The High Court has ordered a bogus broker and rentback scheme operator to pay £4 million for exploiting vulnerable borrowers at risk of repossession.
In one aspect of their scheme, the defendants used financing from two legitimate lenders – Together and Lendinvest – misleading the companies into believing they were making loans for rental properties.
Called “LPI Emergency Property Finance”, a trading name of LPI, desperate borrowers were offered quick refinancing to try to stay in their homes.
But it wasn’t clear what they signed up for, what fees they paid or whether the companies would impose restrictions on title.
The judge said some borrowers were encouraged to sign false leases, give a different address as their place of residence and tell appraisers who visited their homes that they did not live there.
The FCA secured the order against London Property Investments, NPI Holdings, Daniel Stevens – the director of both firms and his father Tony Stevens.
It says LPI arranged mortgages even though they did not have an FCA license.
False buy-to-let and sale and rentback
Because the borrowers intended to remain in their homes, the mortgages should have been regulated housing contracts, but were in fact unregulated investment loans.
In another aspect of the arrangement, NPI purchased properties and rented them back to the sellers.
The FCA has been monitoring unregulated sales and rentals for more than a decade.
In his judgment, Judge Fancourt said the breaches amounted to “serious offences, committed over an extended period of time, involving a high degree of culpability, including misleading consumers and credit providers, and taking advantage of consumer vulnerability.”
Freeze the money
The FCA must now try to recover money before any compensation can be paid to victims.
In 2020the regulator secured an interim freezing order on 17 properties worth around £3.9 million and the defendants’ other assets up to £867,770.
In November 2022the FCA obtained a judgment against LPI, NPI and the father and son in respect of 45 people.
Today’s ruling affects 26 people, bringing the total number of homeowners affected by both rulings to 71.
LPI is required to lift restrictions registered against the ownership rights of four properties.
These restrictions were used to force individuals to pay “exorbitant” fees to LPI.
If these costs were not paid, the individual could not sell or remortgage their home, meaning some were stuck in expensive bridging loans.
‘Years on the vulnerable’
Steve Smart, the FCA’s executive director of enforcement and market supervision, said: “These bogus brokers preyed on vulnerable people who were struggling financially and trapped them with exorbitant fees.
“The defendants used a smokescreen of deception, which cost consumers and lenders a lot of money.
“This was a complex case, but the ruling shows that these were serious violations of our rules.
“It is only right that we can now pursue LPI, NPI, Daniel and Tony Stevens to compensate for the losses they caused the victims.”
Last week the FCA revealed that there had been another allegedly unauthorized broker accused of fraud.