Mortgage brokers could leave themselves open to possible legal action in the wake of a wave of projected home repossessions, warns Burgesses.

New figures from the Council of Mortgage Lenders (CML) predicts that those standing to lose their home will jump from 45,000 this year to 75,000 next – a huge hike of 67 per cent.

But Burgesses believes that the situation has been made worse by the failure of many mortgage brokers to give ‘best advice’ to their clients.

Sara-Ann Burgess managing director of the independent protection insurance specialist explains:

“The Financial Services Authority (FSA) placed with mortgage advisers and other financial services intermediaries an onus of ‘treating customers fairly’ in their dealings with clients. Any advice given by a broker to a client must therefore include identifying and offering solutions to any scenario where the client cannot afford to make the repayments demanded by the lender.

“The obvious solution to avoid possible repossession because the client is unable to make payments because of accident, sickness or unemployment would be to recommend the client take out insurance cover in the form of mortgage payment protection insurance (MPPI) or another income protection policy.

“It seems obvious from the poor take-up of these insurances, and the predicted massive rise in repossessions, that brokers were not doing enough to impress upon their clients the need to guard against the unexpected – such as an economic slump.

“If brokers cannot prove that they brought the existence of this cover to the attention of their clients, even if it was rejected, then it is conceivable that there may be grounds for legal action on behalf of the consumer against the broker since it could be argued that they had not been ‘treated fairly’.”

She added that the CML must shoulder some of the blame too.

“When the numbers of repossessions started to noticeably increase last year the CML maintained that it was nothing to worry about as it was rising from a very low base. That might well have been the case, but it ignored the rising trend to the point where it is now warning that it will reach 75,000 by the end of this year and might possibly rise even further.

“It is a bit late now to flag up the perils of recession and subsequent repossessions for stretched homeowners. CML members were guilty of reckless lending and to hell with the consequences. They are always guaranteed to get some return on the home loans they issue. But it is a different story for those that home loans were loaded on to. They stand to lose everything – job, home and possibly even their family unit because lenders made access to cash too easy in a rush for sales volume.

“The once booming buy-to-let market epitomised the greed of some lenders that threw money at this sector as if it was a one-way bet. It will be the tenants of those landlords that will pay the price of this unfettered greed by losing their homes.”

Speculation that people working in certain sectors will be unable to buy Payment Protection Insurance to meet their financial commitments should redundancy occur is nothing but scaremongering, suggests PPI lobbyist Sara-Ann Burgess from Burgesses.

“A lot of insurers and media commentators are advising that potential purchasers of PPI will be turned down for cover if they’re in a sector that’s experiencing job losses, “ Sara-Ann explains, “but this is rubbish – only those who have been personally informed they are to lose their job will be excluded from cover.

“This rumour can be traced back to the nervous PPI providers who don’t want to be saddled with high volumes of claims – they’re keen to warn off consumers because they don’t want to have to make significant numbers of payouts and so dent their profits.”

As well as implying that certain sectors are excluded from cover, a number of providers are withdrawing their unemployment-only products. Financial aggregator website moneysupermarket reports that the PPI providers it deals with recently withdrew their unemployment only policies, confirming Burgesses suspicion that they do not want high sales volumes for this type of cover.

The aggregator advises that only one independent provider, British Insurance, continues to offer unemployment-only options for PPI.

Sara-Ann continues; “It’s criminal – providers are turning their backs on consumers when they need them most. If you exclude people from ‘at risk’ sectors, you’re rejecting the whole of the UK. You only have to look at the job loss announcements within the last week to realise that every sector is ‘at risk’.”

In financial services, Citigroup announced the cutting of 52,000 posts worldwide with heavy losses in London and New York whilst Friends Provident confirmed 280 posts would go. The communications sector suffered 10,000 job cuts - BT had already announced 4,000 redundancies and now predicts a further 6,000 jobs will go by March.

Manufacturing and construction weren’t immune either; truck maker Leyland announced 280 job losses following a decline in demand, construction equipment maker JCB added a further 398 redundancies to the 178 job cuts it revealed last month and plumbing and materials firm Wolsey announced the closure of 200 branches with 2,300 job losses.

Sara-Ann concluded:”This illustrates just how far reaching the recession is – no matter what sector you’re in, there will be casualties. It’s wrong to warn off consumers and withdraw cover just because you don’t want to pay out. The more honourable providers will offer that financial safety net to purchasers in every sector, so consumers mustn’t be fooled into thinking PPI isn’t available – you just have to shop around.

“This is yet another example of unscrupulous providers moving the goalposts to suit themselves – they’re leaving consumers exposed to financial hardship when they should be protecting them.”

The government must outlaw the increasing use of charging orders by high street financial institutions to recover outstanding debt.

That’s the belief of Sara-Ann Burgess, managing director of independent protection insurance specialist Burgesses.

She was reacting to the Monday evening screening of the BBC flagship Panorama programme. It exposed the lengths to which some lenders will go to in order to recover relatively insignificant outstanding loans.

It revealed that in the most extreme cases lenders are using charging orders as the first stage of a process that ends with the debtor being ordered to sell their home in order to repay the debt.

“Making borrowers homeless is at the very least bad business practice and at worst a moral crime,” said Burgess.

“Those that are struggling to repay a debt are rarely aware when they receive a charging order that these can be attached to their home and they risk losing the roof over their heads.

“It means that lenders seeking to recover even small unsecured loans could force the sale of the debtor’s home rendering families homeless. It’s outrageous but it is happening up and down the country.”

She is calling for the government to urgently outlaw the practice before many more families are forced onto the streets.

She added: “Lenders are looking to protect their own positions in an increasingly difficult economic climate. To that end they are quicker to take more drastic steps to get their money back.

“Charging orders operate on a first come, first served basis, meaning the lender that moves most quickly to recover an outstanding debt gets first call on the cash. Most people struggling with debt owe a variety of lenders money, that’s why we are seeing them move much more quickly down the charging order road.”

The numbers of charging orders obtained at the courts have rocketed from 9,500 in the year 2000 to a staggering 97,000 last year.

That figure can only balloon as the economy asset bubble continues to deflate and jobs are lost.

Burgess adds: “Those that bought property at the market peak are most at risk as negative equity returns to blight the economy. Should one partner lose their job making mortgage repayments impossible to meet then it is obvious they can expect no help from banks or other finance houses.

“That’s why it is crucial that borrowers seek to protect themselves, should the worst happen, by buying insurance.

“Payment protection insurance to cover a loan or mortgage is a must-have in today’s market and very competitive rates are available from independent provides such as Burgesses or British Insurance. Never buy cover from a lender.

“As long as lenders are looking to take your home to recover the price of a new suite or bathroom it is imperative the borrower ensures he or she always buys relevant protection cover at the right price.”

If the Financial Services Authority (FSA) is incapable of creating a fair, transparent and effective payment protection insurance (PPI) market, then those responsible for the failure should be put out to pasture.

Again, consumer watchdog Which? has been forced into demanding action is taken over the shockingly poor performance of firms in the PPI market. However despite the litany of criticism that has rained down on the market, the regulator has done little to root out poor practice and deter future failures.

Sara-Ann Burgess, director of PPI specialist Burgesses, believes many of the failures of this market stem from the regulator’s unwillingness to take decisive action.

“It is time the FSA stopped barking and started biting. There have been numerous reports into this market, which have highlighted the areas that need to be improved. If firms selling PPI do not come up to scratch then they should now expect to lose their authority to trade in this area.”

Burgess accepted that some firms had been fined, but said the level they had been fined at was not sufficient to clean up the market or the sanctions numerous enough to make others believe they would be caught.

“There has to come a time when we stop slapping the market on the back of the hand and take it firmly by the scruff of the neck. The FSA’s approach of trying to cajole firms into compliance has spectacularly failed and it is the thousands of consumers who have been mis-sold policies that lose out.”

Burgess said Which? was right to call for firms found wanting to review their entire book of business and for better information to be available to consumers. However she added: “How many times can the FSA listen to such demands and simply carry on as before? Consumers are losing out because the FSA has shown itself incapable and unwilling of acting decisively in this market.”

When providers such as British Insurance can sell policies, which are more flexible and have better benefits for half the price of those still being sold by high street providers, Burgess said the regulator needed to take stock of the situation.

“There is a huge discrepancy between the best and the worst PPI sellers in this market and we need to close the gap and make sure consumers get the insurance they need. The FSA could regulate the products sold, take a much harder line on those found wanting, or stop credit providers selling only their own protection insurance. It has been offered numerous options but has refused to really put its weight behind any of them.”

The longer the regulator allows the problems in the PPI market to continue, the more consumers will be negatively affected and the more difficult it will become to really deal with them.

“The FSA needs to find the appetite for this work and quickly,” said Burgess. “If the people overseeing the protection market are incapable of doing it properly, then it is time for them to move on. Those firms doing a good job in the market are being let down by the regulator, while consumers continue to get a raw deal because the FSA will not come down as hard as it could and should in this area.”

Consumers must proactively seek to protect themselves in the face of a rising tide of unemployment and take responsibility for their own long-term financial health, says payment protection insurance specialist, Burgesses.

The Confederation of British Industry (CBI) has significantly revised its economic outlook and in its most recent forecast, released today (15.09.08), believes the UK is now entering a recession that will put hundreds of thousands of people out of work.

The CBI believes unemployment will rise over the course of the coming months, breaking the 2 million barrier in 2009. This is a very much bleaker outlook than the CBI gave earlier in the year when it said the UK would avoid recession and is a clear indication of just how bad things are likely to get.

Given the deteriorating economic situation, Sara-Ann Burgess, director at Burgesses, said it was up to each and every individual to take responsibility for their own financial situation and make sure it was sustainable in the changing environment.

While UK consumers have been quick to take on debt, not all had been so quick to make sure they could pay it back and in a faltering economy, such provisions will prove essential, according to Burgess.

She said: “Hundreds of thousands of people are going to lose their jobs over the coming months and this is going to make it very difficult for many of them to meet their financial commitments. Finding new jobs is not going to be as easy as it has been in recent years and for those that do not have savings to meet the mortgage or pay their monthly credit card bills, getting insurance in place now will help them avoid financial disaster if they are made redundant.”

Despite changes to the Income Support for Mortgage Interest benefit, which will come into force next year, the vast majority of consumers will receive no help with their mortgage should they be unable to pay due to redundancy.

Burgess said it was time for consumers to take responsibility for their own future financial health and urged them to see what the protection market had to offer.

“There is robust, low cost protection insurance available in the market despite some of the bad press the protection industry has received. Those who would be unable to pay their mortgage if they were made redundant should investigate their options. This economic storm is going to get worse before it gets better and consumers must protect themselves.”