Lender wants me to make deed variation.

[NormH]

Hi and HELP.

I have a HDT from Mr C BATTEN and so I am sure many of you are familiar with the deed. I have just hit a possible snag with a loan I am trying to get, the story is this.

HDT owns freehold a property valued at $160,000 and it wishes to raise some money, $70,000 + a bit for costs.

I am going to borrow that money and purchase "special units in the HDT" and the HDT is going to offer the unit as security. Nothing unusual in that so far.

The documents are with Assured Homeloans and the HDT will be the guarantor of the loan which is in my name, so the directors of the trustee company will sign the loan docs as well. All is OK until I got a phone call from their legal people saying that I need to add a variation to the trust deed, that variation is to, in the event of a default, an attorney will take control, this is needed to ensure that the person lending the money can sell the property to access their funds which are in default.

I have never come across this before, I am not going to alter the deed to allow any attorney to have control of the trust in the event of a default, even if the appointer could sack them immediately anyway.

So for the money guys/lawyers on this forum, is this common practice?? I would think not, will I need to just say go away and start the loan process again, I have paid about $1200 in fees so far and don't really want to.

cheers and thanks for you advise.

Norman

 

[Rolf Schaefer]

Norman,
I have never heard of this before.

We have done in excess of 150 loans for HDTs with various lenders and mortgage insurers.

I would talk to the lender/mortgage manager and get this condition waived or move your business elsewhere. It is usually not the mortgage insurer that asks for silly things like that. Most of the time the lender/mortgage manager does not understand the HDT trust deed and needs some extra education.

 

[Les]

G'day Norm,

First off, let me say I usually leave all of this stuff to Dale as I don't know enough about it. BUT...

this is needed to ensure that the person lending the money can sell the property to access their funds which are in default.

All I can say is that (from your earlier numbers) this "potential default" on a loan that is LESS THAN 50% LVR seems pretty laughable to me!!! I reckon they'd probably include this if you only wanted a $10k loan too.

i.e. NOTHING to do with the amount owing, but more to do with the fact that the Borrower is One entity, and the COLLATERAL is held by another.

There ARE other lenders out there who are not so paranoid. I don't know this lender that you quoted - maybe they will stay "unknown" because of their actions too. (Just my opinion )

In short, there are other lenders who will not treat your situation in such a heavy-handed way. I reckon you should be seeking them out, and leave this group to do their business in an area more comfortable to them.

Regards,

"One of the great un-washed" who really cannot advise you one way or another This is purely an opinion. How's THAT for a disclaimer ???

 

[tubs]

It depends on what constitutes 'a default' because you dont want to miss one payment and find there's some lawyer in your place measuring up for new curtains...

I would assume that banks hold the security over the property being mortgaged anyway, and can take steps to recover defaults if necessary, so I dont really see the point.

 

[NormH]

Thanks for the replies folks, it now appears that the lender has withdrawn the offer as "they don't do those loans" so I am looking elsewhere, might even have to go back to Westpac, at least I will get the .7 discount from them. Rolf I'll email you to see what you can do? for me, I know you are in Melbourne and I am in Adelaide but if you can better the Westpac offer then that would be cool.

cheers

Norman