Homeowners facing mortgage arrears are being warned not to fall prey to fraudulent schemes and misleading advice that could result in serious financial loss or even criminal charges.
The Financial Conduct Authority has issued a renewed alert for borrowers in financial difficulty, highlighting a rising trend in misinformation, exploitative schemes and unlawful tactics being promoted online and in person to vulnerable homeowners.
MAGNA CARTA DISASTER
One particularly concerning development is the spread of so-called “Freemen on the land” claims – a movement that falsely argues that mortgage holders can legally avoid repayment obligations by invoking archaic legal principles, often citing Magna Carta. The regulator has confirmed that these arguments have never succeeded in court and have left some homeowners not only homeless but also burdened with significant legal costs and a loss of property equity.
The watchdog noted: “Some mortgage holders have paid others a fee to take their claims to court to stop their homes being repossessed. But none of these claims have succeeded as they’re not legally valid.”
QUICK SALE PITFALLS
Homeowners have also been cautioned against accepting “quick sale” offers from companies or individuals promising to buy homes at below market value in order to avert repossession. These offers may come under the guise of ‘BMV’ or ‘distressed property sales’, sometimes with the lure of completion within 48 hours, cash payment or waived legal and estate agency fees.
While quick sales can occasionally offer a legitimate solution, the FCA warned that discounts can be as steep as 35% below market value, and stressed that sellers should always seek independent legal advice or consult Citizens Advice before proceeding.
UNAUTHORISED SALE & RENT BACK
Another area of risk involves sale and rent back arrangements, whereby a company purchases the property and leases it back to the original homeowner. Only firms authorised by the FCA are permitted to offer these schemes. Engaging with unauthorised providers could mean losing both the home and any right to remain in it.
“If you deal with a firm that is not authorised, you may have no protection if things go wrong, and you could end up losing everything,” the regulator said.
INFLATED PRICE DECEPTION
The FCA has also issued a clear warning about fraud involving false sale prices. In one scenario, a buyer may persuade a seller to inflate the reported sale price to the mortgage lender in order to secure a higher loan and bypass a deposit. This type of deception is a criminal offence and could lead to prosecution for both parties.
“It may be assumed that you have more money than you do from the sale of the property,” the regulator noted, adding that this could affect benefits eligibility as well.
Borrowers in difficulty are being urged to speak directly with their mortgage lender at the earliest opportunity, as most lenders have support measures in place to help manage arrears or facilitate an orderly sale that preserves homeowner equity.
“If an offer sounds too good to be true, it probably is, and you could end up seriously worse off,” the FCA said.
