The Office of Fair Trading has told 16 ’sale-and-rent-back’ firms that they must substantiate their advertising claims or face prosecution, amid suspicions that such firms may be misleading struggling homeowners desperate to avoid repossession.

The companies in question offer to buy houses, often at well below the market value, from people struggling to pay their mortgages, promising that the owners can carry on living there as tenants .

The OFT said that advertisements under investigation typically suggested that clients could stay in properties once they were sold for as long as they wished, paying rent at fait market rates. Customers were also told they could buy back the house at an agreed point in the futureif they came up with the requisite funds.

However, last year an OFT report found that these promises were not always met, and a number of tenants had been evicted from their houses very quickly.

“Sale and rent back companies must be clear and transparent about the services they offer and the security consumers have as tenants,” said Heather Clayton, the senior director of consumer protection at the OFT.

“Clarity of advertisements is particularly important in the sale and rent back sector where customers may be under stress from financial difficulties, at risk of losing their homes and making important and complicated decisions.”

Consumer groups have called for tougher regulations for companies offering mortgage rescue schemes.

This entry was posted on Friday, January 30th, 2009 at 4:45 pm and is filed under Home Insurance, Housing Market, Mortgages. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.