A 67-year-old father is facing homelessness as his defunct mortgage lender threatens to repossess his home.
Gregston Clarke, a dry cleaner delivery driver, is currently waiting to appear in court.
His mortgage lender – Southern Pacific Mortgages Limited (SMPL) – is trying to repossess his home against guidelines set out by regulator, the Financial Conduct Authority (FCA).
SPML are pursuing Mr Clarke for repossession of his family home even though he has put it up for sale and promised to repay them the £329,138.63 they say he owes them.
“I’m depressed. I’m not sleeping properly,” he told i after receiving papers stating that SPML were pushing for repossession in just 12 days’ time. “I’m walking on like a zombie. I am just lost.”
If SPML succeeds, Mr Clarke, a father of two, will become homeless along with his sons, who live with him, and his partner Pearl Pancrace, a teaching assistant.
Repossession will also see Mr Clarke lose the house he has been working to pay for since he bought it in 2007 with a £50,000 deposit, as well as being denied the opportunity to sell his home – which is currently on the market for £600,000 – for more than he paid, leaving him with equity to start over.
“It’s robbery,” Mr Clarke added. “I’ve got nowhere to go. At my age who is going to employ me [to earn extra money]? This is my life going down the drain. I maintain that there has been a mistake.”
Mr Clarke is what is known as a mortgage prisoner. His lender – SPML – no longer offers mortgages. It is an “inactive entity” but was once a UK arm of the disgraced US bank Lehman Brothers.
Lehman was one of the institutions which collapsed in 2008 because of the risky loans they had handed out, triggering the global financial crisis.
As i has reported, the mortgages given out by these now-defunct lenders, which also include the likes of Northern Rock and G.E., are called “zombie loans”.
The loans are usually subject to expensive interest because they are on Standard Variable Rates (SVR) which are dictated by swap rates and not the Bank of England’s base rate.
The rates for the standard variable rate (SVR) mortgages that they are on have almost doubled since December 2021, rising from 4.4 per cent to 7.12 per cent. Due to stubborn inflation, these rates are expected to continue rising which those who campaign on behalf of mortgage prisoners fear, could see more people lose their homes.
An estimated 195,000 homeowners are trapped paying sky-high rates as they cannot remortgage, according to the FCA. However, campaigners say the true figure is far higher.
Mr Clarke and Ms Pancrace are not in mortgage arrears. They have never failed to make an interest payment on their mortgage but because it was interest-only, SPML say they owe the amount that their home cost because they have not made capital repayments.
However, they are “prisoners” because they are financially stuck between a rock – their zombie lender – and a hard place – rising interest rates and other factors which make it hard to find a new loan, such as low income or age.
Mr Clarke’s problem is twofold: firstly, he took out an interest-only mortgage and is now being asked to repay the capital amount in full, as opposed to being offered a new deal by SPML. Secondly, there is a dispute over the length of Mr Clarke’s mortgage term, meaning he is being asked to repay a huge amount much sooner than he had expected.
Mr Clarke maintains that he did not realise he was taking out a high-interest, interest-only mortgage with SPML.
As i has previously reported in regards to Mr Clarke’s case, at best, it appears he may have been mislead by his broker. At worst, the documents he was given are fraudulent. Indeed, in 2011 cases of mortgage fraud involving SPML were reported.
“Why would I have paid a £50,000 deposit if that was the case?” he said. “I just wouldn’t have done it.”
Mr Clarke’s initial interest rate was high at 7.19 per cent. After two years, that then went up to a Standard Variable Rate (SVR) which was somewhere in the region of 9.20 per cent.
That means that though he bought his home for £335,000 with a £50,000 deposit, he had to repay £285,000 on an interest-only basis without making a dent in repaying the capital.
SPML now argue that Mr Clarke’s mortgage term has finished, and he must repay them £329,138.63 or face repossession.
Mr Clarke has equity in his home. It has been valued at £615,000. If he was allowed to sell, as opposed to being repossessed, he could repay SPML and start afresh.
Mr Clarke has dropped his asking price to show SPML that he is serious about selling, but they continue to push ahead with repossession.
The complex financial labyrinth he finds himself trapped inside would be confusing for anyone.
Lehman collapsed in 2008, taking SPML with them. The mortgages they gave out are now managed by another lender – Kensington Mortgages.
Kensington is an active lender in its own right but it also services SPML’s remaining mortgages. Kensington has recently been bought by the high-street bank Barclay.
Under the Financial Conduct Authority’s (FCA) guidelines for mortgage prisoners, an active lender such as Kensington or Barclay’s should offer mortgage prisoners a new loan if possible.
Mr Clarke is currently awaiting a court date after SPML progressed the warrant of execution for the repossession of his home.
Seema Malhotra MP, Co-Chair of the All-Party Parliamentary Group (APPG) on Mortgage Prisoners, told i: “Barclays and Kensington are ignoring FCA guidance which says that repossession should be a last resort and that customers should be given enough time to make alternative arrangements.
“There are serious failings in how Barclays and Kensington are treating vulnerable mortgage prisoners. Barclays need to start living up to their values and cancel this repossession.”
Rachel Neale, the lead campaigner at Mortgage Prisoners UK, a campaign group who are assisting Mr Clarke, told i: “It’s ridiculous to think that in the current economic climate, this can happen. Barclay’s/Kensington/SPML are effectively actively evicting a family who have given every assurance that their investment is completely safe by putting their home on the market for sale. There is no negative equity, Mr Clarke’s house has gone up in value since he bought it.
“This family are going to be put out on the streets needlessly. It’s just aggressive. I can tell you that Mr Clarke calls me most mornings scared, frightened and really worried about what’s going to happen. The mental health impact of repossession on mortgage prisoners is serious and as a campaign group we know that there have been several suicides already amongst this group of people.”
An email chain seen by i regarding Mr Clarke’s case started by Ms Neale and the Mortgage Prisoners APPG, copying Matt Hammerstein, the CEO of Barclays, Nick Stace, Barclays’ Head of Social Purpose, Sarah McKenzie, a policy adviser at the FCA and senior team members at Kensington Mortgages appears to have been ignored by all concerned at the relevant bodies.
An FCA spokesperson told i: “We appreciate that repossession can be distressing, and we expect firms to treat their customers fairly and offer appropriate support to borrowers in payment difficulties. However, we are unable to comment on individual cases.
“It is for the Courts to decide whether a repossession claim is justified. Firms must follow a robust process before taking action, which requires that repossession be a last resort. Once a property has been repossessed, firms must ensure that the property is sold quickly for the best price reasonably possible.”
Kensington declined to comment on Mr Clarke’s case. Barclay’s did not respond to i‘s request for comment.