First things first: don't worry too much about this one - there are people who specialise in challenging lenders over MIG-related shortfall claims - with some success.(posted 9301 days ago)The lender would argue that the benefit of the policy to you was that you got a mortgage that you wouldn't otherwise have got. This, of course, was not the benefit you thought you were buying. I don't know how much evidence you have that the TSB said the policy would "protect" you but mis-representation of MIGs and their benefits has been widely reported and you shouldn't have too much trouble convincing a judge of this. There's more to it than that and it is complex but it is largely in your favour.
Because lenders don't like to waste their money, they may well threaten you with court action and claim you were not the beneficiary of the MIG (see the Bradford & Bingley letters in the Repossession section) but they are unlikely to issue a writ if you turn out to know your rights. Bear in mind that lenders generally draw the line at isuing writs not at sending you threatening letters. So expect the threats to continue once they start.
You face three questions: Whether they will pursue you. Whether you will win. Whether you will get another mortgage. TSB's (and Lloyds') mortgages are administered by Cheltenham & Gloucester, which has acquired a poor reputation for mis-selling, for not acknowledging mis-selling and for taking an aggressive stance against customers in difficulty. They may pursue you.
Based on the above, you would probably win though you would need to keep your wits about you.
You should be able to get another mortgage easily. Read our blacklisted section for more on this.
Hope this helps.