Not upheld: forbearance and repossession; failure to extend mortgage term; underfunding disclosure delay complaint against Lloyds Bank PLC

Decision detail

Summary

Mr and Mrs W complained that Lloyds unreasonably commenced repossession proceedings on their interest-only mortgage after the term expired in May 2021, despite receiving reassurances that the lender would work with them. They sought a five-year term extension and compensation. Lloyds had provided multiple holds on the account while Mr and Mrs W pursued various plans to repay the balance through property sales, land sales, and business sales, but none materialized over 3.5 years. An I&E assessment showed a term extension was unaffordable. The ombudsman found that Lloyds provided appropriate forbearance and acted reasonably in commencing legal action as a last resort, rejecting the complaint.

The Ombudsman's reasoning

The ombudsman applied MCOB Rule 13.3 principles requiring lenders to treat customers fairly and discuss circumstances when payment difficulties arise. The ombudsman found that Lloyds provided multiple forbearance measures including holds on the account and time for various plans to materialize. However, after 3.5 years since the term expired, none of Mr and Mrs W's stated plans had come to fruition, the balance had increased by approximately £75,000, and an I&E assessment showed a term extension was unaffordable. The ombudsman reasoned that extending the term without a viable repayment plan would not have been in Mr and Mrs W's best interests as they would have paid more interest with no plan to repay. The ombudsman found Lloyds was not responsible for Mr and Mrs W's decision not to remortgage elsewhere and that even after being informed of underfunding, they did not increase payments. The ombudsman concluded that Lloyds had given reasonable time and that repossession was appropriate as a last resort.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website