. Never was. constant lies.
    I even ended up phoning their valuer myself and arranging it because just ongoing nightmare of no communication.

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    1. and the reality is that the house probably would not sell for more than 150K. This means will still have to pay 75% of their over inflated valuation.

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  7. My parents took out one of these SAM mortgages. Both are now deceased and as executors my siblings and I have recently paid Bank Of Scotland, from our late mother's estate, approximately £150000 on an £19500 original loan. The banks stated view is one of entitlement. They ignore all reference to ethics and values.

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    1. It is easy to condemn these mortgages with the benefit of hindsight and the large increase in property values. Had propoerty prices not risen then the bank would have been entitles to nothing over their principle. Broken down the deal was that the bank bought 25% of the property. In exchange for the lack of rental income and the lack of liquidity (they could not directly sell their share), they asked that they had 75% rather than just 25% of the rise in property value. The deal was simpler to understand than most other schemes. The only question of ethics is if there were people who really did not understand it. I suspect that most people are regretting losing out on the increase in price

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    2. The banks know that in the long term house prices are always going to go up, these schemes were a sound investment for them. The scheme that my parents took out had no projections as to what the outcome would be in different market conditions and the annual statement only ever showed the amount of the original loan.

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    3. ? But it is bleeding obvious what they would have been in certain conditions. If the price goes up by 10% then 7.5% is the banks. If it goes up by 100% then 75% is the banks.

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  8. It is certainly not ethical to charge so much for a loan which people like ourselves took in out in our fifties because of financial hardship. We took financial advice at the time - BUT nobody should have ever been advised to take a SAM. It is a foregone conclusion that property prices rise in the long term. You cant mean to tell me that the financial wizards in Barclays did not work it out that over the substantial period of time that most people would keep this mortgages they would make an absolute "killing". We changed our SAM for a interest only mortgage because we were scared of loosing everything after aprox 5years. We now owe £185,000 and are having to move far from the area we now live in because we cannot afford a house

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    1. Hi everybody, I am Barry James ,currently living in canada. I am married at the moment with two kids and i was struck in a financial situation and i needed to refinance and pay for my son medical bill. I tried seeking loans from various loan firms both private and corporate but never with success,and most banks declined my credit. But as God would have it, i was introduced to a private loan lender by a friend and i got a loan sum of 30,000USD and today am a business owner and my kids are doing well at the moment. So dear,if you must contact any firm with reference to securing a loan with low interest rate of 2% and better repayment plans and schedule,please contact Elvin Morrison he doesn’t know that am doing this but am so happy now and i decided to let people know more about him, he offers all kinds of loans to both individuals and company and also i want God to bless him more. You can contact his company through this email elvinloancompany@yahoo.com

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  9. It's interesting to note that the comment from "Anonymous" almost mirrors that given to us by the BOS. However they did not reinforce this by any specific examples of similar properties which have not risen significatly in price over the period of this loan. Over 600% interest on a loan seems to me excessive from what should be a trusted banking brand.

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    1. agreed Neil watch this space

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    2. I'm sure nearly all houses went up massively over the last two decades. The next twenty years might not be as fast. To be fair though it isn't "interest" and its disingenuous to present is as such. It's a share in the profit that was agreed in exchange for a sum of money. The mistake here is viewing those individuals as borrowers. They weren't. They sold a stake in their house with a stake in the future profit. The outcome was harsh but still fair on the terms given. The thing i see as unfair is if they can't transfer the same percentage ownership deal to another property and are stuck.

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  11. Dad recently died just found a SAM for £30K took out in 1998 bank are now pressuring my mum for almost £200K was originally sold as a 75% equity share in £30 meaning approx £75K repayable. Mum is about to be made almost homeless. This was definately miss sold to my parents

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    1. SAMS are dreadful, My late Father took out 1 with Barclays without telling his Daughter and Son in Law, however I am sure it is the case that they cannot make your Mother homeless and she would be entitled to live there for life as spouse of the deceased party- I wish you lots of luck, absoulute nightmare at a very sad time and should not be allowed.

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    2. I'm going for BOS, a new Lawyer in progress will post up information about how we're doing it. http://www.teacherstern.com/profiles_detail.asp?employeeID=120

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  12. My father took out a SAM with Barclays in 1998. Whilst, as a matter of English language, he may have understood the terms and conditions, the lack of projections as would now be required meant that the real financial implications were never truly explained. He would never have used this product if the likely outcome had been explained in financial terms. The only example given was for a loan of 2 years' duration. Almost all SAMs were effectively whole life loans where the house price rise effect is much clearer. I complained to Barclays in 2000 (before the drop dead date) and suggested a compromise which they refused. I tried the Financial Ombudsman and, as with all Ombudsman services I have used, got nowhere. The SAM contracts are clearly usurous when viewed as whole life loans and as such should be invalid under English law. It is sad but not unusual that the class action failed. How can a group already under financial stress possibly compete with a behemoth like Barclay or BoS? Today, with so many other bank product miss-selling scandals and the extreme cost of care for the elderly, it is about time that the banks who sold SAMs (and only a few thousand such contracts are still in force) agreed fairer terms that do not give them 600-700% returns, whether or not the mortgages have been securitised and sold on. This is a matter of shame on the two banks that sold these products and they should come to the table. Can you imagine how the press would report on this now? Banks forcing the elderly to pay over the vast majority of the value of their only asset making provision of suitable long term care impossible, despite any "hardship" fund offers. I would be more than happy to meet and discuss my case if helpful. Dr Paul Nailor

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  13. My mother too is trapped by this historical arrangement. She acquired the mortgage when she was recently widowed. Unfortunately she trusted her financial adviser, did not understand the consequences (did anyone?) and failed to tell her family what she had done. By the time we found out years later it was too late to take action.

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  14. Hi everybody, I am Barry James ,currently living in canada. I am married at the moment with two kids and i was struck in a financial situation and i needed to refinance and pay for my son medical bill. I tried seeking loans from various loan firms both private and corporate but never with success,and most banks declined my credit. But as God would have it, i was introduced to a private loan lender by a friend and i got a loan sum of 30,000USD and today am a business owner and my kids are doing well at the moment. So dear,if you must contact any firm with reference to securing a loan with low interest rate of 2% and better repayment plans and schedule,please contact Elvin Morrison he doesn’t know that am doing this but am so happy now and i decided to let people know more about him, he offers all kinds of loans to both individuals and company and also i want God to bless him more. You can contact his company through this email elvinloancompany@yahoo.com

    ReplyDelete
  15. My father died 4 years ago and my mother has decided to now move and has been hit by a massive bill and repayment for the SAMs by dad took out back in 1998. She is looking to finance a number of years in a care home and so is selling her house after 35 years being there as she can no longer cope on her own. The original SAMs loan was £15k and she is facing somewhere close to £97k repayment to Barclays (a 650% increase), losing almost half of the property value. The house sale is going through at the moment and this bill was quite a shock to her, but she is going ahead with the sale and repayment simply because she cannot face the circumstances of staying there any longer on her own, but to me it is robbery and a scheme devised to prey on people at a time in their lives when they would be most vulnerable.

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  16. Good afternoon, just seen this excellent piece from Nick and have to say has left me feeling somewhat dejected regarding Sam's and their apparent miss selling. My father has recently passed away and I am in the process of sorting out probate and during this process I have found out my parents took out a BOS Sam, meaning at current market rates BOS will walk away with some £200k on a loan of £28250. This seems totally unfair and completely one sided. Even speaking with a friend who works in the foreign exchange market cannot believe BOS can get away with it, but apparently they can. From the documents have found i understand that i have some 18 months to demonstrate to BOS that I am doing all I can to sell his property. Bearing this in mmd has anyone heard of or had any success with fighting the loan. According to my solicitor a gagging order is attached to the court case taken against Barclays & BOS so information is very limited. I have tried to make contact with Teachers Stern who seem to say they have had success in fighting these but has anyone else taken this route.

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  17. According to the Ombudsman it was not the BOS who leant the money to my parents it was a company not covered by the Ombudsman service. I assume therefore unregulated. known as ' BOS (Shared Appreciation Mortgages {Scotland} No 2) Limited'. The BOS simply act as agents for this company. So they were prepared to accept the £150K and to reply to complaints but actually have no responsibility. A useful brick wall.

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  18. My husband and I, now in out late 50's, took out a BoS SAM's mortgage. We paid a 25% deposit on our new home and borrowed the remaining 75%. We pay the interest on the loan every month and will have to repay 75% of the profit if we sell or when we die.

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  19. I find it strange that lawyers can now claim compensation for losses made in respect of failed investments- the equivalent of asking a bookie for your stake back because your horse did not win- however people like my 94 year old mother borrowed 20,000 and now faces a repayment of 187,500 with no redress. She refuses to concede that my late father could have done anything that was not considered or well advised. It is completely immoral.

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  20. Is there a "Fair market" valuation clause in these contracts?
    Has anyone explored selling to a relative at a low ball price - reducing the value of the capital gain to £0, say. (The relative could fund the purchase with a bridging loan perhaps)

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  21. My Father took out a SAM of 90,000 against his house which was was then valued at 350,000. It is now worth a million. He died in Feb and my Mother currently owes BOS nearly 600,000! Nearly a 600% profit!!! What a nightmare!

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  22. My wife and i made the mistake of taking one of these mortgages wth bank of scotland.we also took part in the failed court action which resulted in a gaggng order against the litigants. we originaly applied directly to bank of scotland for this mortgage after seeing it advertised in the press.We have been advised that we may have recourse against our solictors who have a duty of care to us and could have offered us advice at the time of legalising the mortgage.
    Does anyone have advice on this?

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  23. You are probably outside of the limitation period relevant to negligence claims. In my fathers case the bank are maintaining that he received independent legal advice whereas the reality is the solicitor was instructed by Barclays to only comment on how the product worked not whether it was a fair contract. It is also probably not a contract on which the solicitors could act for both parties.

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  24. My mother also took out a SAM after my father died leaving no life insurance but a mortgage still to pay off. They had bought their house late in life and unfortunately not understanding financial things that well had taken out life insurance that ran out before the mortgage. The SAM seemed like a good idea and as someone else has mentioned the meeting with the solicitor was mainly to comment on how the product worked not to give any advice. It was a really bad decision based on what seemed like an answer to Mum's issues at the time. Oh how wrong we have turned out to be.

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  25. My father took a 25% SAM on a £60K property in 1997. It has just been sold for £192K and we have to pay back £112K (and also they valuation fee for BOS)
    My father signed this mortgage, however he always got my mother to check documents as his reading wasn't good.
    My mother, however did not sign the SAM agreement even though she was his wife and it was a joint home. I don't think she knew of it.
    Was this legal?

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  26. Has anyone come up with something to deal with Bank of Scotland and Barclays regarding these SAMS my parents are in the same position borrowed £56,000, they have been paying back the interest and this month they have paid back over £60,000 in interest and BOS still want back the £56,000 + 75% of the property value. We dont want to sell the house just get rid of this SAMS mortgage

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  27. Hi, I have only found out that my Father has one of these through Barclays, The loan was for £145,00 and if he sells his house now he will give Barclays back £600,000. I understand that the agreement is leagaaly binding, but as has been stated before why was there no cap put in place by Barclays when they could see what was happenening. I am sure if the house markets had affected the bank in a negative direction the situation would have been addressed quickly, surely this is conducting a business/client relationship "with due care and attention.

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  28. Try calling Chris Philpot Teacher Stern Solicitors London who is taking a number of SAM cases against Barclays and BOS.

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    1. Ive emailed Teachers Stern about SAMS but as yet no reply, are they still interested

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    2. about to get Bank Of Scotland to take most of the house, there is nothing anyone can do (Sadly) pay up and move on

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  29. My 83-year-old long-widowed Mum has one of these. £23K loan vs £172K payback. She'd been on her own for 13 years when she took a SAM out, to supplement her small pension. She regrets it now.
    On the very interesting discussions above, it seems to me it is entirely in HBOS & Barclays interests to stall, obfuscate and generally resist all or any claims for as long as possible, for the obvious reason that these despicable products apply to a group of people whose numbers reduce over time. Without wishing ill of anyone, especially my poor old Mum, those numbers are going to start reducing at an increasing rate from now on. So as each month goes by, the banks are taking their 'profits'.
    Another observation, in response to the supporter of these odious things who said the banks would have had to take the downside if house prices fell - I argue that a bank would have 'hedged' (in one form or another) that exposure if they felt there was any likelihood of it happening. Hedging against the downside was not an option for Mum or any of the other individuals concerned, nor was it offered by the banks, thus making the transaction even more one-sided.
    I honestly don't mind banks making a profit, even big profits where they've taken a risk and it's paid off. The SAM problem is in the patent inequality of the almost non-existent 'risk' versus a stupendous return. The fact that SAMs have also resulted in misery for people throughout this exchange brings the bank's 'corporate social responsibility' into play.
    They have a responsibility to the wider community, and especially thier customers, to provide a service which offers 'social good' as well as make a reasonable return for their shareholders. Again, SAMs seem to be completely imbalanced in favour of the shareholder.
    In short, I would be happy to join any scheme to challenge the banks... if it's as free of risk as a SAM.

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  30. Thank you for publishing this article. I am trying to help (pro bono) a lady who was sold one of these to refinance a capital repayment mortgage when she was 47 and still working!

    Her situation has now changed and she has inherited some money. She is paying circa 6.5% interest on the outstanding loan and getting around 1.5% from her bank. Logic tells me at least repay the debt and stop the people who provided these arrangements from profitting any further. However, there is very little paperwork and I want to make sure that she won't suffer any further financially if she does so. Is there any detriment or further penalties if she pays it off? Any help much appreciated.

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  31. Can anyone tell me how inheritance tax will work with a SAM? My mothers house is worth 700,000. Barclays will take 75% of everything above 200,000. Will I pay inheritance tax on the full value of the house or just on the inherited cash after the house sale (once Barclays have taken their share)?

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  32. Does anyone know how inheritance tax will work with a SAM? Do you still have to pay inheritance tax on the full value of the property even if you are only inheriting a small percentage of the value after the bank have taken their share? The property my mother owns is worth 700,000 pounds but the bank are taking 75% of everything above 200,000 pounds. Plus they will also take the original 50,000 loan.

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  33. Rosie - IHT is only due on the value of the Estate. The value of the house should be reduced by the sum payable under the mortgage

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  34. I there anybody out there whos had success with the banks over the SAMS?

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  35. Sounds harsh but I’ve done some sums here looking at the Halifax house price index. Effectively this was a sale of part of the house and not a loan. The bank owned 25% and they rightly would expect the growth on that. It would also be logical to say that they would be entitled to a loss of rental yield that could be expected from residential property. The fifteen years prior to 31 December 1997 show an increase in house prices of just over 135% or 5.9% p.a. compounded. If the Banks asked for three times that amount the return would be 405%. This is equivalent to an annual return of 11.4%. That is 5.5% higher, which I don’t believe this is significantly higher than historic rental yields after costs. The fifteen years following 31 December 1997 showed a remarkably similar return on property compared to the previous fifteen, in fact it was a tiny bit less. If we look at the time between the end of 1997 and when this video was published the equivalent additional annual return for the bank was 5.3%. Admittedly the figures would depend on where you lived but you can only fairly judge this on a national basis.

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    1. If the banks took 25% ownership, they then recover 75% of the sale price, plus a repayment of the loan. Notwithstanding the loss of rental income (to which they could only be judged to be entitled to just 25% on a pro-rata basis) they accept no responsibility for the upkeep of the property, and there is no allowance for any increase in value due to enhancements.

      Strikes me this assessment of fairness is pretty facetious at best, tending to facile. Probably from a person unaffected by these criminal financial goods, possibly associated with Barclays or RBS.

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    2. It's an interesting assessment though. Conerning only being entitled to rent on 25% it does works on that basis because it is quantifies it as a return just on that part. Whether the return is representative of a rent AFTER equivalent upkeep costs, I don't know? but it doesn't help your argument making assumptions about and attacks to the person trying to look at things logicslly. Clearly if people were deceived about what they were getting into there SHOULD be compensation but not just because they now regret it.

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  36. Alexander Mac
    They knew in advance how the house price-rise would come about, it was simulated on computer and tested and then it was engineered to occur. You were deceived as was I. We have the data. In collecting more data, it would be helpful if you could send the date - just the date you signed your SAM to avpco@aol.com, with SAM in the subject line, if you can.
    We are all in this together - and they are going to pay.

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  37. The scheme that my parents took out had no projections as to what the outcome would be in different market conditions and the annual statement only ever showed the amount of the original loan.

    work injury compensation

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  38. Hi, new to blog but believe there is a Solicitor that is reviewing cases and potentially reviewing a group action. Let me know if interested.

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    1. Get a copy of the Sun Newspaper for today 15th July 2015 and go to page 13. Perhaps we should all write to the national newspapers about this awful situation. I would be interested to join any group or to contact any solicitor willing to take up our case.

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  39. Great comments . For what it's worth , you are wanting a USCIS I-9 , my business partner edited a template document here http://pdf.ac/aF6asA.

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    1. What is a USCIS-1-9 document? Went to link but it says the firm is no longer supported.

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  40. Hi, Has there been any follow up on these mortgages. My parents have just died and they had a SAM taken out in 1997 for £30,000 initial loan and house now valued at £435k so £265,750 due to BoS - so totally unrelated to the scale of the original loan.

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  41. im new to this blog too, my parents are 86 and 81 and borrowed 19K in 1997 a few weeks before the RBS stopped selling them ( they must have known they were mis selling them)..if they sell now they have to repay 160 k for a 19k loan !..anyone knows how we can change this morally reprehensible thing please let me know, email pxpspence@yahoo.com

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  42. Like others on here I have parents who I recently found took out a SAM (Barclays). My parents are now both elderly & in poor health & the home they are living in & on which the SAM was taken out is far from ideal for their current needs however the terms are completely restrictive as if the house is sold the bank will be entitled to 75% of the appreciation since taken out which leaves insufficient funds to pay for alternative accommodation i.e. residential care home etc. I would be very interested to hear if there is any recourse or someone has been successful with any action taken.

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  43. Hi
    My mum is now in her 80's and vulnerable she was widowed when she took out a BOS SAM from an allied Dunbar salesman. Totally conned and got nowhere trying to deal with BOS so hope to join others in legal challenge.
    Co tact sammi@btinternet.com

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  44. Hi all and thanks for your contributions.

    I have a commission to revisit this story.

    Please could you message me via my other website www.nickwallis.com if you are interested in taking part in the programme and being filmed telling your story (to me!)

    This request is urgent as we are looking to start filming in a couple of weeks.

    Many thanks

    Nick

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