The acquisition and restrictive covenant

One covenant.
Two different years.

The mortgage transfer, the Bank’s different accounts, and the protection in the covenant.

1. The false account of the original mortgage transaction

My GMAC Key Facts Illustration (KFI) showed a rate equivalent to 1.99% above Bank of England base rate, as did those of other customers. The Leek 21 prospectus recorded a 2% ceiling above base rate.

The Co-op told the Ombudsman that “the mortgage book” transferred in 2007, making it “inconceivable” that the covenant agreed then could be reflected in my 2006 KFI. Yet its 25 July 2025 letter said the covenant was agreed at my 2006 transfer. My transfer notice fixes that date at 30 June 2006, just 79 days after I took out the mortgage with GMAC.

Both accounts cannot be true. By presenting the covenant as a later, separate arrangement, the Bank disconnected the mortgage from its protection. That connection mattered to the Ombudsman’s “fair and reasonable” assessment, regardless of whether I could enforce the covenant directly.

This is a further example of the Co-operative Bank’s two-audience problem. A partial truth to me, a false statement to the Ombudsman, with the Bank's usual "As you are aware..." prefix, yet the facts remained the same. A triumph of assertion over evidence.

Compare the Bank’s accounts

The model behind the acquisition

Created to trade

GMAC made mortgages with a view to selling them. Its own presentation describes entering the UK market by specifically “creating to trade”. It sets out an organised sales process in which buyers, mortgage pools and prices were agreed before completion.

That matters because the Bank told the Ombudsman that GMAC “would not have known or foreseen the sale of the mortgage book” when I took out my mortgage. The prospectus records repeated purchases through MAS4 from April 2005 and MAS5 from March 2006. My mortgage transferred on 30 June 2006, 79 days after I took it out. I say the claim that the sale could not have been foreseen cannot stand against that record.

GMAC sourced the borrower; MAS5 was at the other end of the pipeline. My case is that the borrower was the only person left in the dark about what was happening, and the restrictive covenant provided the protection. My KFI quoted a rate equivalent to 1.99% above Bank Rate, while the covenant capped the rate at 2% above Bank Rate. With that protection operating, the borrower arguably had nothing to complain about merely because the imminent transfer had not been explained: the transfer would not leave them paying more than the protected rate.

The Bank turned that protection into a supposed benefit to which I had no entitlement. For my mortgage, it did so by telling the Ombudsman that “the mortgage book”—singular—transferred in 2007, when the covenant was agreed. That detached the covenant from the sourcing and sale of my mortgage in 2006. It then argued that the 1.99% margin shown by my KFI could not have reflected a cap supposedly agreed a year later.

What the Bank called a “windfall” was, on my case, the restrictive covenant doing its job. By presenting it as an unrelated later benefit, the Bank could argue that removing it merely allowed the rate to rise back to where it “should” have been. The actual acquisition history changes that argument: the pricing and the protection belonged to the transaction itself.

I cannot be blamed for not realising sooner that the Bank was misleading the Ombudsman. I asked the Bank for my Service file and it did not provide it, so I obtained it from the Service myself. My fairness argument does not depend on establishing that I could enforce the covenant directly. I ask the Ombudsman to decide what is fair and reasonable in all the circumstances. The circumstances are not what we thought they were. I say the Bank’s windfall argument has been blown away.

What GMAC’s typical sales process involved

Two to three months before completion: the buyer was identified, key pool parameters and initial pricing were agreed, and an example pool was supplied for pricing.
Six weeks before completion: the contract was issued to the buyer.
Four weeks before completion: the sale pool was delivered, final pricing agreed and due diligence carried out.
One to two weeks before completion: the contract was agreed, signed and exchanged, and the exit letters were approved.
On completion day: exit letters were sent to borrowers and solicitors.

The buyer had access to the information behind the loans. GMAC offered “Full access to all origination documentation – application and offer”, alongside product specifications, lending policies and arrears-management information. Read with Britannia’s own account of examining portfolios before buying them, this raises the question of what the purchaser knew about my mortgage’s pricing and protections.

My complaint is about the transaction I entered and what I was told about it. A clause allowing a mortgage to be transferred, and a later letter saying it had transferred, did not explain to me at the outset that GMAC was creating loans for sale into this established purchasing relationship. The acquisition, the original pricing and the covenant’s protection need to be considered together.

Read GMAC’s own slides

GMAC slide stating that it entered the UK mortgage market by specifically creating to trade — GMAC’s stated purpose: “creating to trade”. Supplied slide file, page 4; E-SEC-04 reproduction, page 2.

GMAC's typical whole-loan sales process showing buyer identification and pricing two to three months before completion, a contract six weeks before, and due diligence four weeks before — The buyer, pricing and due diligence before completion. Supplied slide file, page 24; E-SEC-04 reproduction, page 12.

GMAC slide listing access to application and offer documents, lending policies, product specifications and arrears-management specifications — The information offered to purchasers. Supplied slide file, page 28; E-SEC-04 reproduction, page 14.

Sources: Craig Beresford, GMAC-RFC, The UK Whole Loan Sales Market, supplied reproduction, original slide content; E-SEC-04, pp.2–3 and 12–14. Sent reconsideration Ground 1, pp.5–6 (headed Ground 4), and Ground 3, p.2 (headed Ground 10). The slides show GMAC’s typical process; the dated sale agreements and transfer records identify my own transaction. The supplied highlighting is retained; later commentary in the reproduction is not relied upon.

Next: the covenant itself

01 / The Bank’s two accounts

One covenant.
Two different years.

A two-audience problem: one Bank, two accounts. The Bank linked the restrictive covenant to the mortgage transfer in both communications. It told the Ombudsman 2007, but later told me 2006, consistent with my actual transfer date.

Email to the Financial Ombudsman Service31 July 2024

View the email images

“2007”

“As you can see from this there are no restrictive covenants attached as suggested by Mr Jarrett. GMAC would not have known or foreseen the sale of the mortgage book when the mortgage was taken out in 2006, and therefore it is inconceivable that a future agreement, clearly not in place at that time, would be referenced in the KFI. As you aware, the mortgage book was transferred to MAS in 2007, at which point the restrictive covenant was agreed.”

The Co-operative Bank email in the Ombudsman file, E-FOS-13, pp. 1–2. Original wording, including “As you aware”.

Letter to me25 July 2025

View the letter images

“2006”

“Your mortgage was taken out with another lender, GMAC RFC Limited (“GMAC”) in 2006. Later in 2006 the mortgage was transferred to MAS5 (at the time a subsidiary of Britannia Building Society). At the time of the transfer, there were certain terms that were agreed between GMAC, MAS5 and Britannia Building Society (“BBS”), one of which was that the SVR MAS5 charged on the mortgage would not be more than 2% above the Bank of England base rate.”

The Co-operative Bank response to my disclosure demand, E-DIS-01, p. 1. The transfer-and-covenant passage is quoted without an ellipsis.

Why this matters to me. The Warwick prospectus records three GMAC–MAS4 sale agreements and seven GMAC–MAS5 sale agreements. This was a series of purchases, not a single transfer in 2007. It documents an ongoing relationship in which GMAC originated mortgages and sold portfolios to Britannia’s companies.

In the Davies case, citing a covenant date of March 2006 did not identify the agreement under which her mortgage transferred on 8 June 2007. My mortgage transferred on 30 June 2006, yet the Bank told my investigator that the book transferred in 2007, when the covenant was agreed, and that GMAC could not have foreseen the sale. Its later letter to me says the protection was agreed at my 2006 transfer.

I contend that the Bank obscured the series of sales because it exposed the relationship behind the transaction: mortgages originated by GMAC were being acquired for a closed book, without that destination and its significance being explained to borrowers at origination. The restrictive covenant provided rate protection within those sale arrangements. The Service needs the actual agreements and the full acquisition history to assess that protection—not a general covenant date detached from the sale of the particular mortgage.

The sales were already under way.

Warwick Finance No. 2’s prospectus lists GMAC-RFC mortgages sold to MAS4 and MAS5 under these separate mortgage sale agreements:

MAS4 agreements

29 April 2005 · 30 September 2005 · 27 January 2006

MAS5 agreements

31 March 2006 · 30 June 2006 · 29 September 2006 · 31 January 2007 · 8 June 2007 · 29 June 2007 · 28 September 2007

MAS4’s purchases from GMAC-RFC began before my mortgage illustration was issued. Yet the Bank told the Ombudsman that GMAC “would not have known or foreseen the sale of the mortgage book” when my mortgage was taken out in 2006. In my view, the Bank made that statement to defeat my argument about the rate shown on my KFI.

My KFI, produced on 15 February 2006, quoted the reversionary SVR as “currently 6.49%”. Bank Rate was 4.50%, making the illustrated current rate 1.99 percentage points above base. It showed that pricing before my loan was sold to MAS5 on 30 June 2006. On 31 July 2024 the Bank sent the Ombudsman’s investigator “the KFI issued by GMAC in February 2006”, writing: “As you can see from this there are no restrictive covenants attached as suggested by Mr Jarrett.” The document the Bank chose shows my rate at Bank Rate plus 1.99%. My mortgage offer of 15 March 2006, which the Bank itself enclosed with its final response of 16 January 2020, says the same: “currently 6.49%”.

The Final Decision repeats the false 2007 transfer date in its covenant reasoning, despite correctly recording June 2006 on its first page. I say a decision which detaches my sale from the rate protection the Bank itself says was agreed at my 2006 transfer, on the basis of that false history, cannot stand. That is why I have asked the Ombudsman to reconsider it.

Sources: Warwick Finance No. 2 prospectus, printed p. 149 (E-SEC-02); Bank email of 31 July 2024 (E-FOS-13); KFI of 15 February 2006, p. 2 (E-KFI-02); Final Decision, pp. 1 and 9.

How I say the Ombudsman was misled by the Co-operative Bank

The Bank’s submission gives differing accounts of when it says the covenant ended: April 2009, until 1 April 2009, and May 2009. April and 1 April can be consistent; May requires an explanation. The Bank has not produced to me the operative release document establishing its date, terms and effect. I do not concede that the covenant was validly released.

A central part of the Bank’s defence treats the covenant as a private commercial arrangement between companies. Yet Clause 14 required interest-rate reductions, notification to affected borrowers and recalculation of their payments. Those duties concern borrowers directly. They must be addressed when deciding what protection accompanied the purchase of our mortgages.

The Bank refers to “the mortgage book” transferring in 2007. I contend that this was deliberate misleading: my mortgage transferred on 30 June 2006, and the Bank already held the correct date and had used it in its enforcement records. The false chronology then supported its argument against my complaint, separating the covenant from my mortgage and dismissing the significance of my original pricing. That requires an explanation against the documents.

The resulting reasoning treated the lower rate produced by the covenant as a benefit that could justify leaving the later increases in place. My case is that this conclusion must be reconsidered against the actual transaction and the covenant’s duties. It also left an earlier issue unexamined: reductions which, on my reading of Clause 14, MAS5 had to make within one month were already late. MAS5 was then within Britannia; the Co-operative Bank later defended its account to the Service.

First missed deadline · 7 December 2008

Bank Rate fell on 6 November 2008. Clause 14 required the corresponding reduction within one month, by 6 December. A recovered MAS5 notice to a fellow borrower made the reduction to 4.99% effective 11 December; my own rate record gives the same date. The notice’s 1 January 2009 payment date is a different thing. I say the first breach began on 7 December.

What borrowers were told · September 2009

A later MAS5 notice to the same borrower announced a rise to 4.50% from 1 October and said the SVR was not linked to the Bank of England base rate or the LIBOR rate. It did not explain the covenant or the earlier duty to reduce. These are that borrower’s recovered copies; my own rate record shows the same rise on the same date.

In separate Davies proceedings, MAS5 told the court that its rate-change letters from before January 2010 were no longer available after computer-system changes. A fellow borrower’s surviving copies now show what two of those notices said, and every rate and date in them matches my own rate record to the day. The Ombudsman’s jurisdiction decision, below, proceeds on the basis that MAS5 wrote to me each time it changed the rate.

In its 4 July 2024 jurisdiction decision, the Ombudsman reasoned that I should have known I could complain about the rate because MAS5 wrote when it changed the rate and I could see the increases while Bank Rate stayed still. But I am also complaining about reductions it failed to make. No rate-change letter would announce a reduction that never happened. The recovered customer-facing explanation pointed away from a Bank Rate link, while the covenant and its protective duties had not been disclosed to me.

The transfer notice told me in June 2006 that my lender had changed; it did not tell me about the earlier GMAC–Britannia sale programme or Clause 14. If I had known of that protection and the missed December 2008 deadline, I could have complained then. I say the Bank’s incomplete account misled the Service about what I could reasonably have known. I have asked it to reconsider that question under DISP 2.8.2R(2)(b), which provides for a later three-year period from awareness, or reasonable awareness, of a cause for complaint.

My complaint is about what I contend was a deliberate overcharging business model and the Bank’s attempts to conceal it. I rely on the false 2007 account as evidence of that concealment, read alongside the Bank’s correct transfer records, the earlier GMAC acquisition programme and its other inconsistent statements. I contend that it was deliberately misleading, not an isolated mistake. The undisclosed covenant, the missed reductions and the concealment of the business model are all relevant to assessing when I knew, or ought reasonably to have known, that I had cause for complaint. The later disclosure of that false account therefore matters to reconsideration of the time-limit question as well as the merits.

Why reconsideration matters. In R (Moniak) v FOS [2023] EWHC 333 (Admin), later evidence undermined a central factual premise of an Ombudsman decision. The court quashed the refusal to reconsider and required the Service to decide that request again; it did not prescribe the outcome of the complaint. My position is that findings built on the Bank’s false chronology cannot safely be maintained without confronting the evidence and assessing what changes when the true history replaces it.

Sources: Bank submission (E-FOS-15, ¶¶7.6, 9.1.4, 9.1.6 and 10.6.7); Clause 14 (E-DIS-01, p. 3); Bank email (E-FOS-13); transfer and enforcement records identified in Ground 1; recovered MAS5 notices (E-CMP-08); my SSR0109 rate record (E-STM-03); MAS5’s Davies skeleton, ¶12 n.6 (E-JRB-01); Jurisdiction Decision, pp. 3 and 6; Final Decision, pp. 9–10; Moniak, ¶¶67–68 and 81–82. The recovered notices identify another borrower and are not reproduced here.

Read the wording

The covenant itself

The covenant wording is reproduced on page 3 of the Bank’s letter of 25 July 2025.

Read the covenant wording

Page 3 of the Bank’s 25 July 2025 letter, including the restrictive covenant wording

Open the document →

2. My complaint starts in December 2008—and “another day” has arrived

In MAS5’s 2022 judicial review concerning Mrs Davies’s complaint, Mr Justice Griffiths said a possible error in the Ombudsman’s later merits assessment of cost-of-funds evidence might provide a basis for future action, but that question could not be decided before her final determination:

“If she falls into error in that respect, this might be a basis (I know not) for future action. … that is for another day.”

— MAS5 v Financial Ombudsman Service, [2022] EWHC 1979 (Admin), paragraph 90.

That day has arrived. My own 2024 merits decision has now been made, and I ask the Service to assess the new evidence before deciding whether to reconsider it.

The restrictive covenant required MAS5 to implement any reduction needed to keep the rate within the cap, notify the borrower and recalculate the monthly payment within one month. Following the 6 November 2008 Bank Rate cut, that deadline expired on 6 December. MAS5 did not make the reduction effective until 11 December. My complaint therefore starts with what I say was a breach on 7 December 2008—not just the later rate increases.

The covenant was concealed from me. A September 2009 MAS5 notice recovered from another borrower said the rate was “not linked to the Bank of England base rate or the LIBOR rate”. In its 2022 judicial review, MAS5 said its pre-January-2010 rate-change letters were no longer available because of changes to its computer systems. The recovered notices show the late reduction and the misleading explanation.

Knowing that my rate had risen did not tell me that an earlier reduction had breached a concealed obligation. Had the protection been disclosed, I could have identified that breach and complained much earlier.

The Service must reconsider its time-limit decision against this evidence. The Bank should not benefit from keeping the obligation hidden, issuing a September 2009 notice to another borrower saying the rate was not linked to Bank Rate, while never telling me it had followed base-rate cuts under the covenant before that protection supposedly “came to an end”, and then blaming me for not complaining sooner. The wording of the restrictive covenant is new evidence to me. The Bank’s false 2007 date and account of its purpose matter: I say that even if my Ombudsman had seen the wording, she would have evaluated it through the Bank’s misrepresentation that the covenant was in no way connected to my mortgage.

9 July 2025

What the Co-operative Bank wrote to me

“We have explained in detail in previous correspondence why we do not agree with the allegations you have raised against MAS5. A number of those points were also dealt with in the Ombudsman’s final decision on your complaint dated 16 September 2024 (including the points you raise relating to the restrictive covenant, which the FOS reviewed when arriving at their final decision).

We re-iterate that MAS5 has not deliberately concealed any facts and we strongly deny that we have acted dishonestly or made misrepresentations. The Ombudsman concluded in his published decision relating to similar complaints that there was no evidence of bad faith, or dishonesty, on MAS5’s part.”

The Co-operative Bank’s letter to me, 9 July 2025.

02 / Evidence to Parliament

How Britannia said it bought GMAC loans

In public evidence to the Treasury Committee on 4 September 2013, former Britannia and Co-operative Bank chief executive Neville Richardson described Britannia’s purchases from GMAC. He said Britannia carried out its own due diligence, had no forward purchase agreements, bought loans portfolio by portfolio, and had warranties allowing it to put loans back to GMAC if they did not meet expectations.

“We bought GMAC loans on a portfolio-by-portfolio basis.”

He also told the Committee that bad debts on that portfolio after the merger had been “absolutely minimal” and that it had earned Britannia members “profits of well over £100 million.” Those are Richardson’s statements to Parliament, not independently audited findings by this website.

Read with the dated sale agreements above, his evidence describes an active purchaser selecting GMAC portfolios. It makes the buyer’s due-diligence records and the terms of my own 30 June 2006 sale important questions.

Treasury Committee, Project Verde, 4 September 2013, questions 200–201, Ev 25. Read the full official transcript ↗