Loans Being Called In ?

From: Paddy in the Paddies

A question about lenders,

How much notice does a lender need to give when calling in a loan ?

My father is constantly feeding me fearful reports about the big 4 banks calling in mortgages without notice, i.e. w/o time to refinance. He claims this is becoming more prevalent and is done sometimes without just cause. Citing such cases as a fellow who lost a 1.2 million property due to a $20 problem.

I mean we know the banks are demonic by nature. Some people wouldn't piss on them if they were burning. However we need to deal with them. What exactly can we do to us if it takes their fancy ?

Apart from the ever increasing fees and decreasing service, I haven't had any bad dealings so far. What lies ahead ?

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Reply: 1
From: Mike .

Hi Patosan,

According to the Consumer Credit Code, you have at least 30 days after receiving a notice to rectify the default. I've attached a document which goes into more depth. Hope you find it useful.

Regards, Mike
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Reply: 1.1
From: Waverly Bay

Patosan - - notice to "call in" a loan instrument will vary between lenders. The particular clause in the loan instrument giving the bank this right... is usually widely drafted and basically provides the bank with an unfettered right to call in a loan instrument - ie there is no restriction on when a bank can call in a loan; they could call in even if there is NO default.

If you have a Line of Credit ("LOC") with a bank... have a good read of the terms of conditions. I came across one with ANZ recently which states that ANZ can terminate the LOC facility on 7 days notice. It is an unfettered right which they can exercise for any reason. With 30 days notice they can change the amount,frequency etc of charges and the amount to be repaid.

What happens in practice could well be a different story - and in this regard, i would be interested to hear from mortgage brokers or investors who have had their loans "called in". Presumably, if a borrower never defaults, maintains a good LVR, in stable employment... there would be little reason for a bank to "call in a loan" - but never say... "never" !


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Reply: 1.1.1
From: Rolf Latham

Hi all

There is also an important distinction between PPOR and Investment Loans.

Investment Loans are NOT regulated by the consumer credit code, even though most lenders voluntarily treat them the same, some definitely do NOT.


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From: Michael Yardney

Banks are basically money shops and only make money by lending money.
Why would a a bank call in your loan? It's not in their interest - they would only have to find someone else to lend the money to.
In my experience they only call in their loans if you are constantly in default or if your loan to value ratios drop below their comfort levels - that is your property must fall considerably in value.
Banks don't just go calling in loans for something to do. In the early 90's when property prices dropped and interest rates soaredd, banks gave many owners of commercial and industrial properties a hard time, but for most residential property owners, they extended the terms of the loans rather increased monthly payments
Michael Yardney
Metropole Properties
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