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Bradley Willcox et al v. Lloyds TSB (US case, Honolulu, Hawaii.)

Posted on 20/06/2017 · Posted in Expert Witness, Financial Litigation, Investment, Property

US Litigation focuses on consumer rights in complex loans

Willcox v Lloyds had some similarities with the previous case in Northern California of Dugan v Lloyds TSB. This time a further action was brought in Hawaii on behalf of mortgagees of Lloyds TSB who had property in Hawaii.

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The International Mortgage Services (“IMS”) lending of Lloyds Bank had been particularly popular on in the international property markets as it allowed the mortgagees to switch the currency borrowed at each quarter end. This became very convenient particularly for individuals who wanted a second home in a foreign location to where they worked. This enabled them to pay the interest in their currency borrowed without the need for continually doing a foreign exchange transaction from their earnings. In cases where the individuals were working in Japan and earning in Yen yet wanted to have a property in California, Washington State or Hawaii, it also meant that they saw a much lower mortgage interest borrowing rate since the yen rate was substantially below that for US dollars.

The problem arose in 2008/9 when the Yen appreciated substantially against the US dollar and in some cases threatened the collateral cover. At the same time, Lloyds Bank agreed to take over Halifax Bank of Scotland and with the financial credit crunch going on at the same time, property prices fell. It had all the makings of a perfect storm.

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The dispute centred on a cost of funds clause in the lending agreements with the mortgagees. The interpretation of what this clause actually implied for a large international bank trading in many currencies was not agreed on. Lloyds sought to interpret it as giving them the ability to raise the price of the loans from 2009 onward. Understandably the mortgagees disagreed at a time when interest rates fell as a consequence of the financial credit crunch.

The issues were resolved in judgement entered in favour of plaintiffs and the class following an offer of compromise by the Defendants before the matters came to a full jury trial. The judgment is filed on the public docket 569.

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