Bradford and Bingley Seeks to Recoup Losses from Same Day Remortgages

Bradford and Bingley Seeks to Recoup Losses from Same Day Remortgages

The government has decided since taking ownership of Bradford and Bingley’s 27 billion pound buy to let mortgage book to look deeper into the "get rich quick" plans of same day remortgages. They are considering a legal negligence claim against the law firms that advised the lender on the loss making buy to let loans. Meanwhile, Bradford and Bingley is looking to recoup losses by taking legal action against solicitors that advised the same day remortgage borrowers.

Borrowers often would attend seminars on buy to let same day remortgage plans. Others purchased at home training kits on the subject. The plan taught was for the borrower to buy a property for no money down by using credit card debt to obtain it. These would be distressed, discounted, or soon to be repossessed homes that could be purchased below market value.

The borrower would then go in on the same day of purchase and obtain a remortgage at market value. For Bradford and Bingley it was through their specialist lending arm, Mortgage Express. Wannabe landlords would then think they had made a profit. This plan left over 2 billion pounds of problem loans for Bingley and Bradford and they were forced to set aside 388 million pounds as a provision for potential losses.

Bradford and Bingley alleges that solicitors were "in breach" of the Council of Mortgage Lender’s Handbook which requires a professional duty to report that borrowers were remortgaging property within six months of ownership. They also believe that the Law Society’s guidance on property fraud was ignored.

In a statement released to the IC, Bradford and Bingley reported: "Prior to 22 April 2008, Mortgage Express accepted certain same day remortgage applications where specific lending conditions were satisfied. Bradford & Bingley's standard internal review processes subsequently identified a number of same day remortgage applications where full information and facts were not disclosed by the applying solicitors, as required by the CML Handbook."

Should Bradford and Bingley be successful with their claim, professional indemnify insurers could be faced with a bill running into billions of pounds for contributory negligence.

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