Bank errors

[h8dk97]

I’ve seen my loan manager this afternoon and found out that my loan repayments have been almost half of what they should’ve been for the last year or so, as a result of a bank error. Consequently my loan instead of decreasing has grown by few thousand dollars. He said that I can leave it as is but he recommends re-submitting a loan application for another 30 years, that way I’ll be paying the full amount but not as much as if it would be with the current loan (20 something years). Am I in the position to demand some sort of compensation? I’m not hoping for much here, but thought maybe someone else had a similar experience?

Another question I had (which my bank manager could not give me a sensible answer to) is: I’ve recently used the redraw facility on my loan, as a result my repayments increased, however, even if I put the same amount back the repayments cannot be decreased; that’s what the banker said. He explained it by the interest rates raise but it still does not make sense to me. When I asked for the formula that is used here he said that the system calculates it automatically. Any thoughts on this?

Thank you.

 

[geoffw]

I've been in the same situation- I noticed the error myself- and was not able to claim any compensation. I had to pay the loan back.

 

[Spectre]

Pardon the pun.

Which bank?

 

[The Y-man]

I’ve seen my loan manager this afternoon and found out that my loan repayments have been almost half of what they should’ve been for the last year or so, as a result of a bank error. Consequently my loan instead of decreasing has grown by few thousand dollars.
.

So had they not noticed, could you have kept paying the low repayments, and kept capitlizing your interest? Sounds quite good actually....

Cheers,

The Y-man

 

[Medine]

He said that I can leave it as is

Why not leave it as it is? If that really is an option? And consider using your addtional serviceability to do something else?

I agree with Y-man. It sounds pretty good to me.

Cheers, Medine

 

[h8dk97]

Thanks All for your replies.

To answer lukentel's question the bank is NAB, but I think something like this could’ve happened in any bank. It was a nightmare to deal with CBA for another loan, things didn't get sorted out until I went to their complaints department.

From my conversation with the bank manager it looks like I can leave things the way the are and I did think about it, however:

1. Because I'm not paying enough to even cover the interest my loan is growing. What is the limit and what are the implications?

2. At the end of the loan term the bank will ask me to make the final payment which will be ten times more than I can afford. Of course I can refinance before then... not sure.

Oh, and does anyone have any thoughts on my other question, about the redraw and it’s effect on repayments?

Thanks again.

BTW
The funny thing is I went to the bank to check if I can reduce my repayments so that I can be more flexible with my cash

 

[Spectre]

h8dk97
When I was a young lad, this stuff used to happen at CBA every year (which is why I asked wb?). Loans come off their honeymoon or fixed rate and then the rate goes up and the repayments stay the same. The loan ends up falling behind and the customer gets a letter or a phone call outlining what you had happen. come fix it up or we'll just increase your payments.

My main thinking is in your case, is that if your loan falls 'technically' into arrears a lot of lenders charge a default interest rate, so say while you think you are paying 7.37 youre really paying 9.37. Honestly, I dont know if NAB do this but you might want to check it out (its probably a rare chance).

End of the day the bank will say you signed a contract to do 'x' and you're not doing it.

I'd suggest either fix it up or go elsewhere, thing is if another lender goes to do the refi and they see you arent meeting the payments this might not help your case with them as well.

 

[mja]

Bank errors! Don't get me started...

Oh, ok. It's a good story.

Last year, we built our PPOR. Construction loan was with ANZ. When the construction completed, the loan was converted into a standard P&I loan (instead of interest only) because my broker at the time forgot to tick a box on the application. Oh well.

This was July 2006.

The first months repayments were interesting. ANZ deducted the months interest - twice, and noting their mistake, reverted it... twice.

As such, the actual loan repayment didn't occur for July.

Fast forward 3 months to October, and I get a nasty letter in the mail from ANZ (an automated response), that my loan was in arrears to the tune of $3500. The actual problem was magnified because one month wasn't paid, and the letters kept coming every 2 weeks, but the arrears amount was *growing*.

In December, the amount of arrears was $6k. ANZ agreed it was their error, but I had to pay July's interest and they'd take care of the rest. It took another *3* months for ANZ to convince their mortgage system that I wasn't in arrears any more and to finally fix the problem.

So, 9 months later, everything is back in order.

Bank errors... *grumble*. I'm sure there are other awesome stories out there!

-- MJ.

 

[hobo-jo]

Bank error in your favour, collect $200. Take that community chest card into your branch and ask for your $200

 

[pursefattener]

I've never really had too many dramas with bank errors as such but last year had extra stampduty taken from my account 9 months after settlement... I got my solicitor to have a look at it as it was about 2k worth . He said , lookat it this way you have had use of the money you wouldn't have had in the interim...###

 

[h8dk97]

h8dk97
When I was a young lad, this stuff used to happen at CBA every year (which is why I asked wb?). Loans come off their honeymoon or fixed rate and then the rate goes up and the repayments stay the same. The loan ends up falling behind and the customer gets a letter or a phone call outlining what you had happen. come fix it up or we'll just increase your payments.

My main thinking is in your case, is that if your loan falls 'technically' into arrears a lot of lenders charge a default interest rate, so say while you think you are paying 7.37 youre really paying 9.37. Honestly, I dont know if NAB do this but you might want to check it out (its probably a rare chance).

End of the day the bank will say you signed a contract to do 'x' and you're not doing it.

I'd suggest either fix it up or go elsewhere, thing is if another lender goes to do the refi and they see you arent meeting the payments this might not help your case with them as well.

lukentel,

Good point, thanks. I will check carefully at what rate my loan has been growing. I must say I've been satisfied with NAB until recently, I used to have a dedicated loan manager and dealing with one person was much easier, but it has now gotten worse... oh well.

From other posts I conclude that there's not much I can do, just "fix" it and keep repaying.

Anyway, thanks everyone for replying.

 

[nonrecourse]

further to nab bank errors

About 7 or 8 years ago when nab out sourced its mortgages through homeside we had one property in a trust controlled by our super fund where for over a year they had stopped taking out interest and principle and had not charged us any further interest. It was their mistake and I picked it up near the end of the finacial year. I rang the bank manager and asked him if I could have this sort of loan facility for all our other IP's

The story gets even better. It seems that when the loan was transferred across the bank stuffed up with the paper work and they needed our signitures to recover the interest and principle and in exchange the bank wore the cost of the mortgage being in limbo for a year. In effect we had the use of those funds for almost a year with no penalty and we also borrowed 110% for another property at a very reasonable rate using other property as collateral which was below their published rates because we had been reasonable it fixing up the stuff up

 

[tobe]

Just thought I'd share a recent bank error in my favor. They dont happen often, but it seems so far I have gotten away with it. I bought a flat for $150k and took out a lo doc loan at 80%. A year later I re-fi ed with the same lender when it was valued at $175k for a total of $140k. Then I got a pay rise at work, and I re-fied again with the same lender but this time full doc at 90% on the new val of $200. However somewhere along the line, they missed out on adding the first increase to the total loan, so I ended up getting $195k in total on a valuation of $200k, whihc was supposedly a 90% LVR. Also, as I was an existing customer for some reason they also only charged me a total of $200 for LMI when it should have been closer to $3,000, which I have never seen before in my 4 years as a broker.
Banks sometimes make errors, but I have never seen a mortgage insurer miss out on their payment. The interest is calclated on the whole amount, so I am not actally getting anything for free, just a higher loan amount than the banks policy allows.
Anyway, this wont help you at all in your current situation, but it does show Bank errors in your favour are not only on the Monopoly board....

 

[Ol School Skata]

here's another more recent example.

Just this month went through the process of refinaning a loan for a property. Existing arrangement was 2 loans - one LOC used to draw down equity and purchase other IP's and shares, and 2nd loan originally on fixed term, expired in Dec 06, converted to standard variable, interest only.

Refinanced to another institution to take advantage of staff loan rates (partner works for them), already had our banking with this institution - 2 IP loans, ccards, normal transaction accounts etc. We wanted the following

• Loan for original loan amount $110K - interest only
• Interest only Loan with offset account for balance (apporx $170K) with $68 deposited into an offset account - (LOC was not included in staff loan rates)
• Wanted a separate offset account (in addition to the one we already had) so as to keep personal money away from investment money. This was actually suggested by the institution

Turns out the institution now says they cant do 2 offset accounts...contrary to the lending managers advice...so they have dumped the $69K into the existing offset account.

Instutition has advised they could do a LOC but at full priced rates....

This has defeated the purpose of the refinance as the interest rate was substantially lowere than other bank and what they could offer.

 

[lizzie]

i ha a settlement on a property was delayed by two weeks due to the bank loosing the paperwork and the vendor was getting cranky. i had applied for a mortgage increase against an existing ip went that was to fund the 20% deposit.

after much stress and pressure on the bank by my mb, i had been assured by th bank that everything was sorted and that the money would be deposited at a set time the next day. i sat in the bank at the time given waiting for the funds to be deposited so i could immediately draw a bank cheque and go to the conveyancers office to settle.

two hours later and after many phone calls asking where the funds were i was advised they were now in.

haha - what a joke - the application was for the loan to be increased "by" $X. instead the bank increased the loan "to" $X. a very large shortfall from what was required.

i was then advised by the bank that i had to reapply and go thru the loan process again - what - another 2-3 week delay!

fortunately my broker and conveyancer came to the rescue - they dipped into their personal funds and financed my deposit (i love them!) so i could settle and i paid them back, with interest, when the bank finally got it right 2 weeks later.

after that nothing the bank stuffs up on fazes me - in fact - it's now expected.

 

[Mofra]

Bank errors... *grumble*. I'm sure there are other awesome stories out there!

Well, I'm from the other side of the coin.

My old employer (a major bank) had actually stopped making loan reviews because we were so short staffed there was no-one to do the work.

I had to be involved in a project to refinance literally hundreds of loans that had fallen behind repayments for a variety of reasons:

- Bridging loans where the interest capitalisation during the bridging period was not ended upon sale of the existing security - clients not making nay repayments for months
- Partial discharges, where the full funds were credited to the loan, repayments reduced to a msall amount, full redraw completed over the internet & because of no loan review, no increase in repayments.
I saw one loan > $500k with $38per fn repayments
- No increase in repayments with rate rises, interest portion being greater than the P&I repayment made
- $10k max extra repayments being hit incorrectly flagged on a fixed rate loan, so client could not make repayments to their loan even if they tried. Many simply gave up for a years or more, so interst capitalised.


If anything doesn't make sense on your loans (especially with a major bank), ask. You'd be surprised how many mistakes are made.