Additional Mortgage Loan and the CCA? Help Pls

[andrew1]

I have also posted this on the Consumer Credit Agreement Thread, but need an answer today if possible as I have a court case on Monday

 

Can someone tell me if the CCA would apply to this:

 

I have a mortgage and a property with a lot of equity. In 2003 I was in trouble and requested a further advance on my mortgage of another 50k. I had a Directors guarantee 2nd charge on the property for £13k and a Caution on the property (won't bore you with why, but I was going to leave it there forever) for £22k.

 

My mortgage company after a long fight to get the additional loan insisted I cleared the two charges before they would lend any more so they had a clear 1st charge on all borrowing - not unreasonable I guess, but I had no choice. Now the funds were consolidated into my mortgage but have pushed the loan up £35k.

 

My question is that under the CCA an advance to discharge a debt should be treated as a separate regulated agreement for provision of a fixed sum, restricted use debtor creditor credit falling under sections 11 (1)c of the Act.

 

Does anyone think this additional lending should have been treated likewise rather than just lumped into the mortgage when there were strict conditions on clearing these debts built into the terms of the transaction?

[Bona]

All I can tell you is that when we remortgaged we had to clear all outstanding charges on the property before they gave it to us therefore I assume your second loan is part of the mortgage and that doesnt apply but Im not sure

[andrew1]

Thanks, but I really need to clarify this this as perfectly as I can because there's an issue with whether it's a mortgae or a loan to pay off debt and covered by the CCA - it's a twist and not something people generally question, but it is important to get clarified as soon as I can. In court Monday pm so I don't have much time.

[Bona]

You need to look at your agreement when you took out the loan if it is a mortgage deed secured on your house it will say so

[andrew1]

The documentation refers to this as an 'Additional Loan Offer' secured by the first legal mortgage ( which they already have ) subject to the terms set out in the attached ' Offer Conditions'

 

It is obviously geared as an additional mortgage and refers to this £92800 overall gross figure as a mortgage offer - however, the conditions make the disbursement, ie: the separate payments to pay off the charges as a condition something similar to a loan which pays off previous loans or debt before the recipient gets the full amount of the loan. - a restricted use credit debit if it was geared under the cca. Now just because this is a further advance / additional Loan ( they refer to both in the documentation ) does it mean the CCA is irrelevant? I know mortgages are not regulated by the cca, but it's the way in which these transactions have been disbursed that and the conditions which ensured their payment which concerns me.

[Bona]

Why are you in court

[gizmo111]

AFAIK Andrew, when you remortgage/consolidate they can impose these terms and they will be a condition of the mortgage and nothing to do with the original agreement that may have been covered by the CCA.

it is not unusual for some mortgage co's when offerin a further advance to clear other credit or charges on the property to make the chqs out to the credit company.

 

As Bona says what are you in court for?

[andrew1]

I have been working for 6 mnths on a project and not been paid, it put my mtg in arrears and they issued repossession proceedings. I can handle that ( been there before in darker days). There was no 'original Agreement' under the CCA Gizmo. BUT.. if they insist on clearance of these other charges and especially the Caution which I was going to leave forever) does that or should that not be treated as a different 'loan' situation and under the CCA?

[tomterm8]

 

I had a Directors guarantee 2nd charge on the property for £13k and a Caution on the property (won't bore you with why, but I was going to leave it there forever) for £22k.

 

My question is that under the CCA an advance to discharge a debt should be treated as a separate regulated agreement for provision of a fixed sum, restricted use debtor creditor credit falling under sections 11 (1)c of the Act.

 

 

My understanding is that the agreement was to clear two debts, one of 13k and one of 22k, making a total of 35k, and that the same agreement varying the mortgage covered both debts.

 

I believe such an agreement would normally fall outside of the consumer credit act 1974, if made before the relevant section of the consumer credit act 2006 came into force, since the agreement repaying the indebtedness is for greater than the prescribed financial limit set out in s8 (i.e. 35k) .

 

However, if some part of the agreement were restricted-use and other unrestricted-use, and both agreements were less than the prescribed limit, they might very well be treated as seperate agreeements according to s18. I really do not know if this is the case, however, as I have never seen any case law on these matters.

 

This is the kind of question where i would tend to take to a barrister. i wouldn't be confident to bring the case on my own.

 

Does anyone think this additional lending should have been treated likewise rather than just lumped into the mortgage when there were strict conditions on clearing these debts built into the terms of the transaction?

 

I believe that mortgage lenders often consolidate existing debts into the mortgage. This might possibly create a partially regulated debt - I haven't checked the case law, but your argument seems correct to me - but even if the partially regulated section is unenforceable, i don't believe the rest of the mortgage would be.

[andrew1]

"but even if the partially regulated section is unenforceable, i don't believe the rest of the mortgage would be".

 

actually tomterm That wouldn't be a problem as the overall additional loan was £92k - if I get rid of that - I think I might be somewhat happy !

 

"My understanding is that the agreement was to clear two debts"

 

Actually, the 'condition' was to clear 2 debts, which were the charges/caution. The Agreement was to clear mortgage arrears and other personal debt to the tune of c£55k, they added the conditions of offer which bumped it up to £92k . The 2 charges were £14k and £23K (caution) and they sent a £37k cheque to my solicitor to clear both this was in June 2003

[tomterm8]

"but even if the partially regulated section is unenforceable, i don't believe the rest of the mortgage would be".

 

 

actually tomterm That wouldn't be a problem as the overall additional loan was £92k - if I get rid of that - I think I might be somewhat happy !

 

"My understanding is that the agreement was to clear two debts"

 

Actually, the 'condition' was to clear 2 debts, which were the charges/caution. The Agreement was to clear mortgage arrears and other personal debt to the tune of c£55k, they added the conditions of offer which bumped it up to £92k . The 2 charges were £14k and £23K (caution) and they sent a £37k cheque to my solicitor to clear both this was in June 2003

 

Maybe you should post a list of what the agreement did, i.e.

 

clear debt 1 £XX,XXX

clear debt 2 £XX,XXX

clear debt 3 £XX,XXX

etc.

 

i really can't even get down to this simple level, all the different bits of the agreement are kinda getting lost on me.

[andrew1]

Further Advance £92800

Less Processing fee £1500

 

Cleared:

1. 1st charge Mortgage arrears £23,800 t/f'd directly to Mtg Account by bank

2. 2nd charge Lloyds loan £14,157 - Paid by bank directly to my solicitor to clear

3. Caution £22,227 - Paid to my solicitor to clear

(- 1 chq covering 2 & 3 above £36,937 including my sol legal costs £552)

 

Balance of £30,545 paid into my current account, but agreement stated it must be used solely to clear creditors.

 

I had applied for £55k advance, No's 2 & 3 above had to be cleared as a condition of the further advance increasing the advance to £92,800

[Bona]

im not sure what you are trying to achieve you are in arreas on your mortgage of 92 grand and they have issued repossession proceedings can you elaborate

[andrew1]

Bona, this detail above relates to a further advance agreement in 2003 as I pointed out above and what I am trying to achieve is to find out IF, when the agreement was put together it was legal - ie: should these amounts paid separately by the mtg provider, which were restricted use credit, as would have happened had they been a loan company I had approached, be subject to CCA regulations? If the same thing happened with a loan from a lender who was a second charge loan and they lumped the whole lot together under one agreement they would have breached the CCA in a variety of ways such as mixing an unregulated, restricted credit sum with an unrestricted sum and the agreement would have been a multiple agreement. You'd have to understand the CCA to understand where I am coming from. I am comparing exactly the same transaction, but this time through a further advance of my mortgage rather than a loan company. So, were they right to do what they did making it a condition I cleared these amounts, paying them themselves as a separate transaction directly to the parties concerned? These were restricted amounts for fixed sums and combining all these different types of 'loan' into one loan amount rather than splitting them in to their relative parts, they couldn't have done if this were a conventional loan. It's the difference between being a further advance on a mortgage and an ordinary Loan regulated by the CCA ( which I know mortgages are not when first taken out). The court case I have now is for an unrelated amount which is outstanding currently on the same mortgage, but my arrears are a couple of thousand only currently for which they have raised action against. I want to go into court and argue they did this agreement incorrectly - if what I am saying is correct. I just need someone with better mortgage knowledge than me to clarify my position if they can. That's all.

[caro]

I don't pretend to be an expert Andrew, and I do see where you're coming from, but I wonder if the consolidation means that the new mortgage terms are the ones that apply as they are now secured on the property anyway.

 

I do wonder though if there were any charges on the original agreements, which effectively mean that you borrowed more than you needed to, although unless it was the mortagage company in the first place, I don't see that will help your case. I suppose that you could argue that because of these charges you borrowed more than necessary which compounded your problems with arrears now.

 

I'm not sure if my logic makes any legal sense though.

[Bona]

your logic makes sense but is it legal unfortunaltley i dont thinck andrew has time

[Bona]

your logic makes sense but is it legal unfortunaltley i dont thinck andrew has time to take advise but he could go with that argument he has nothing to koose

[andrew1]

Actually, that is another angle, they forced an additional £37k on my mtg which certainly hasn't helped.

 

There are twists to the cca which I currently don't want to put onto the forum for reasons I'll have to explain at a later date. What I will try and do tomorrow, is attempt to bring in the fact that the bank SHOULD have looked at this finance in a different way because it is a multiple agreement. A mixture of regulated agreement for the provision of fixed sum, restricted use debtor creditor credit and a regulated unrestricted use debtor creditor agreement falling under s11(2) of the c c act. I will also add the bit you suggest. No, I don't have time, I'm faxing this to their legal department in the morning and hope to god that I can throw enough doubt on the equation to get the hearing adjourned. I also have a whole swathe of small 30 & 25 charges on the account since 1994 I can chuck in for good measure and hope I get the D.Judge I had before ( I wrote to her afterwards telling her wonderful she had been! - just hope she remembers me !)

 

Anyway, thanks this has been a bit of a panick move as I have only just found out about this twist. I might, just might be able to swing it - you guys will be the second to know - the first knows who that will be!

 

Thank you everyone..

[caro]

Ooh Andrew1 you are a tease.

 

It certainly seems like an adjournment will be your best bet, so if you can throw an element of doubt into the judges mind, I reckon you might stand a chance so that you can collect your thoughts and sort out a good case for yourself.

 

If anyone can do that I'm sure it's you.

[make them aktiv runners]

Hi Andrew.

 

I had a gut feeling that the CCA did not apply as such but did not like to argue with some-one with more knowledge.

 

Adding from what I posted on the other thread, I think you have 2 options:

 

a) the mortgage is always a first charge and the 2nd charges (that they made you finance) are just that. If the bank had simply refinanced your mortgage to the level you wanted (100K + 50K if I remembered correctly) then there was no need to finance the 2nd charges as they would have remained 2nd to the mortgage anyway (assuming of course that the mortgage would be greater than the banks normal lending criteria, eg if max loan to value 95%).

 

b) The bank have intentionally made you unable to proceed under CCA (due to total amount borrowed for charges). At the end of the day, if they wanted you to clear the charges then these should have each been refinanced (still as 2nd charges) by the bank before they did anything else (both would definately have fallen under CCA and been under 25K).

 

I am no expert. Hope the above helps in some way.

[andrew1]

Aktiv thanks.

 

The bank stated that they would have to join the queue if the were to provide further funding otherwise they could effectively wipe out any 2nd charges by keep lending or refinancing the motgage, which, when you think about it make sense. Sadly I'm no mortgage whizz either.

 

However, what I am getting at is that IF this was a company like say GE and I was applying for a loan (forget the 1st charge mortgage for a minute) and they requested a 2nd charge but the charges and caution were already there and had to be cleared and they paid them off, then they would HAVE to be treated in the manner I described under the CCA. SO what makes the mortgage situation any different?

 

As you rightly say, they always have the 1st charge on the initial mortgage, but any further lending, especially when it is to consolidate debt of fixed sums SHOULD be constructed under a cca agreement in my opinion ( but my opinion with such a scant knowledge of mortgage finance doesn't count for much) Well that's what I am going to argue tomorrow and see what they say. As I have already submitted no real defence other than sorry m'lud this is going to be either thrown out as nonsense or it will be adjourned for a later date, by which time I will have researched it better. I only came up with this on Friday.

 

I have a whopping amount of equity so I am not unduly worried, I just don't want to increase my borrowing just now, I rather prefer to 'trade my way' out of these situations when I get into them. Anyway, it's all food for thought.

 

We'll get there..

 

Sarah

[caro]

Do you know Sarah, I really don't get it with mortgage providers and equity. In my personal experience equity seems to count for very little, and yet it obviously means that if the worst comes to the worst the mortgage provider is guaranteed their money back, especially if the property has to be sold. So what is the problem? I'm in the process of remortgaging, and will still have 50% equity in our house, and yet we really struggled to get the money we need, and then due to the age of my OH, we can only get it for 13 years. If we could get it for 20 or 25 it would be very easy to manage.

 

As you have equity, and the previous charge is gone from your property I believe,i f it comes to it and an adjournment isn't agreed, maybe you should ask for a new charge so that if it's sold later, your arrears can be paid then. Unfortunately the self employed are considered high risk which will not go in your favour I guess. I really wish I could be more constructive.

[make them aktiv runners]

Do you have a copy of the deeds before you took on this additional borrowing?

 

If so, mortgage companies often write in something on the lines of "maay be subject to further advances" I cannot get onto the land registry website but I am sure this means that no matter what the borrowing is then they will always have first call irrespective of any other 2nd charges registered.

 

The only other thing is the advice they gave you. You can remortgage through another bank who may well lend you more and it will be a first charge. Yes the interest rate might have been higher but the amount borrowed would have been 37K less. Did they explain this?

[make them aktiv runners]

Not sure if this is of any help.

 

Land Registration Act 2002 (c. 9)

[andrew1]

Thanks Aktiv,

 

I suppose this might cover it :

 

s.49 Tacking and further advances

(4) The proprietor of a registered charge may also make a further advance on the security of the charge ranking in priority to a subsequent charge if—

(a) the parties to the prior charge have agreed a maximum amount for which the charge is security,

 

 

If you think that the sums were already set and not increasing, one could argue perhaps that these were agreed maximum sums?