Mystery mortgage offers prove hard to nail down: Terms for borrowers with credit troubles seem too good to be true

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The Independent Online
Mortgages at interest rates that seem too good to be true are being offered by First Commercial Credit, a firm of brokers in Sutton Coldfield.

But the company will not divulge the name of the lender providing the funds.

During the last few weeks brokers have received promotional literature from FCC, which is offering a selection of mortgage schemes 'on an unlimited basis in conjunction with high street lenders'.

The current mortgage rate from most lenders is 9.99 per cent. However, if you already have mortgage arrears or county court judgments against you, high street lenders are unlikely to touch you.

Borrowers with problems have to resort to the secondary lenders - the firms which specialise in problem cases. They are lenders of last resort and usually charge high rates of interest.

In the present market, most have withdrawn from lending. The few that remain are typically charging a flat rate of between 12 and 16 per cent, an APR of about 19-29 per cent. They will lend only 50-60 per cent of forced sale valuation.

However, FCC says that for a borrower who is up to eight months in arrears, it has mortgages at 10.5 per cent fixed for 10 years. Borrowers who have up to four county court judgments that have been satisfied and in some cases arrears as well, can get mortgages at 10.95 per cent variable rate. FCC says there are no flat rates and that all rates are 'normal bank or building society rates'. Loans are available up to 85 per cent of open market value.

The terms of FCC's mortgages sound too good to be true and industry sources have expressed amazement that loans at this rate are on offer.

We telephoned FCC and spoke to a Richard Baldwin. He agreed that the mortgages seemed too good to be true. He said: 'When the person involved in all this approached us, we were flabbergasted and we did not believe it. But since then we have seen offers and we have seen completions'.

Mr Baldwin said his firm has only recently become involved with the scheme as a regional broker and had first advertised the offers a month ago. But he would not disclose the identity of the lender.

He said: 'We are committed not to say what source it is coming from, but they are trying to lend pounds 50m a month in the next 24 months. They are trying to very much take the UK lending market by storm.

'It is a very large institution, a consortium of three - and they are big. The people at the top of the tree are very important people in their own respective fields.'

Earlier Mr Baldwin had said that all the mortgage offers come from 'one of six high- street banks or building societies' - but none of the high street banks or building societies we spoke to will lend money on cases with multiple arrears and county court judgments.

According to its promotional literature, FCC claims it is 'so confident in our ability to complete your cases that we have now introduced a guaranteed fee refund scheme'.

With every case there is an application fee of pounds 285 for mortgages up to pounds 50,000 rising to pounds 450 for loans over pounds 150,000.

If the application fails to proceed to an offer - providing that all the information given initially is correct - the fees will be returned in full without query, it says. Fees will not be returned 'in cases of non-disclosure or poor references'.

For borrowers who have arrears or county court judgments there is usually a broker's fee and a lender's fee, which can vary. With FCC, in cases where there are up to eight months' arrears the brokerage fee is pounds 1,500 and the lender charges 1.5 per cent of the loan. These fees are charged on completion.

Mr Baldwin is adamant that the advertised mortgages are available. He said: 'Everything is legitimate; everything is proper. That is why there is a refund guarantee.'

It will be interesting to see how many mortgages are actually completed.