[3][4] Barclays' booklet on shared appreciation mortgages says that they were "specially designed for the needs and lifestyles of the mature homeowner... aged 45 or over and... property worth over £60,000.
This is a précis of the chapter: Craig Corn, a director in structured finance at Merrill Lynch, was looking for a way to give investors access to one of the largest asset pools, the housing market.
At their second meeting in early October, they were alerted by the IT people to the fact that Unisys, one of the bank's IT systems, could only process loans of up to 50 years, whereas the SAM was open-ended, until the sale of the property or the death of the owner.
By the launch date the bank was already receiving about 2,000 phone calls per day, with most of the callers interested in the 0% option, and 2,500 people had requested more information.
The Millennium Product concept was launched by Prime Minister Tony Blair in September 1997[9] and the full and final list was unveiled by him in December 1999.
These separate companies were not signatories to the Banking Code, and so the Financial Ombudsman Service was not able to investigate customers' complaints about Shared Appreciation Mortgages.
[19] The standards of the Code are encompassed in ten key commitments, which include helping customers to understand the financial implications of a mortgage.
[27] After The Times reported on Geoffrey Cooke's case in August 2003, they said they were inundated with letters, telephone calls and e-mails from readers who similarly ended up facing crippling debts.
[28] As the Financial Ombudsman Service was ineffective, shared-appreciation mortgage customers contacted their Members of Parliament and in 2003 created the Shared Appreciation Mortgage Victims Action Group (SAMVIC), a body of 500 homeowners who felt that they had been deceived by lenders into taking on debts that were now exorbitant,[26] to coordinate legal action against the banks.
It stated that the Treasury would be "looking at options to create a level playing field for the regulation of equity release and home reversion plans to protect consumers and make the market work better".
During the debate, a number of members specifically mentioned shared-appreciation mortgages, including Vince Cable, Stephen O'Brien and the then Financial Secretary to the Treasury, Ruth Kelly.
[21] During her speech, Ruth Kelly said, "I am pleased to say that, when the FSA's mortgage regulation comes into force, the proposed advice and disclosure regime will enable borrowers to become fully aware of the implications of all equity release loans before they take a decision on the right one for them...
Members' constituents believe that they have been badly advised, or that their mortgage was missold, and, assuming that all internal complaints procedures have been completed, they may be able to seek redress from the Financial Ombudsman Service.
"[21] In June 2003 the then Chief Secretary to the Treasury, Paul Boateng, initiated a consultation and in the following month he announced in response to oral questions, "All mortgage-based equity release schemes will be regulated by the Financial Services Authority with effect from 31 October 2004.
"[21] During a further debate held in December 2003 in Westminster Hall, the Financial Secretary said, "... the FSA will regulate the selling of mortgages by first legal charges on UK property where at least 40% is residential accommodation to be occupied by the borrower or their immediate family.
That definition was derived following consultation and is designed to protect loans when a person's home may be at risk as a result of being sold an unsuitable product.
[31] The Shared Appreciation Mortgage Action Group (SAMAG) was set up in 2009 by Hilary Messer, who was then head of litigation at RWP Solicitors (Richard Wilson Pangbourne[32]), based in Reading, Berkshire.
[7] The banks agreed to waive their costs if the customers made legal agreements ("gagging orders"[31]) not to make any further complaints about their shared appreciation mortgages.
[36] In June 2021 the solicitors Teacher Stern announced that they had successfully negotiated a settlement with Barclays Bank on behalf of 37 clients who took out shared-appreciation mortgages in the late 1990s.
[38][39][40][41] Some of the Bank of Scotland shared appreciation mortgages sold between 1996 and 1998 had agreements which were "governed and interpreted in accordance with Scots law."
At present, English solicitors are not prepared to make group claims on behalf of customers of Scottish shared appreciation mortgages or their families.
[31] Christopher Philpot, Senior Associate in Teacher Stern's dispute resolution department, was interviewed on the BBC's The One Show on 3 April 2017 in relation to the claim being organised against the Bank of Scotland and Barclays.
It said that there would be a preliminary hearing at the High Court in October 2021 for litigation brought by Teacher Stern, representing 150 Bank of Scotland SAM customers.
[45] On 4 February 2024 The Sunday Times published an article written by Ali Hussain: "Victory for families whose unfair loans cost them their homes".
It says that the Bank of Scotland has backed down at the last minute from defending its sale of an "unfair"equity release scheme (shared appreciation mortgages) in court.
A shared appreciation mortgage differs from an equity-sharing agreement in that the principal of the loan is an unconditional obligation (to the extent collateralized by the property).
In particular, a shared appreciation mortgage must stipulate an unconditional obligation of payment of principal to avoid being recharacterized as an equity-sharing agreement, which may lead to different tax consequences.
Because of the complexity of tax laws and terms tailored for individual situations, private, noncommercial mortgages involving shared appreciation should always be executed with the counsel of a real estate attorney.
At the time of sale or refinance, the family is required to repay the full amount of the loan plus a portion of the home price appreciation.
[48] In this way, the amount returned to the subsidizing entity is based on increases in home prices, which helps to preserve the "buying power" of public subsidies.