Following on from the reports in the press last week about Chris and Denise Tudor-Whelan, I have coincidentally met five separate people recently who have been ruined by the banks for no good reason.
These people once had very successful solid property businesses â€“ all of them worth tens of millions and all of them keeping up payments on the loans they had secured against the properties. Â And yet these people were all destroyed by the small print in their loan documents; three of them being made bankrupt and two still fighting to avoid it.
What most people do not know is that the small print in their mortgage documents allows the banks to call in the loans if the borrower breaches the â€œLoan To Value Covenantsâ€.
Essentially, what this means is the banks can have your property portfolio valued periodically by a surveyor (of their choosing) and if that surveyor decides the value has dropped below a certain threshold the bank can call in the loan immediately or massively increase the interest rate because of the perceived extra risk, thus making the investment unsustainable. They are allowed to do this even if you have never missed a payment.
There is little doubt in my mind, after speaking with these people that some if not all the banks have actively pursued a policy of using this small print to destroy property investment businesses and seize their assets at a vastly reduced level.
Yes itâ€™s immoral, unethical and corrupt, but what can be done about it? There is certainly a groundswell of public opinion against the bankers. And the internet abounds with the self proclaimed â€œfree men movementâ€ seeking to remove themselves from the shackles of HMRC and the â€œbankstersâ€. They have some interesting arguments and I would love for them to be successful. Unfortunately the whole system is stacked against them so it is incredibly unlikely.
To my mind the best solution is to avoid using banks wherever you can. Give them as little power over your life as possible. Its why we set up The House Crowd so you have the choice of dealing with an ethical, transparent and fair organisation that will also give you a much better return on your money.
Read Cartmel Butlers Report to the Parliamentary Select Committee on how banks sell on the benefit of your mortgages to privately owned offshore companies but then seek to reclaim the debt from you and repossess your property (even though you no longer owe them the money).