Why Does my Mortgage Have a Power of Attorney?

What is the Problem?

This one comes from Joanne in Cumbria. She says:

“I have found a Power of Attorney clause in my mortgage conditions which I knew nothing about. Why does my mortgage company need a Power of Attorney?"

That’s is an excellent question and frankly the answer is not a short one, so make yourself a nice cuppa and get ready while Simon answers this tough nugget of a question.

Your Due Diligence

Before signing anything, you should always know what it is you are signing and all the implications of each of the clauses [claws].

Generally speaking, the power of attorney clause/condition is something which should have been highlighted and explained by the Bank’s sales advisor, or the broker, before you applied, and by your solicitor before you signed/executed the deed. Therein lies a problem.

How can an independent solicitor possibly know what the power of attorney is actually going to be used for by a third party Bank?

All the solicitor can really do is relay what he/she has been led to believe about the use(s) of the power of attorney from the bank in question, or from his/her training, which, in turn, may or may not be accurate.

The solicitor has no first hand material knowledge of the facts. The same applies to brokers.

As for the Bank staff - you may as well ask the office cat.

The Outline Solution

• If you're concerned and wish to discover what the mortgage company has actually done (executed) in your name, then you can write to your mortgage company and ask them.
• The mortgage company should be able to identify the person with direct control-of, and responsibility-for, the power of attorney and in turn this person should know what has been executed in your name

Possible Arguments Against You

• We have noted that some mortgage companies are refusing to divulge what has been executed in your name.
• The Financial Ombudsman Service has, on many occasions, refused to even consider complaints regarding the power of attorney clause, citing a lack of ‘legal qualification’ as their (FOS) reason for not getting involved.
• This means borrowers are often left with the prospect of expensive court action, just to uncover the answer. Yet the answer itself should have been discussed and made clear up front, prior to the mortgage application being made.

The Almost Legal Info

• The power of attorney clause/condition places a duty of care upon the Bank, and more specifically, the member(s) of staff controlling it.
  This means that you may have a cause of action if the power of attorney has been abused.
• Most mortgage companies claim that the power of attorney clause is required to enable them to enforce the mortgage against you (the borrower) in the event of non-payment. Ask yourself: "why would the bank need to act as you, in order to enforce a mortgage debt, against you?"
• Even more worrying; some mortgage companies have claimed that all members of staff are able to operate with, by and or under, the power of attorney, which raises question marks as to ‘reasonable care’.

Helpful Paragraphs:

If you feel aggrieved and or find yourself unable to obtain answers from the bank or mortgage company, you should seek independent legal advice. You may ultimately need to take some kind of action to obtain the answers you seek, but this can cost.

Rather than approach a solicitor who, in turn, then refers you to a barrister, you may find it more cost effective to consult a barrister under the direct access scheme.

The direct access scheme removed the need to be referred to barristers via solicitors, reducing potential costs.

If you seek independent legal advice, always be sure to have the legal professional put his/her advice in writing and have them sign their name to it. Do not accept anything less than a letter signed in the following style:

1. Signature
2. NAME
3. Position
4. Company Name/Partnership Name

Need More Help?

YAYC have invested a great deal of time investigating this very specific issue and even more relating to mortgage products. If you would like to see what we have discovered and learn some techniques which have already resulted in large sums being wiped off mortgage balances, then visit the ToolBox.

If you would like to learn more and are unsure what to watch first, simply email [email protected]