Keep a careful eye on brokers' charges

YOU should always think twice about paying a fee to a mortgage broker, particularly when the fee is non-returnable.

Worldwide Finance UK, of Warwick Court, Park Road, Middleton, Lancashire, offers loans to homeowners who are already in financial difficulties.

Worldwide is a lender and finance broker. Funds are provided directly by the firm's in-house lending arms or indirectly by a syndicate of lenders based in the UK.

Worldwide does not deal direct with the public but through brokers. For a residential mortgage you have to pay a pounds 250 fee when the application form is submitted.

A Worldwide mortgage application form clearly states that 'the processing fee is not refundable and covers administration costs should my/our application be considered'.

The form also says a facility fee of up to 1 per cent will become payable upon 'offer of loan'. In addition a further fee to be agreed will be payable 'on drawdown of the funds'.

When you send in your mortgage application form to Worldwide you have to send the processing fee. In one case recently an applicant received a letter, which appears to be a mortgage offer, within 48 hours of the form being sent.

The letter clearly says at the top: 'Subject to contract; offer of loan.' However, when you read the letter it soon becomes apparent that the applicant is a long way from getting a firm offer of mortgage. The letter also strongly advises applicants to seek independent professional advice.

In the text of the letter the offer of loan becomes an 'in-principle' offer and is subject to a list of conditions, which include the requirement of a 'bricks and mortar valuation' prepared by a nominated panel valuer whose report is for Worlwide's use only.

The amount of the mortgage must be no more than 60 per cent of the 'forced sale valuation' or the purchase price (whichever is the lower) 'as defined by the credit committee' taking the valuer's report into consideration.

There has to be completion of Worldwide's 'due diligence procedures', normal underwriting procedures and 'formal approval by the credit committee, whose decision is final'.

However, before Worldwide will start the ball rolling again, get the property surveyed and carry out all the other checks which a building society does before issuing a formal offer of mortgage, you have to pay another fee.

This time '1 per cent of the total loan is payable upon acceptance of this our 'in-principle' offer letter and is STRICTLY NON-REFUNDABLE whether or not this application proceeds to completion.'.

If you applied for a pounds 50,000 mortgage with Worldwide you would have already paid pounds 250 processing fee and now a further pounds 500 is required before the survey is carried out or Worldwide has performed its normal underwriting procedures.

The applicant in question had already paid the pounds 250 processing fee and was not prepared to pay any more money to accept the in- principle letter.

He subsequently had his property independently surveyed and the valuer downvalued to such an extent that there was no way he would have met Worldwide's criteria.

We spoke to Michael Rashman, the director of residential finance at Worldwide. He denied that the processing fee was not refundable.

He said: 'The pounds 250 is refundable if we do not process the application. If the application form differs from the information in the phone call or faxed inquiry from the broker, we send it back together with the fee. Quite a few fees are returned.'

Mr Rashman said that 'quite a few completions' were going through - about 10 a month, including both commercial and residential. 'There were probably quite a bit more than that in offers made,' he added.

Mr Rashman said that the credit committee which made the final decision on whether cases were accepted comprised himself and four other people in the organisation.

The total fee a client would pay varied beween 1-3 per cent of the loan, a standard figure for mortgages at this end of the market.

'Our fees are reasonable - we do not say they are cheap' added Mr Rashman. 'We try to be as careful and considerate as we can.

'In a difficult time we do complete and try to be very fair. There are not many people who can provide finance, and we have letters from clients thanking us for our help.'

(Photograph omitted)