The situation has never arisen, so no broker would have experienced a situation where a lender claims a borrower is in default, and then takes action against that borrower, simply because general house prices fell. Having said that, I am interested in their views, especially if one of them could back it up with a link to relevant loan clauses, and offer some good reasons as to why those clauses might override laws established by the NCCP Act and ASIC.
NCCP Act 2009: Lenders not permitted to 'call in' loans unless borrower is in default
- Thread starter Shadow
- Start date
The situation has never arisen, so no broker would have experienced a situation where a lender claims a borrower is in default, and then takes action against that borrower, simply because general house prices fell. Having said that, I am interested in their views, especially if one of them could back it up with a link to relevant loan clauses, and offer some good reasons as to why those clauses might override laws established by the NCCP Act and ASIC.
Yes your correct, sorry.
it is cl 88 of schedule 1, not section 88 where I was looking.
You might also want to look at the state legislation governing mortgages.
In NSW:
The Real property Act
http://corrigan.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/
The Coneyancing Act
http://corrigan.austlii.edu.au/au/legis/nsw/consol_act/ca1919141/
i have never actually heard of a bank calling in a resi loan but i know CBA did insert those clauses during the GFC.
An interesting thing happened to me a few years ago that tends to support Shadows thoughts.
A nice bank accidently lent me $400+k by mistake taking my LVR to around 115-120% on that property.
They realised the mistake 18 months later and came a calling, i replied that I had signed their contract that they prepared and had honoured my part and expected them to do the same.
They were less than keen on that and said they would speak to their legal team and i would hear from them which I never did which was lucky as I had spent the cash on deposits for 6 more ip's.
Its suggests their legal team told them to suck it as they did not have a legal leg to stand on as long as i made my repayments and meet all conditions of the contract which i did.
An interesting thing happened to me a few years ago that tends to support Shadows thoughts.
A nice bank accidently lent me $400+k by mistake taking my LVR to around 115-120% on that property.
They realised the mistake 18 months later and came a calling, i replied that I had signed their contract that they prepared and had honoured my part and expected them to do the same.
They were less than keen on that and said they would speak to their legal team and i would hear from them which I never did which was lucky as I had spent the cash on deposits for 6 more ip's.
Its suggests their legal team told them to suck it as they did not have a legal leg to stand on as long as i made my repayments and meet all conditions of the contract which i did.
As I've already pointed out, the NCCP section that you quoted doesn't conflict with the CBA clause I already found (not that you'd admit it, go back and read it again and then read my response relating to how you mixed up the terminology). The ASIC document is an information sheet and hardly specific enough to be relied on.
You've got nothing Shadow (which conflicts with the CBA clause already provided).
What about a quick summary of what it says Terry?
I've got official documents from ASIC and the 2009 NCCP Act.
You've got a CBA mortgage information booklet, which may or may not even relate to regulated loans, and which doesn't even say that CBA can claim a borrower is in default, and take action against that borrower, simply because general house prices fell.
Let me know when you find a link to any regulated loan contract with a clause that actually allows a lender to claim a borrower is in default, and take action against that borrower, simply because general house prices fell.
Bigtone...did you have mortgages over other prop's with the same lender at the same time (and with equity)?
Also do you think it is possible that the bank officer who found out about the mistake swept it under the carpet?
Also do you think it is possible that the bank officer who found out about the mistake swept it under the carpet?
I can't understand it sorry.
Take this as an example from the RPA
http://corrigan.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/s58.html
I think that is just one sentance, but I am unable to read it all in one hit, so cannot be sure.
I think it says the mortgagee can sell the land mortgaged and, the subsection 3, allows the proceeds to be used to pay the debt owed to the mortgagee.
This power arises under s52(2) on the event of default
http://corrigan.austlii.edu.au/au/legis/nsw/consol_act/rpa1900178/s57.html
Which basically eans you if breach a condition of your mortgage agreement the mortgagee can exercise the power of sale.
cl 88 of Schedule 1 of the NCCP lists some requirements which must be met before a credit contract can be enforced. These requirements include period of default, service of notices, etc.
No other mortgages with that lender .
Given the loans on the property were over 1.5m and low doc and it was the mortgage insurer who picked up the mistake I am pretty sure they would have done whatever possible to get dollars back. Mortgage insurer told them the insurance was invalid and as lvr well over 100% they had to put loans on the balance sheet so it cost them plenty so I am positive they would have enforced any law if they could have.
Lower end banking staff are so useless it is scary, I know of many many many loans that still exist where the security has long been sold.
Crikey.
You're overcomplicating this.
- A Bank can take possession/require full or partial repayment if loan is in default.
- Whether a loan is in default is determined by reference to the contract.
- Terms and Conditions (T's and Cs in the trade) form part of the contract.
- These conditions vary by institution and by product.
- They can relate to just about anything but can include ongoing requirements around the condition of the property, use of property, value of property or anything else (within reason) that is in the contract.
Also, it goes without saying that if the insititution enters into the contract as a result of fraud/misrepresentation on behalf of the borrower, you can call it in.
Been there.
Done that.
Well put Token
Overcomplicated yeah !
I think I said that in one line
, however yours is much more specific and has correct spelling.Def of default is whenever the lender deems u are in default under your agreement ........case closed
I have to laugh when I see the outcome of some indefensible actions in court of some borrowers trying to stave off the obvious. Its no wonder that lenders want a borrower to get independent legal,medical, and psych advice
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Do you believe banks, using a regulated mortgage contract, can declare that a borrower has defaulted, and then repossess or force the sale of the property, simply because median house prices happened to fall?
the point of the thread really is what actually happens.
TF have u ever called in a resi loan with the only reason being that the value of the property had dropped from market forces? I have never seen it but ur experience would be more hands on.
Having seen the length of time, and hoops the bank had to jump thru, to repossess a house that WAS actually IN default (not mine - long story) I would seriously doubt they would bother, as long as the mortgage was paid ... even IF they had a legal right to.
And if the average house value has dropped significantly enough to warrant such action - how many mortgages on their books would they have to reposses? A move which, in itself, would trigger further falls.
And if the average house value has dropped significantly enough to warrant such action - how many mortgages on their books would they have to reposses? A move which, in itself, would trigger further falls.
In terms of relying the contract, only on LOCs. Not called in but reduced credit limits (allowable under ours and most Ts and Cs) by a lot, including to $0.
Have called in/required borrower to tip in funds on term loans as a result of becoming aware of LVR issues but did so leveraging other terms of the contract.
