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HBOS resistant on SAMs compensation

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by Brian Turner

HBOS, which comprises the Bank of Scotland and Halifax, is reportedly resisting implementing any rescue packages for those who took out Shared Appreciation Mortgages (SAMs).

SAMs were interest-free loans secured against the future equity growth of the property purchased, with the bank able to claim as much as 75% of the property value.

The aim was to provide accessible lending to people, who would be able to own their own home, with the bank repaid only if the property were sold or on the death of the mortgage holder.

SAMs were packaged and especially targeted at the elderly in the 1990′s.

However, the steep rise in property values since SAMs were first issued has led those who took out such policies finding themselves left paying a huge amount far inexcess of reasonable interest rates – and with the problem of not having enough from the sale of such property to finance a purchase in a smaller one.

HBOS and Barclays were the only high street lenders to issue SAMs, issuing around £700-800 million over the course of 1997-1998.

Barclays already launched a rescue package in June for its own SAMs customers, targeted at those who may be experiencing hardship due to infirmity and similar circumstances that make the original terms difficult for them.

However, so far, HBOS has reportedly refused to apply any specific scheme to aid its own SAMs customers, instead recommending individuals to approach the bank individually as required.

This is despite the fact that HBOS was responsible for around 80% of SAMs sales in the UK, selling around 12,000 policies. The mortgages it sold were then later sold on to Swiss investment bank UBS.

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News posted: August 21, 2007

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