Defaulting repayments - need advice

[Rolf Latham]

Hi Sue,

I can understand your frustrations. I have my three loans with Westpac - only because a couple of years ago they offered 85% LVR without mortgage insurance. But they have been very difficult to deal with.
Every time we call the "Mortgage Centre" they make us talk to a different person who has to look up our history on the computer and they have no idea how to deal with more complicated matters than telling us the current interest rates.

We have threatened to leave Westpac several times, and they immediately transferred us to the "customer retention centre" where they proudly told us that our variable loans would cost $3,500 to discharge, as we have only had them for two years.

I encourage you to put this behind you, keep your faith in investment properties, and change lenders ASAP!!! I will be dealing with Members Equity Bank for my next investment.

I wish you well.

Mike

Hi Mike

Dunna matter what lender you deal with, they all have their chinks.

As an example a certain very large Building Society has a habit of issuing 5 year IO loans with no PI period and no point of sale disclosure.

If you miss the "500 000 repayable on day x letter" you are in default at 2 % + interest.

ta
rolf

 

[sue78]

dan, actually that's not 100% true. Bank staff are suppose to pride themselves in customer service.

They are suppose to care why I can't meet payments, it's in their best interest isn't it? they want their money back.

I like westpac because i've never had a loan rejected and my bank manager is great. But this time around, I think I did the right thing explaining my situation to them but they failed to record me or whatever their procedure is.

A lot of my friend's are bankers for other banks and defaulting is very common and if there's a reason and there are expected funds to cover default..as long as the bank's in the loop, it does not go to credit or affect credit rating.

When I previously worked in corporate banking, I had to check daily for defaults in our portfolio, find out the reason, find out when it will be paid or take actions to balance the accounts and write a report to credit. Clients are very important actually, that's what they teach you at training in the first week to all employees.

Why didn't anybody do this for me? I told them everything. I even had a 20min sit down with the branch manager when we decided to to renew the lease and put it on the market. This is before I even defaulted. She was surprised and thought it was great that I would let them know in advance but people don't do that usually. At that time my bank manager was away. When I was referred to mortgage centre and explained my situation to them, I thought since hey know I wouldn't need to tell my bank manager anymore. I thought it's the procedure. When collections phoned me, which surprised me because obviously the depts don't communicate, I told them the same thing. All of this should have been reported to credit ages ago.

Now credit can interpret it which they want..wth I think that's wrong and I don't know what more I could have done. I probably went through the wrong channels, did not fill out forms or whatever but i didn't know...westpac should have advised me. My friends are now telling me this is what should have been done and I was not advise of anything by westpac.

 

[Ed Barton]

I think I will be changing lenders.

good luck with that.

how would you feel if your tenants gave notice to leave and then stopped paying rent for the last 4 weeks because they have a 4 week bond?

 

[Ed Barton]

dan, actually that's not 100% true. Bank staff are suppose to pride themselves in customer service.

They are suppose to care why I can't meet payments, it's in their best interest isn't it? they want their money back.

I like westpac because i've never had a loan rejected and my bank manager is great. But this time around, I think I did the right thing explaining my situation to them but they failed to record me or whatever their procedure is.

A lot of my friend's are bankers for other banks and defaulting is very common and if there's a reason and there are expected funds to cover default..as long as the bank's in the loop, it does not go to credit or affect credit rating.

When I previously worked in corporate banking, I had to check daily for defaults in our portfolio, find out the reason, find out when it will be paid or take actions to balance the accounts and write a report to credit. Clients are very important actually, that's what they teach you at training in the first week to all employees.

Why didn't anybody do this for me? I told them everything. I even had a 20min sit down with the branch manager when we decided to to renew the lease and put it on the market. This is before I even defaulted. She was surprised and thought it was great that I would let them know in advance but people don't do that usually. At that time my bank manager was away. When I was referred to mortgage centre and explained my situation to them, I thought since hey know I wouldn't need to tell my bank manager anymore. I thought it's the procedure. When collections phoned me, which surprised me because obviously the depts don't communicate, I told them the same thing. All of this should have been reported to credit ages ago.

Now credit can interpret it which they want..wth I think that's wrong and I don't know what more I could have done. I probably went through the wrong channels, did not fill out forms or whatever but i didn't know...westpac should have advised me. My friends are now telling me this is what should have been done and I was not advise of anything by westpac.

my last post may have been a bit harsh. i don't think i understood your situation.

you told the bank what you were up to and they agreed? well that sucks. it might just be different departments not talking to each other.

 

[Rolf Latham]

and defaulting is very common

See, thats where I think there is a perspective thing

Obviously depends on the portfolio and the loan mix, but on an average month our books carry less than 1 % arrears.

The majority of those 1 % is where soemone is a week late making a repayment.

The not a very common occurence then

In the current enviro, 2 missed payments are a HUGE cause for concern for their risk management area, even where the LVRs are okish. They dont want to take your house.

There are 2 separate issues here I think

The new legislation is being used as an lame weasel excuse by your lender here, because the banks dont even fall into that as yet, and I fail to see how retaining margin to decrease LVR without lowering repayments falls into responsible lending.

Then there is the issue that you have acted in reliance of information provided by the lender,and thats where u may have some comeback.

The Ombudsman wont be of much use to here either, they usually only consider items where u can demosntrate financial loss AFTER the FACT


ta
rolf

 

[sue78]

Ed - yes I agree with you that it does suck but I have had situations when the tenants fell behind because they were in the midst of changing jobs and they made up for it later. My Pm dealt with it...there was nothing much I can do but take her advice. She said they have a good history, they are genuine etc she was right. I mean they have been paying rent on time for 5 yrs on time.

another tenant I have fore go her bond because she moving out and was cash strapped. However, the bond did not cover the clean up + 2 weeks rent. But she went into a payment plan and paid it off within 5 weeks after moving out. It was suppose to be for 3 mths but she paid extra where she could and paid it off quickly.

I think that's a better outcome than going to court or not even getting a cent back at all. That's what westpac should have done for me. They didn't even request payment plan etc they were happy with default paid out at settlement.

and I have also had tenants that never paid a cent of rent or bond and lived rent free for 3 mths until they were forced out by the courts and police.

There's a big difference.

People have cashflow problems all the time.

 

[skater]

also, defaulting on loans is so common...doesn't anybody go through difficult cashflow times on SS? what do you do? what am i suppose to do next time?

Yep! I've gone through hard times BUT the loans are always paid first. I have many posts about the hard times that we have had in the past, including this one http://www.somersoft.com/forums/showthread.php?t=23497&highlight=buffer

The point is, that if you are having a hard time financially you really need to get in there and cut expenditure big time. If you have any equity in your PPOR, then you should have a LOC set up to cover you for this too. You said that your PPOR is only geared at 40%, so why didn't you have a LOC in place to see you through?

 

[Spectre]

Only way Westpac would be ok with you missing payments would be if you had it in writing from them.

I know at CBA if we get customers in difficulty then they have an area of the bank which assists. I'm pretty sure westpac doesnt.

But usually even if your personal banker is on holidays, they'll get someone to cover for them... which then leads to how long are they on holidays for as this has been running two months behind. Most bankies I know only get 2 weeks at a time.

 

[Lil Skater]

lil skater - it's not that i didn't want to pay them but i didn't have the funds to. why do u need to be sarcastic though?

Because for some reason you feel you're a victim?

I don't know why some people think it's okay to not pay their bills and EXPECT sympathy, it's incredible.

If you knew you couldn't support the loan, perhaps you should've kept the tenants in for the two months, but left them plenty of notice of the date of settlement.

I get that your annoyed because you cleared it with who ever, but I still don't believe you have any right to complain when someone has stuffed up and not done what they've told you they would - In my view, you should've just paid your bills and left it at that.

 

[Piston Broke]

I knew they would sell quickly and cashflow is tight (no rent) so I thought it would be ok to default for a few mths.

That worked in banking and "dont care" that your loans go in default is absolutely flabergasting to me.

The rest of the thread is pretty much you blaming everybody else for the fact that you "did'nt care" and purposely left you loans to default.

if they play dirty and retain funds then i've really had it with this business. my ip's all all below 80% and my ppor is below 40%. without cashflow i can't operate anyway.

What business? It does'nt seem like your running a business from my view.
There was plenty there to avoid the situation.

I had an issue with a payment not being processed due to a deposit being reversed (still dunno why), Westpac called me after a few days and politely pointed out that the payment had not been made.
I checked, they were right, paid the amount, no problems.
That you deliberately chose to default is beyond me, as I've posted many times defaulting is never an option x-col or not.
You need to pay up and save your credit asap, not whinge & complain trying to find ways out of it.

good luck with that

 

[Gremlin]

another lesson learnt..just deal with 1 person so you can hold just 1 person accountable if there's a problem.

There is only one person to be held accountable. You'll find them in the mirror.

 

[Intrinsic_Value]

There is only one person to be held accountable. You'll find them in the mirror.

Unfortunately i think this is right.
I understand the emotional drag you are feeling now Sue.
But i think your mindset is wrong.

Borrowing money should be viewed as a priviledge not a right.
Even more so when the underlying purpose of those borrowings are for commercial purposes rather than personal purposes.


You compare yourself 'defaulting' with your tenants 'defaulting', but this is really two different things.
You are in the business of borrowing money and investing it, your tenant is merely 'paying rent' for a roof over their heads.

As a 'business owner' of residential property, you have to DEAL with it. Instead of just blaming Westpac (which can can still do mentally ), you need to be proactive and think with your 'business owners' cap on,

HOW DO I FIX THIS SITUATION, this is a problem effecting my business and i need to remedy it.

 

[Ed Barton]

Ed - yes I agree with you that it does suck but I have had situations when the tenants fell behind because they were in the midst of changing jobs and they made up for it later. My Pm dealt with it...there was nothing much I can do but take her advice. She said they have a good history, they are genuine etc she was right. I mean they have been paying rent on time for 5 yrs on time.

another tenant I have fore go her bond because she moving out and was cash strapped. However, the bond did not cover the clean up + 2 weeks rent. But she went into a payment plan and paid it off within 5 weeks after moving out. It was suppose to be for 3 mths but she paid extra where she could and paid it off quickly.

I think that's a better outcome than going to court or not even getting a cent back at all. That's what westpac should have done for me. They didn't even request payment plan etc they were happy with default paid out at settlement.

and I have also had tenants that never paid a cent of rent or bond and lived rent free for 3 mths until they were forced out by the courts and police.

There's a big difference.

People have cashflow problems all the time.

i must admit, i don't know a lot about banks as i don't owe anything. but everything should be negotiable. i've had tenants with problems and we've worked it out. they've paid as they said they would and when they said they would. perhaps i have just been lucky.

people hit hard times, and renegotiate the deal, i 've always come out ahead. but then I'm not a hard nosed bank!

when talking with them they are just doing business, you're just doing business back, don't get emotional. in my younger years I've had banks breathing down my neck, they try to frighten you. don't budge, but best to know how that will effect your credit rating.

 

[sue78]

skater - I don't like debt. also, it was a mistake on my part that i miscalculated how much i needed to borrow for construction! I wanted to get refinance/loc but i stopped working, our income situation changed. we couldn't get the top up. Even with lvr...the last thing i want to do is take on more debt really...just for a very short period.

If westpac had told me otherwise, i would have just borrowed. I did have funds but I was in a catch 22 situation. I needed to get the house finished so it can be re-valued and ready for sale or rent..that's the only way I can have cashflow. If I pay my loans and the house is not finished, I can't do anything.

But if I had known then I probably would have made diff choices I guess. It would cost even more in interest leaving the house not completed for mths.

I told all of this to the bank manager i had a meeting with. I wanted to lay out my situation and see what's the best way for a win win situation.

 

[wylie]

Hi Sue. I'm fine, and didn't realise you had been AWOL for so long until I saw your name. Sounds like you have been having a rough time.

My first thought is that all my calls to Westpac are recorded, but you said later that this is not so. Can you check this. Also, there should be notes on your file from whoever told you it would be ok to not make payments and clear the loans from the settlement.

If you can prove that this is what was said, then perhaps you can salvage things.

I have found over several years dealing with Westpac that I have to follow things up that are promised, but not done. Or things are done incorrectly, wrong paperwork sent etc.

If you have done what you have on the understanding that Westpac has given the ok, then I'd chase that up.

In the meantime, could you borrow from family to clear those arrears immediately, let Westpac know why this happened (that you thought they had given it the thumbs up) and perhaps mention you plan on talking to the ombudsman to see why the conversations were not recorded or notes made on your account?

I have been told that engaging the ombudsman means a cost to banks, and they may try to avoid that, but I don't know if that is true.

Like others have said, when things have been tight, the banks come first and we have had to tighten our belts many times, or borrow from family at times to get us through a few weeks of "no money".

Good luck, and try to salvage things from here.

 

[skater]

skater - I don't like debt.

So your answer is "I don't like debt?"

Sheesh, I don't like debt either (well non-deductable stuff), but that doesn't mean that I would default on a loan when there are other options open to me.

So.....you don't like debt? Did you do anything else to aide in the payment of the loans? Did you cut all expenditure? Were you reduced to eating baked beans for diner for those two months with no outings and cut lunches for work? Or, was it business as usual and let the loans take care of themselves?

 

[sue78]

If you knew you couldn't support the loan, perhaps you should've kept the tenants in for the two months, but left them plenty of notice of the date of settlement.

I would have done that but the tenants wanted 1 year, they also knew we were selling which is why we did not renew. they wanted to move.

it was a difficult position to be in with both properties, both have plenty of equity and both on the market. it's just timing sometimes.

anyway, we will know the outcome soon. settlement is thurs now...first time i ever had to delay settlement for selling!! all loans up to date too.

piston - yes it's not technically a business..just using the term loosely. But it's like a business. All my ips are spec homes. My niche is building. It's not hard to get caught out with cashflow problems. I am not new to SS, been around maybe 5 years? was brought here when I think John Burley was a popular figure.

 

[willair]

Well, not exactly "ever"...more like "until recently".

And from a funder's perspective, "recently" is all that matters.

Always good to see how the other side think..willair..

 

[sue78]

So your answer is "I don't like debt?"

Sheesh, I don't like debt either (well non-deductable stuff), but that doesn't mean that I would default on a loan when there are other options open to me.

So.....you don't like debt? Did you do anything else to aide in the payment of the loans? Did you cut all expenditure? Were you reduced to eating baked beans for diner for those two months with no outings and cut lunches for work? Or, was it business as usual and let the loans take care of themselves?

yes I did, not to that extreme because it's not a big amount and the house was unconditional with a longer settlement. It went unconditional awhile back....again westpac was happy with that. I was even told there's a policy when it goes unconditional, you don't need to make any more repayments as it will pay out the loan from westpac.

I also did not completely ignore the loans, I did not make payments by due date but I did deposit a couple of times $500, $1k etc Would this be the reason they didn't say anything to me? I have no idea now. The amount owing is not 2 full mths repayment. The first mth, the 1.7k, I actually brought it down to about $800 owing and also paid down a bit on the other loan too.

Like I said, I think ppl are quite harsh because I was in a difficult situation, tried to pay as much as I could and I told westpac everything.

But I think what westpac is doing now is a bit harsh really. Also, the settlement officer basically said I'm in default, surplus will be retained and most likely credit will pay down other loans. He had no idea of the history of the defaults and that I had been speaking to mortgage centre and collections.

 

[sue78]

Hey...great to see so many old faces!! I can't believe you guys are all still around. awesome!! <waves>

on a good note...my recent new build cost approx $500k borrowed $450k listed $679k. I am still building but market is tough now..land is rare and expensive. Might have to take a break until government releases more land. Maybe a reno next but being a new thing to me, I will probably stuff it up majorly like I did investing in the share market.

Even an oldbie like me is still making mistakes and learning all the time!

my twins are 16mths now. where tracey? she's on my FB.