|Shared Appreciation Loans Pensioner Scam|
Hundreds of pensioners who took out controversial shared appreciation mortgages (Sams) and are in a legal fight with Bank of Scotland and Barclays face a new hurdle - their fighting fund is exhausted.
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Hilary Messer, the respected solicitor fighting their case, has written to Sam borrowers warning that they will need to pay more if they want the battle to continue.
Sams were sold to older homeowners during 1998. The lenders charge no interest but can claim most of the increase in value of borrowers' homes on resale.
Sams cause hardship because the rise in house prices means homeowners cannot afford to buy smaller properties as their share of equity in their home shrinks. Many remain trapped in big homes that they are unable to maintain or even heat.
In 2008 Messer asked for £5,000 from borrowers to launch a group action against both banks and is thought to have raised a fund of about £1.6m.
She won a significant pre-trial victory in 2009 when a judge agreed that Sams cases could come under a group litigation.
However, both banks appealed and Messer says fighting the appeal has drained cash.
'But for the appeal and attendant costs we would have had sufficient cash to cover at least the next stages,' she says. 'As it is, we simply do not have the cash to do any more work at all.'
In her letter, Messer asked her Sam clients whether they were prepared to pay more. And last month she held a meeting in Reading, near the office of her practice, where borrowers could attend and ask questions.
Another setback is that the banks have partly succeeded in their appeal. Judgments on individual Sam cases will not set binding precedents, raising questions about the benefit of the litigation.
Frank Cooksey, 90, a veteran of the D-Day landings who later ran a haulage business, was among those who paid Messer £5,000 in 2008.
Frank's original £15,000 loan has swollen to about £160,000, which means he cannot afford to move out, even though his home in Barmby Moor, East Yorkshire, has stairs and is difficult for him to manage.
Last week he told Financial Mail: 'I couldn't give any more money. I had to borrow the £5,000 in any case. I would like to
live long enough to see how this ends.'
Only Barclays and Bank of Scotland were involved in Sams. Of the two, just Barclays has acknowledged real cases of hardship
by setting up a scheme that offers to assist borrowers in moving to more suitable accommodation, if necessary.
Both banks maintain that Sams were fair and that borrowers' solicitors were responsible for warning homeowners about what could go wrong.