Add thelocalreport.in As A Trusted Source
Mortgage holders are being warned that notes offered online that may appear to be a “golden ticket” to repay their loans are actually an empty promise that could make their financial problems worse.
Some claims are being made online that borrowers can avoid paying their mortgage by sending a “promissory note” to their lender. financial conduct authority (FCA) said.
The notes hold claims that another party, such as a trust, will either provide funds to repay the mortgage, or claim that the note itself will be accepted by the lender in order to repay the mortgage in full.
Borrowers sending notes are often in financial difficulties and are paying for them in the hope that it will solve their problems. Some people can spend hundreds of pounds.
The regulator said a promissory note is not an acceptable form of mortgage payment – and if one is sent to the lender it does not mean the customer no longer has to repay their mortgage.
Greg Sachrajda, head of the retail banking market intervention department at the FCA, said: “We have a number of lenders reporting increasing numbers of borrowers trying to use these promissory notes to repay mortgages.”
Christmas is often a time when people’s financial problems come to a head, which can make some offers of what appear to be “quick fixes” to paying off debt particularly tempting.
Mr Sachrajda said: “People A service is sold claiming that you can send the lender a promissory note, and it will somehow pay off their mortgage. It’s not like that.
“These promissory notes are just an empty promise that someone else will pay the mortgage, they don’t actually make any payments.
Get free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement
Get free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement
“Lenders are rejecting those promissory notes. Now, this may seem like a golden ticket for borrowers who are really struggling, essentially a free pass to a world where they’re debt free.
“But, of course, it’s not a free pass. If you borrowed the money you have to repay it. We often say that if something sounds too good to be true, it usually is, and that’s certainly true of these promissory notes.”
He said people using the notes could risk making their situation worse because they “may be paying significant sums, £500 or more, for something worthless” and “they are not actively engaging with their lender in a way that could actually help make their situation better”.
The lender will return the note and other documents to the borrower, often signposting them to an acceptable type of mortgage repayment.
Mr Sachrajda said: “Lenders are required to treat borrowers in financial difficulty sensitively and fairly and, if appropriate, they can explore options with them such as extending the loan term, temporarily switching to an interest-only mortgage, or agreeing a payment holiday.
“Even if selling the home is the right next step because the borrower can’t really pay off the mortgage any other way, the bank can still help them with something called an assisted voluntary sale, which gives the borrower more time to sell the property, and the bank can help with the costs and the sale process.”
Earlier this year, the FCA issued a warning about legal loopholes and false information about fraudulent claims that could lead to people not being held liable for their debts.
The regulator has previously warned about claims that could use outdated arguments charter letterWhich people may try to apply to various types of debts or taxes.
Mr Sachrajda said: “These are examples of people paying money for services that don’t work and don’t improve their situation.”
He said online misinformation about mortgages “can cause real harm to mortgage borrowers, often vulnerable ones who are struggling with their mortgage payments.”
Mr Sachrajda said: “Our advice to mortgage borrowers is not to waste their money on worthless promissory notes.”
He said people should instead talk to their lender, who can offer “real options that can help”, and they should also consider getting free help from a debt support charity.
organizations like national credit line Which is run by the Money Advice Trust, StepChange, Citizens Advice and MoneyHelper, which can help people who are struggling financially.
Financial Ombudsman Service (FOS) has seen cases where people have been sold promissory notes relating to mortgage payments and it has not upheld cases based on such arguments.
A spokesperson for the FOS said: “A mortgage is likely to be the most significant debt a home buyer will incur, which is why it is important that consumers understand what their mortgage means for their finances.
“Mortgage borrowers – especially those in financial difficulty – may be targeted by websites and companies offering quick fixes such as promissory notes.
“These notes do not pay off the mortgage or replace the need to make payments. Relying on the promissory note to stop payments puts your home at risk of foreclosure.
“If you’re having any problems with your mortgage, always talk to your mortgage lender first.
“If people don’t feel they have been treated fairly by their broker or mortgage provider, they should contact our free, independent service and we’ll see if we can help.”
Karina Hutchins, head of mortgage policy at UK Finance, said: “Promissory notes are not a valid way of paying off your mortgage. Borrowers who send these documents will still need to make their payments and repay their mortgage.
“Not doing so risks worsening their financial situation. If you’re struggling, speak directly to your lender about the help available, and consider getting free, independent debt advice.”