In the latest case involving elderly home owners urged by salesmen to take out mortgages and invest the cash, a couple are about to have their home of 15 years repossessed
A couple in their late 60s face the loss of their home within days thanks to a catastrophic financial arrangement whereby they were advised to extend their mortgage and then put the cash in supposedly "safe" investments.
It is the latest of many cases to emerge involving a discredited investment known as the Integrity Cash Maximiser, sold by financial advisers before the credit crisis when it was still easy to obtain mortgages.
In 2006 Rita and Richard Kauffman turned to their adviser, Mint Financial Services, in the hope of boosting their income.
They entered a deal where they tied up £50,000 of savings and topped up the investment by taking out a £195,000 mortgage.
The money was used to buy second-hand endowment policies, a form of investment often described as "low-risk" but which has in practice delivered volatile and often poor returns.
The couple outside their home (SWNS)
The arrangement was supposed to work by delivering returns big enough to cover the couple's mortgage - the £195,000 debt was added to an existing £160,000 loan - plus some spare income.
But according to the Daily Mail, which reported the Kauffman case, the investment started to unravel in 2009.
The Kauffmans took their initial complaint against Mint Financial Services - which has since been bought by a firm called Intrinsic Financial Services - to the Financial Ombudsman Service (FOS), which found in their favour.
But compensation from the FOS is limited to £100,000, and their total debts were far higher.
The couple subsequently settled for a sum of £105,000 after costs, according to the Daily Mail, leaving them with debts of £376,000.
Their lender, originally Bradford & Bingley and today overseen by UK Asset Resolution, a government body, said it had "no choice but to commence possession proceedings". A date of August 20 has been set.
The new owner of Mint Financial Services, Intrinsic, said the payout had been accepted as settlement by the Kauffmans.
The couple told the Daily Mail they had stressed at the outset their unwillingness to take on risk. Mr Kauffman, 69, said they were now "exhausted, desperate and working flat out to pay down the debt".
The dangers of borrowing to invest
This is not the first time the Integrity Income Maximiser has been exposed for wrecking couples' finances.
In 2011 a case emerged in which a Cardiff couple, Peggy and Mike Newman, then in their early 70s, found themselves stuck with £130,000 of mortgage debt and no way to clear it.
Again, the money they borrowed - also on the advice of Mint Financial Services - was invested in traded endowment policies, the income from which was supposed to more than cover the mortgage repayments.
Although their case was also upheld by the Financial Ombudsman Service, too little compensation was on offer to settle their debts and to restore them to their previous financial position.
Previous examples of disastrous schemes where home owners were encouraged to take out mortgages and invest the proceeds include the West Bromwich Building Society's Home Income Plans sold in the early Nineties.
Here, older home owners paid hefty commission in order to release equity from their homes and then invest in the stock market. In many cases the strategy failed, leaving pensioners unable to meet the costs of their borrowing.
Source:- http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/11798145/Elderly-couple-to-lose-home-after-being-advised-to-borrow-to-invest.html
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