All monies clause & Cross Collateral [Clarification needed]

[investor1668]

NEED HELP TO CLARIFY 'ALL MONIES' CLAUSE

I have read that even if you have have a stand alone mortgage instead of cross collateralised loan, the bank can still foreclose your property as a result of the "all monies" clause. This normally impacts borrowers that have several mortgages with the same banker.

Eg Investment property and Owner Occupied property both are stand alone with the same bank. If defaults on Investment property, the bank can still foreclose your Owner Occupied property as a result of the "all monies" clause.

My questions are:

1. I am not sure whether this is sill applicable under the Uniform Consumer Credit Code (UCCC) regime. Please help to clarify this...because if this is true, the only way to avoid exposing your other property is to get loans from different banks.

2. Can anyone give an example of "all monies" clause? So that we can look out for it when reviewing the loan documents.

 

[Peter_Tersteeg]

Technically the bank can foreclose on any properties that the hold. If the properties are not cross collateralised I imagine they'd need to go through a more rigorous process to take your PPOR, but they ultimately can do it.

I'd also imagine that they could go after properties that they don't have the title too if necessary and if they're willing to go right through the courts. This doesn't generally occur because they tend to get their money long before that happens and they also take out mortgage insurance policies. There would also a cost-benefit process involved.


This isn't the reason you shouldn't cross collateralise. I've never seen this occur, but I have seen a lot of other nasty things occur which have literally derailed people investment strategies, such as refusing to release equity, refusing access to cash from a property sale and even refusing to allow a sale to proceed.

Loosing your home is probably the least reason you should avoid crossing securities.

 

[Terry_w]

NEED HELP TO CLARIFY 'ALL MONIES' CLAUSE

I have read that even if you have have a stand alone mortgage instead of cross collateralised loan, the bank can still foreclose your property as a result of the "all monies" clause. This normally impacts borrowers that have several mortgages with the same banker.

Eg Investment property and Owner Occupied property both are stand alone with the same bank. If defaults on Investment property, the bank can still foreclose your Owner Occupied property as a result of the "all monies" clause.

My questions are:

1. I am not sure whether this is sill applicable under the Uniform Consumer Credit Code (UCCC) regime. Please help to clarify this...because if this is true, the only way to avoid exposing your other property is to get loans from different banks.

2. Can anyone give an example of "all monies" clause? So that we can look out for it when reviewing the loan documents.

This is not the case I believe.

An 'all monies' clause relates not to taking possession of property but to applying funds you have with the bank. You might have surplus funds in account A and negative funds in account B - this clause has the borrower giving permission for the bank to apply the funds from account A to offset the loss in account B. Yes, it applies under the NCCP.

However if you have 2 separate properties mortgaged to bank X with separate mortgages and no cross collateralising of the securities, then the bank cannot directly take possession of both.

If Loan A is secured by Property 1
Loan B secured by Property 2

If loan A is not paid then the bank can take possession of property 1 as mortgagee. This could be done without going to court, but usually banks go to court to get a judgement before taking possession - as a safety precaution I guess.

But I believe property B would be safe from possession unless the repayments for loan B were in default. Assuming they are the bank would take possession of property 1, sell it and possibly apply any funds released to loan B. If there was still a shortfall of money owed then since they have a judgment against the borrower already they could then enforce this judgment and take possession of property 2.

So not as bad as cross collateralising the securities.

The difference in going to a different bank for loans 1 and 2 is that the second bank would not know you are in trouble until much later and they could not get their hands on the proceeds from the sale. This will give the person much more freedom in selling property at their own pace and taking greater control.

Although I am a lawyer, the above may not be totally correct because I do not practice mortgage law.

I am actually writing a book on loans and tax atm and have an 'all monies clause' here which I was looking at last night and will type it in later.