NCCP Act 2009: Lenders not permitted to 'call in' loans unless borrower is in default
- Thread starter Shadow
- Start date
The link to the ASIC document is in my OP. Yes, it states the conditions under which a lender can take action. It would be strange if ASIC decided to omit certain conditions - can you think of any reason why they would omit some conditions from their document?
I enjoy the debate, and will drop it when I'm satisfied that I have the correct answer.
It would be silly to drop the debate while there is still something to be gained from it, but if you want to drop out now, that's fine.
They are just summarising the law.
Because they can't list every single clause from every single lender, it's just not practical. As Terryw says, it's a summary, not to the exclusion of all else.
What about a car?
BAnk lends you the money for a car worth $25,000
You go and buy the car and drive it out of the car yard and it is instantly worth a lot less.
I dont think the bank cares whether it is worth less then the loan amount, they would be more concerned whether you are capable of paying back the loan. Aren't they?
Similarly, the CBA document you refer to is a summary of their various T&Cs across various loan products. The document mentions that borrowers do have other rights under law that are not mentioned in the CBA document. If refers borrowers to ASIC and the NCCP.
And still nobody has provided an actual contract from any lender that includes a clause allowing the bank to take action in the event of property values falling.
Let me ask you a simple question hobo-jo... do you believe it would be 'unreasonably difficult' for a borrower to ensure house prices don't fall?
Exactly, as long as the bank is getting its repayments, that's normally all they care about. They aren't going to take action against a borrower who is keeping up with their repayments.
Will answer once you've addressed this which I asked on the last page. Equally as simple:
If the NCCP doesn't allow lenders to 'call in' loans (where they have defaulted in a way other than missing payments) then this should be easy to find and quote.
The NCCP says this (the link goes directly to the NCCP source)
I'm not a lawyer myself, but the legal organisation that I linked to before (along with ASIC) interpret the NCCP rules to mean that the lender can only take certain action in the event of the borrower defaulting by missing repayments.
Concentrate on the solution?
Interesting thread.
IMHO, I am aware of the cases that this has happened to commercial property (CP). So the question I pose, why wouldn't it be possible to be applied to residential property (RP) in turbulent times?
Do you trust the banks, the laws I would think favour them? Do you then trust the government (ASIC)?
A friend hadn't been paid Super by his employer so lodged a case with ASIC and won. Todate he has not seen the money? The morale of the story is that even if you win doesn't mean it will be followed through...
The next question I would pose, do we have control over banks, governments? I don't think so, they can change and modify any laws.
So what should we do, would be to beat them at their game. Have a contingency plan B if the situation arises, in other words I would concentrate my effort on solution rather than the problem if and when it happens?
What do you think?
Interesting thread.
IMHO, I am aware of the cases that this has happened to commercial property (CP). So the question I pose, why wouldn't it be possible to be applied to residential property (RP) in turbulent times?
Do you trust the banks, the laws I would think favour them? Do you then trust the government (ASIC)?
A friend hadn't been paid Super by his employer so lodged a case with ASIC and won. Todate he has not seen the money? The morale of the story is that even if you win doesn't mean it will be followed through...
The next question I would pose, do we have control over banks, governments? I don't think so, they can change and modify any laws.
So what should we do, would be to beat them at their game. Have a contingency plan B if the situation arises, in other words I would concentrate my effort on solution rather than the problem if and when it happens?
What do you think?
Don't think they do, think I had to sign a waiver for a recent loan, might have to check.
Anyway, I recently extracted 200k in LOCs based on old valuations done 18mths prior, though I know that in the current market all the properties values have probably fallen 5-10% or so.
Was lucky to get it through with old valuations, but was told by NAB that if valuations were done and they had fallen (potentially creating negative equity)... nothing would be done.
All part of playing the game with RIP investing.
The question we have to ask is WHY a bank would take such action against a borrower? If a borrower is making regular repayments, and has the means to continue to do so, what possible reason could the bank have for potentially destroying a paying customer's financial situation? Why on earth would they take a situation from which they are deriving steady profits and turn it into a situation where they would likely:
a) wreck the flow of repayments; and
b) reduce the value of the asset that they would then need to sell (potentially at a loss).
Makes no sense. Requesting a reduction in LVR would be far riskier than holding a loan secured by an asset where the LVR had increased a bit.
Add to this the substantial legal treatment of such a situation (not to mention the immense negative press they'd receive), and the whole idea seems nuts.
There may well be some very specific circumstances under which a bank would choose to call-in a loan or request a reduction in LVR, but for Joe and Jenny average paying down their home, or even an investment property or two, it just doesn't add up.
Not quite as simple as that. The issue is why did the LVR increase. If the LVR increased simply because house prices fell, then I believe the NCCP would rule any attempt at action by the bank as 'unjust' because a condition that house prices don't fall would be unreasonably difficult for a borrower to comply with.
In any case, I still haven't seen an actual mortgage contract that includes such a clause, so it may be a moot point.
What if a bank is going under and tries to survive by any means????? Isn't a bank like any business? Haven't we heard many times that cashflow can destroy your business....
There can be many reasons in tough times.....
I know of one person who mentioned this story to me:
Held $XX million in CP and about similar amount in RP. When GFC came, first they said he's ok, then they revalued CP and asked for a margin call of $3mill then revalued again and asked for $12million.... Note only of CP! I presume the business was making same profits (didn't disclos that) since he's in business todate.....
So if they have done it to CP what stops them to do it to RP in turbulent times?
So, did anyone come up with the solutions if they did it?
Can you actually cite the test case for this situation that proves the banks are not able to enforce a clause that defines 'default' that they have in the contract ? (as demonstrated on the non-regulated mortgages).
If not, then you are just offering conjecture on the outcome and nothing more.
Would banks do this ? No idea, but that is not the underlying question here.
Can they do this ? Certainly, for the right circumstances they can enforce what they have defined as a default as per the contract.
Can they win ? no-one knows... so Shadow, why presume to advise people that it can not ever happen ?
I dont disagree with this in general, as a basic Ma and pa home owner your risk is small............as a big investor it may be different.
for perspective though read here ..............I personally know a couple of people that went to the wall for no fault of their own.............yes I know its different.......
http://en.wikipedia.org/wiki/Savings_and_loan_crisis
ta
rolf
