Thanks for your private email, Matt.(posted 8524 days ago)It would appear that even some lenders believe that many shortfall-related properties were negligently over-valued in the first place (e.g., the original valuation surveys, at the time when mortgages were being arranged, were negligent because they didn't take into account crucial factors such as location/area).
This is worth exploring, if only because ex borrowers have clearly lost their right to redress on this point because of the lenders' undue delay in pursuing them for these alleged shortfall 'debts'. (That is, actions against the original valuers will be statute-barred.)
There's a C&G memo reported in the Guardian (Jobs & Money Aug 26) which reveals lender staff referring to many repossessed properties on their books as 'rubbish'. So the lenders obviously know they lent on some right turkeys in the past. [C&G staff were told to stop lending 'on rubbish or to rubbish']. I'll wager, though, that many people will remember the huge enthusiasm shown to them, and about the properties they were being encouraged to buy in 'up and coming areas', by lender staff when mortgages were being arranged.
A few years later many of them found themselves living in bomb sites with overpriced flats and houses on their hands.
They were told, hand in the keys and walk away.
Many years after that the letter from the lender's lawyers arrived on the doormat asking for a vast sum. Too late for the ex borrower to query the original valuation - all they can do is marvel at the low price the lender sold the property for after repossession, and try to query that.
Those lenders' surveys at time of purchase, by the way, were designed to protect the lenders' interests, do you remember? Funny that when it all goes horribly wrong, suddenly repossessees are being told that it is they and their money which is now required to protect the lenders' interests. This, of course, after the lenders find out that their potential claims against the valuers are statute-barred. (In my view, many lenders disasterously colluded with the valuers in over-valuing property in order to maximise the amount of mortgage money being lent and thus the amount of profit being made, in the late 80s and early 90s. There are signs of it happening again.)
In my view, lenders have to accept that they take a risk on loans. They get adequate compensation for this by charging interest well above the base rate and thus making a net profit from its lending activities. There is no profit without risk. A lender will of course try to minimise that risk, and one of the ways it does this this is to have a valuation survey done on the property when it's about to loan money for a mortgage on it. This is a contract between lender and valuer. If it turns out that the valuation is negligent, then the lender has the option of suing the valuer.
What I find unacceptable is that the lenders appear to be trying to push that risk onto the shoulders of hapless repossessees. This is neither fair nor reasonable.
I think that lenders who wait so long to pursue for alleged mortgage shortfall 'debt' that the ex borrowerer has absolutely no chance of seeking legal redress over the original valuation survey (which, after all, was a contract between the lender and the valuer) have a lot of explaining to do.
In my view.