'intentionally homeless'

Cold callers 'break rules to lure right-to-buy tenants' | Communities | SocietyGuardian.co.uk

Cold callers 'break rules to lure right-to-buy tenants'


Jill Insley on the firms accused of misleading social housing renters into taking on huge loans

Sunday April 22, 2007
The Observer

Housing association chiefs are warning their social housing tenants to beware cold callers using dubious tactics to persuade them to exercise their right to buy.

Housing associations that have taken over the management of council estates around the country have told The Observer that their tenants are being targeted by cold-calling canvassers knocking on their door. This is a practice that breaks Financial Services Authority mortgage rules if it involves selling, but the firms contacted by The Observer claim that they are simply making tenants aware of their right to buy.

In many cases, the housing associations report that canvassers are making false statements and pressing tenants into signing application forms when they have no real interest in buying their homes.

Ron Dougan, chief executive of Trent & Dove, a housing association that manages more than 5,000 homes in the Midlands, says estates in Burton upon Trent and Uttoxeter have been targeted by at least four right-to-buy service firms to his knowledge.

He says some cold callers have falsely claimed that housing benefit payments would continue after a property has been bought; that Trent & Dove would still carry out repairs for the tenant even after completion of the sale; and that retired tenants would still be eligible for mortgages even when the state pension was their only income.

'They have also told tenants that the housing association will allow them to clear rent arrears on completion of the sale, encouraging them to build up arrears in the meantime, and that they can add fees for the broker's services [approximately £3,000] and any miscellaneous debt to the mortgage,' he says. 'This means the tenant will end up paying interest on an arrangement fee and wipe out the benefit of the discount the tenant receives on the value of the property.

'I'm angry about any organisation that misleads tenants into making one of the most important decisions of their lives - decisions that can create a great deal of misery if they are not fully informed.

'We've had tenants come back after buying their homes with all sorts of problems - they can't afford the repairs or their mortgage, and in some cases their homes are about to be repossessed. At an educated guess, I would say about 5 per cent of those properties we have sold have been repossessed by the lenders.'

Tenants are often told that it will be cheaper to have a mortgage than rent, but because housing association rents are much lower than those in the private sector, this is rarely the case.

Debbie Davies, a single parent and an adviser volunteer for East Staffordshire Citizens Advice in Burton upon Trent, has herself been targeted by cold canvassers. At the time she was working just a few hours a week and did not qualify for working tax credit, yet the canvasser told her that if she included the child benefit for her three teenage children in her income details, she would be able to apply for a mortgage.

'The way they wrote it down, I sounded like a millionaire, even though in a few years my children would be grown up and therefore no longer eligible for the benefit,' she says.

Cold canvassers have persuaded tenants of Trans-Pennine Housing in Halifax to apply for right to buy by telling them that the scheme is ending. Karen Morley, head of finance for the housing association, says: 'The cold callers are targeting vulnerable persons who often do not understand what they are signing - and certainly do not realise that they do not need to pay a fee to get help with the process.'

Tenants of housing association properties, particularly those who were previously council tenants, usually receive large discounts on the value of their home when buying. But this discount has to be repaid if the house is sold on or repossessed within three or five years of purchase (depending on when you bought your home).

Morley says Trans-Pennine has been asked not to reclaim discounts by former tenants who wanted to sell their home to avoid repossession.

Former tenants in this situation are unlikely to qualify for further help in finding housing from their council or housing association as they will be deemed to have made themselves 'intentionally homeless' by taking out a mortgage they could not afford.

Other housing associations whose tenants have been targeted include Aspire Housing in Staffordshire, Luminus in Cambridgeshire and Community Gateway in Preston.

Sue Washington, legal services manager for Aspire Housing, says cold callers claim to be acting in conjunction with the housing association. 'We have in the past complained to Trading Standards on this issue. The names of the organisations often give the appearance of council tie-ins or involvement.

'We frequently get "batches" of applications - often on the wrong form - which result in us having to refuse the application and advising that the appropriate form be completed and a pack is enclosed. We send these direct to the tenant rather than to the cold caller. The tenants then telephone us to say that they have said they are interested just to get rid of the cold callers and ask us to cancel any subsequent application that we receive.

'We have also been informed by the tenants of one property that the right-to-buy application had been sent in without their completing the form or authorising the action.'

'He asked for help, they gave him a bigger loan'

Six years ago Arthur Stone, a postman in Burton upon Trent, bought the council home in which he had lived with his parents since he was 10. He had been wrongly told by acquaintances that, after the death of his parents, Trent & Dove Housing Association would not allow him to continue renting their house.

He bought the property with a £17,000 mortgage from the Nationwide, and six months later took out a further £10,000 for a new kitchen and bathroom. At this point Arthur, who struggled to understand money after his employer stopped paying him in cash, could no longer work out his budget. Because he had a mortgage he was bombarded with offers for credit cards and loans, which he took up to pay his mortgage. As his debts escalated, he remortgaged - first with HSBC for £60,000 and then GE Money for £75,000.

The extra £15,000 from the GE loan was intended to pay off a loan with Household, a division of HSBC. But when he tried to pay the money into his HSBC account prior to paying off the loan, he says the bank advised him to take out a cash mini-Isa and put the remainder in a savings account. Instead of paying off the loan, he has been using the 'savings' to meet the monthly payments on all his debts and his mortgage. He owes more than £100,000.

Suman Antcliffe of Citizens Advice is trying to help. She says: 'Arthur wants to do the right thing, to repay his debts, and every time he has asked the banks for advice, they appear to have encouraged him to take out a bigger loan.'

Arthur is unlikely to be able to meet his mortgage payment next month, and Antcliffe fears that unless GE Money agrees to renegotiate, he will soon lose his home. He is likely to be treated by the housing association as if he had made himself 'intentionally homeless'.

GE Money says Arthur's mortgage was reasonable based on his income and the monthly payment was lower than those for his previous mortgage and debts, but says: 'We should have taken action when Citizens Advice first contacted us. We will now talk with Mr Stone about what course of action can be taken.' However HSBC says it cannot help, and has done nothing wrong. A spokesman said: 'Our branch teams are trained to a very high standard ... and we are confident that they followed standard procedure.' Citizens Advice is advising Arthur, who intends to complain to the ombudsman.