Discharge Issues

[MYDomain]

Hi everyone,

I currently have mortgages with one of the major lenders and looking to refinance my ppr to another institution.

My loans to date to have been offered at a particular LVR which has been the prevailing norm for the last 7 years.

My bank is now stating that they will discharge the loan but requires a lower LVR than what was offered at the time of taking out the loan.

My question is, can the bank retrospectively change the LVR requirements to effect a discharge? Can they arbitrarily change the goal posts in such a manner?

Looking for some guidance and insights from the many knowledgeable members on this forum.

Thanks in advance.

 

[pinkboy]

What do your loan documents say?

pinkboy

 

[Scott No Mates]

(I'd see a doctor or a plumber. ... )

Sounds like you're using the ppor as security ie crossed hence wanting more security/lower lvr.

 

[Jamie M]

Hiya

Sounds like one of the pitfalls of cross coll - I take it the PPOR is crossed up with other properties?

Cheers

Jamie

 

[Rolf Latham]

does smell like the dreaded xcoll.............

Possibly and likely the remnant properties have been valued ( perhaps just desktop) and the retained property values on that basis are less than when loans were taken.

I have had several cases where people have lost almost their entire portfolio previously valued at millions because they relinquished control of their financial decisions to their lender - all the while not having any idea they had done the same.

for others reading this thread, below is a mouldy oldie that mostly still applies and needs a few more added to it

http://somersoft.com/forums/showpost.php?p=120656&postcount=6

ta
rolf

 

[Colin Rice]

Get upfront vals done (by a clued up broker, not DIY) and take the whole lot elsewhere pending valuations and give them the bird on the way out the door.

 

[Redom]

Get upfront vals done (by a clued up broker, not DIY) and take the whole lot elsewhere pending valuations and give them the bird on the way out the door.

If your not in LMI category, this. Appears your loans are crossed and you may not even know it. If you're wondering whether they are, loan docs will tell you under the 'security section'.

 

[MYDomain]

Thanks for everyone's responses.

Yes the properties are unfortunately cross collateralised!

Given that the remaining properties (IPs) will be at or less than the prescribed LVR at the time of taking the loans, can the bank refuse to discharge my PPR on the basis that it does not me their LVR requirements (because they have moved the goal posts since taking out the loan)?

Colin,
I agree. This is my final option which I will definitely execute should the bank fail to meet my initial request. Fortunately my portfolio has an acceptable LVR so transferring to another FI shouldn't be an issue.

 

[Colin Rice]

Colin,
I agree. This is my final option which I will definitely execute should the bank fail to meet my initial request. Fortunately my portfolio has an acceptable LVR so transferring to another FI shouldn't be an issue.

In that case you tell the bank to listen up as you have been talking to a broker, or a few to be accurate, that you want xyz to happen or you will take your business elswhere. Also insist loans are un crossed as well.

If they dont co operate then get a broker on your side and move on, no matter how nice the person/s at the bank you are dealing with are as they will be fair weather friends, if they are still around next week, month, year or whatever.

 

[Terry_w]

Thanks for everyone's responses.

Yes the properties are unfortunately cross collateralised!

Given that the remaining properties (IPs) will be at or less than the prescribed LVR at the time of taking the loans, can the bank refuse to discharge my PPR on the basis that it does not me their LVR requirements (because they have moved the goal posts since taking out the loan)?

Colin,
I agree. This is my final option which I will definitely execute should the bank fail to meet my initial request. Fortunately my portfolio has an acceptable LVR so transferring to another FI shouldn't be an issue.

Yes the bank would have this power. Maybe the solution is to ask for a discharge of all your loans and then see what they say - move anyway.

ANd don't you ever cross coll again. I have seen people bankruptcy becaause of this and retirement plans out the window - because the client sold a house and could not get the proceeds to live on

 

[Colin Rice]

ANd don't you ever cross coll again. I have seen people bankruptcy becaause of this and retirement plans out the window - because the client sold a house and could not get the proceeds to live on

That is some heavy duty consequences for an incorrect loan structure.

 

[Terry_w]

That is some heavy duty consequences for an incorrect loan structure.

Yes, some severe consequences of cross coll when certain events happen.

the first person was actually a mortgage broker - one without a clue.. He crossed 2 properties sold one but the bank would not release the title unless he paid down the other house. Sale fell through.

The second was a SS member who stopped working and planned to gradually sell one property whenever he needed money. He had plenty of equity andd something like 10 properties so his idea was to sell one, get a few hundred thousand which he planned to park in the offset accounts on the other and slowly draw down to live on. Great strategy and he probably would only have needed to sell just one as rents would rise and it would take him years to use.

But they were all crossed. So the bank required him to use the whole proceeds from the sale to pay down other loans with them. This buggered up his retirement plans. As he was not working he coudn't refinance.

And this reminds me of another SS member's mum. She was in a similar boat. Heaps of equity, little income from rent and none from other sources. She was unable to get the pension because of the properties because of the assets test. Since not working she couldnt refinance to uncross. Her two solutions would have be to either get a job again and/or sell a property.

so don't cross.

 

[MTR]

(I'd see a doctor or a plumber. ... )

.

Thinking the same, sounds very nasty, almost as bad as my dog issues, well that's another story

 

[Peter_Tersteeg]

The best thing you can do is threaten to refinance everything. There's still a good chance that they'll refuse and you'll need to make good on that threat.

The problem with cross collateralising isn't that you might default and loose everything (I've never seen that happen). It's that you give the lender near absolute over your finances and get put in this type of situation.