‘I’ll pay £1m over 25 years on my mortgage – but I’ll never own my home outright’

In 2007, Alison Overson (pictured) made a decision that would define the rest of her life. On the advice of a broker, she and her husband took out a £350,000 mortgage with Southern Pacific Mortgages Limited (SPML) on their home in Burnley, Lancashire. “At the time, I felt really secure,” Alison explained. “We both had good jobs. We were advised that the SPML mortgage was good for us.” Today, Alison, 59, is a mortgage prisoner, stuck on a standard variable rate of 7.44 per cent – almost double the lowest five-year fixed rate. Alison and her husband Vince, a former professional footballer for Burnley and Stoke City, still live in the home they remortgaged with SPML, where their two boys grew up and Alison now cares for her elderly mother who has dementia. “I’ve had to take £20,000 out of my personal pension just to keep on top of mortgage payments. We are being charged an extortionate interest rate and every time I complain to SPML, it falls on deaf ears,” Alison said.

Mortgage prisoner turned campaigner

When Alison and her husband remortgaged with SPML, they did not know its US owner, Lehman Brothers, was less than 18 months from collapse. In 2006, Lehman Brothers were selling off their European mortgages – including the one Alison took out – in an attempt to raise urgently needed funds. This involved creating subsidiary companies – also known as special purpose vehicles (SPVs) – which would own SPML customers’ loans and collect their interest payments. The interest collected on SPML mortgages was sold to a series of SPVs which sit under a parent company called Eurosail-UK 2007-3BL PLC. Mortgage securitisation is completely legal, and it allows a lender to sell loans they have given out to raise capital. However, companies that buy up mortgages, unlike high street banks and building societies, are often not overseen by the UK’s financial regulator – the Financial Conduct Authority. (Photo: Dragon Claws/Getty/iStockphoto)

'I cannot afford the interest'

In an attempt to solve the question of who owns her mortgage, Alison has taught herself as much as she can about what happened to her loan. Surrounded by a pile of papers in her living room, she said: “I cannot afford the interest I am being charged, and I cannot remortgage or move to another lender because SPML has put so many charges on my account that nobody will touch me.” The Oversons took out an interest-only remortgage with SPML in 2007 which was initially fixed at 6.59 per cent for the first two years with monthly interest repayments of £1,926.91. Now, Alison’s monthly repayment is £2,416, plus an extra £200 a month in arrears because she fell behind on her payments after losing her job in 2015. (Photo: Dominic Lipinski/PA)

'Collateral damage in the financial crisis'

SPML says Alison owes them £458,000. Around £150,000 of that is charges for arrears, payments and legal costs which, she claims, cannot always be accounted for. “I am continuing to complain to them and query the charges that have been added to my account,” she said. Alison’s mortgage term will end in 2032. She calculates that by then they will have repaid more than £1,000,000, “but we won’t own our home and we will be forced to sell and all we will have is whatever equity is left”. She added: “We are just collateral damage in the financial crisis. We thought we’d bought a home for life, but we have no idea what our future looks like.” (Photo: Moment RF/Getty)

Who owns Alison’s mortgage?

The legal and financial structures around closed-book mortgages like Alison’s and other SPML customers’ might be complicated, but they are not illegal. Based on The i Paper’s analysis, more than 10,000 of the UK’s 166,880 mortgage prisoners could be SPML customers. It was 2016 when Alison realised her mortgage was part of a complex web. She said: “I got a letter from Acenden [a third-party organisation which services SPML’s loans] because it was time for their annual update on our building insurance policy. My insurance requires me to list any interested parties, so I listed my mortgage provider – who I thought was SPML. However, I received a letter back from Acenden asking me to put SPML/Eurosail. I was told on the phone that Eurosail had ‘a beneficial interest’ in my mortgage.” While Acenden and SPML are both regulated by the Financial Conduct Authority (FCA), Eurosail is not. (Photo: Getty/Bloomberg/Chris Ratcliffe)

Court trial

In 2016, SPML took Alison to court to try and repossess her home over disputed arrears in a three-day trial at Preston Crown Court. In that trial, she called Lee Brandon, SPML’s only listed director at the time, as a witness because she wanted to prove her mortgage had been securitised and sold to a company not regulated by the FCA. “In court, I was given a bundle of papers by SPML’s barrister, which included the sale documents made up when Lehman Brothers sold our loans to Eurosail,” Alison says, sifting through the papers. “I don’t know if they meant to give it to me, but I have it!” Alison’s papers suggest her loan was among a bundle of 3,590 SPML mortgages sold by Lehman Brothers to Eurosail in 2007, for a total of £392,937,561.23. This equates to around £110,000 per mortgage. The i Paper approached Lee Brandon, who was SPML’s only listed director between February 2011 and August 2024, for a comment about the practices of SPML and Eurosail. He said in a statement: “Lehman Brothers did sell the interest on loans to a number of [special purpose vehicles] such as various Eurosail entities but did not sell the loans themselves.” Brandon added that this is “standard practice for a lender wishing to raise finance to develop its business”, and insisted SPML still owns the loans, meaning its “customers are with a regulated entity and benefit from consumer protection.” SPML’s most recent filings to Companies House show it owns the legal title of its customers mortgages – or the paper they’re printed on – but that the beneficial title – or the ultimate value – is owned by SPVs via Eurosail. Eurosail itself appears to have no employees and lists its only director as Wilmington Trust SP Services, which is owned by M&T Bank in the US. (Photo: PA)

'There is a clear policy here'

Chris Makin, a forensic accountant based in Leeds, reviewed SPML’s filings to Companies House for The i Paper. Makin noted that it is unusual for a company “of this size” to have only one director. He said: “The fact SPML has reduced its share capital and paid out sizeable dividends shows that there is a clear policy here: collect existing mortgages and pass the cash received to the holding company.” In the filed accounts, SPML also cite their “robust” home repossession strategy as a reason why the directors of each Eurosail SPV should feel positive about the outlook of their investments and “strong performance” of the company in the future. They also note “the directors of each securitisation company” are “closely” monitoring the number of SPML customers who are behind on their mortgages to “maximise” results. One lawyer with years of experience in mortgage securitisation stressed SPVs like Eurosail are “not inherently suspicious” and are commonly used to protect investors from insolvency. However, the lawyer added SPVs become problematic if they use “aggressive tactics for debt collection”. A spokesperson for M&T Bank said Wilmington Trust’s role is limited to “providing administrative services” but declined to comment further. (Photo: Elise Amendola/AP)

'Can significantly affect people's lives'

Alison has complained to the Financial Ombudsman Service (FOS) about SPML and the charges on her account, but they did not uphold her complaint. All financial providers are expected to treat their customers fairly in accordance with the FCA’s rules. But the FCA cannot compel closed-book mortgage owners like SPML to reduce interest rates. A spokesperson for the FOS said: “Increasing mortgage payments can be hugely stressful and have a significant effect on people’s lives. That’s why it’s so important people are treated with transparency and fairness.” However, the FOS would not specify what they considered to be “unfair” practice in the setting of interest rates. In most UK mortgages, there will be a clause which states the lender can sell the loan to another entity. There is nothing to stop that entity being an offshore company as long as the company which communicates with customers – like Acenden – is FCA regulated. Rachel Neale, of the Mortgage Prisoners UK campaign group, says there need to be more safeguards against such arrangements. She said: “These companies are allowed to buy up UK mortgages irresponsibly and treat people as numbers. We are talking about British families, but our government and the FCA are allowing them to run around buying up loan books.” (Photo: Getty)

SPML timeline

2007 – Lehman Brothers announces that they will continue operating Southern Pacific Mortgages Limited (SPML) in Britain despite closing other parts of their British business. Securitisation of SPML mortgages via Eurosail takes place. Alison and Vince take out a mortgage with SPML (trading under the name The London Mortgage Company) / 2008 – Lehman Brothers collapses / 2024 – Southern Pacific Holdings Limited is established (Photo: PA)

Losing everything

To complicate matters further for Alison, Acenden is owned by an active lender named Kensington Mortgage Company (KMC). Kensington was recently bought by the high street bank Barclays. As active lenders, both Kensington and Barclays could also offer SPML customers a new deal. A spokesperson for Kensington said: “SPML customers are in no way restricted from seeking an alternative lender and have been prompted to consider doing so. We cannot proactively solicit SPML customers to remortgage with us.” A spokesperson for Barclays said: “While a part of Barclays UK, KMC is operated as a separate regulated entity to Barclays and has its own relationships and contractual arrangements with third parties.” In July, the FCA introduced new consumer duty rules aimed at setting “higher and clearer standards of consumer protection” for mortgage customers. An FCA spokesperson said: “Under the duty, mortgage firms are still able to set their own prices, in line with their appetite for risk, but they must be able to show they’re providing value. We have already seen some firms operating closed products act to ensure that they are ready to comply.” A Government spokesperson said: “We have updated mortgage lending rules, removing the barrier that prevented some mortgage prisoners from being able to switch, and introduced significant financial and legal protections for those most in difficulty. We continue to work with the Financial Conduct Authority and the sector on this issue and will carefully consider practical and proportionate solutions put forward.” (Photo: Chris Ratcliffe/Bloomberg via Getty)

UK government’s involvement with mortgage prisoners

2008 – The global financial crisis is caused by the subprime mortgage crisis. Labour’s Gordon Brown is prime minister. The British government brought British bank Northern Rock into public ownership on 22 February, when all shares in the bank were transferred to HM Treasury. / 2009 – A Treasury consultation, first published in 2009 with the input of Gordon Brown under then-chancellor Alistair Darling, would have given the City watchdog (then the Financial Services Authority) more power over the sale of mortgages. / 2010 – The Conservatives win a general election with David Cameron as Prime Minister. Labour’s proposals to protect mortgage prisoners if their loans are sold are never implemented. / 2015 – HM Treasury sells Northern Rock customers’ mortgages to several private buyers. (Photo: Duncan McGlynn/Getty)