Homeowners win Group Litigation Order against BOS and Barclays

You asked us to let you know as soon as the Group Litigation Order was granted and we are delighted to confirm that this has now just happened. We therefore sincerely hope you will find room to cover the below story and will be pleased to provide you with any further information or interviews you require. Thank you! 6th October 2009 Homeowners win Group Litigation Order against BOS and Barclays On 5 October 2009 the High Court granted a Group Litigation Order to UK homeowners who are suing BOS and Barclays over “unfair” Shared Appreciation Mortgages (SAMs). This move, which BOS and Barclays attempted to block, is an important victory for homeowners who will now sue the Banks on a group, rather than an individual, basis. (BOS, later part of the HBOS Group, is now part of the Lloyds Banking Group which is now part-owned by the state-owned vehicle UK Financial Investments.) SAMs originated in the US in the 1970’s. In the mid-1990’s, SAMs were developed for the UK market by a partnership between Swiss Bank Corporation (now UBS) and BOS in order to create securities linked to the UK property market, which were then offered to investors in the capital markets as bonds. Barclays also developed a similar scheme offered through Barclays Capital. In total, about £500m worth of these bonds were created. Under these schemes, which were only sold in 1997 and 1998 before being withdrawn from the market, borrowers took out loans secured against their homes, at a zero or a reduced fixed rate of interest. However, on repayment of these loans, borrowers also had to pay an additional charge which in most cases worked out at or close to 75% of the increase in the value of the property during the lifetime of the loan (the appreciation). Despite the fall in house prices since late 2007, the steep rise in house prices in the 10 years between 1997 and 2007 has meant that with zero interest SAMs the Lender’s share of the appreciation is now an average of 4.4 times the amount borrowed, equivalent to an average interest rate of 35-40% per annum on a simple interest basis. With fixed interest SAMs, the average interest rate is even greater at 42- 52% per annum on a simple interest basis. In a typical case, such as a house worth £100,000 in 1998, which is now worth £300,000, the figures are startling. If the homeowners borrowed £25,000 at a zero rate of interest, they now have to pay a total of £175,000 on redemption (£25,000 plus £150,000, being 75% of the £200,000 appreciation). If the homeowners borrowed £75,000 at a fixed rate of interest, they now have to pay a total of £225,000 on redemption (£75,000 plus £150,000 of the appreciation), as well as about £50,000 in interest payments over the term of the loan – in all a staggering £275,000 or thereabouts. Many of these mortgages were taken up by older people, who now find themselves trapped in properties which are no longer suitable for them, as they cannot afford to sell up and buy a suitable smaller property. It is estimated that a total of 12,000 SAMs were sold in the UK, of which around 7,000 may still be unredeemed. Hilary Messer of RWP solicitors, the Lead Solicitors in these cases, said: “Up to now, the Banks have been able to recover payment in full under SAMs and the merits of the enormous number of complaints made about this product over the years have never been properly tested in the Courts. Recent changes in the Consumer Credit Act, which have yet to be considered by the Courts, will assist the Claimants. We are delighted the Chancellor of the High Court has consented to these cases being dealt with on a group basis, as this is the only practicable way that ordinary homeowners can take on the Banks in litigation which is likely to raise complex issues of law and fact. ” David Lowe QC and Duncan Henderson both of Thirteen Old Square Chambers in Lincoln’s Inn are instructed on behalf of the homeowners. At present, 126 claims have been issued by homeowners. Now that a Group Litigation Order has been made, a large number of further claims will be issued by RWP solicitors. It is anticipated that many other homeowners will now decide to join in the group litigation since early action is required to ensure that claims which can still be made do not become time barred. Individual SAM holders who wish to contact the Lead Solicitors for more information should do so on: 0845 003 9355 or register at www.samgroupaction.com Contacts: Hilary Messer, RWP Solicitors: 0118 984 2266 hilary@rwp-solicitors.co.uk www.rwp-solicitors.co.uk Tim Maltin, Maltin PR: 020 7887 1357 tim@maltinpr.com www.maltinpr.com Notes to editors: A copy of the formal press release required under the Order can be found at http://www.maltinpr.com/file_download/100/GLOFormalPressRelease.doc Further information about the history and background of the case can be found at http://www.maltinpr.com/file_download/102/SAMsAdditionalBackgroundInformation.doc Hilary Messer Biography is available at: http://www.maltinpr.com/file_download/93/HilaryMesserBiography.doc A photograph of Hilary Messer is available at: www.maltinpr.com/hilary-messer Five SAM case studies with photographs are available at the following links: http://www.maltinpr.com/file_download/87/CaseStudyofMr&MrsJones.doc http://www.maltinpr.com/file_download/89/CaseStudyMrsPutnam.doc http://www.maltinpr.com/file_download/90/CaseStudyofMrPettit.doc http://www.maltinpr.com/file_download/91/CaseStudyofMrsHoney-James.doc http://www.maltinpr.com/file_download/92/CaseStudyofMrWhite.doc Additional information and text of the Group Litigation Order (excluding personal details) is also available at www.samgroupaction.com