Reading an article by Bill Zheng today; it suggested that a loan could be recalled by a lender during bad times. I've never heard of this before. How & why would this happen? Would it only happen to a owner if they had defaulted one too many times of making repayments, & thus the lender decides to recall the loan? Any other reasons why the lender would do it? Does "recalling the loan" mean you have to refinance through another lender or pay out the loan by selling up - is this the same as a lender foreclosing on the property?
How/Why would a loan be recalled by a lender during bad times?
- Thread starter CairnsInvestor
- Start date
I believe that this is more for margin loans rather than homloans. We have LOC set up against our properties at the height of the boom (when value peaked and we could get a high val) and these properties have dropped 15-20% in value and we havent had to reduce our LOC amount.
I hope this helps.
Have a great day!
I hope this helps.
Have a great day!
If a lender ran into trouble, ie could not raise funds to pay obligations (eg depositors wanting funds or unable to refinance their borrowings) then they may be forced to recall loans. This would be a serious situation and would be the last call. The system is based on confidence, which would take a huge hit if this eventuated.
The RBA offers a level of support to the major banks but the other mortgage providers are more susceptible. Look at the rams scenario. Westpac basically bailed out the business as it was having difficulty rolling over its loans and if the worst eventuated, well the whole industry would look shaky.
Its common in commercial mortgages to have conditions such as loan review after 3 yrs and the lender reserving the right to recall if circumstances change. They would be expected to give a period where you attempt to refinance with another lender, but again if this situation arises the general industry would most likely be hesitant.
Didn' this happen to a Chanel 7 sports commentator in the 90's? From memory the properties were revalued lower and he had to put up more collateral which he couldn't do.
If the banks think they have too much exposure to you - then they might recall your loans or get you to reduce the LVR, which you may be able to refinance else where or have to sell the property.
If you spread your finance around for different properties, this is less likely to happen. I don't know what the tipping point is though.
If you spread your finance around for different properties, this is less likely to happen. I don't know what the tipping point is though.
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