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You've edited your post. Originally you agreed that was your position, now you are saying almost.
It all boils down to - is it unjust for a mortgagee to have a clause which would give then a right to take possession if the LVR increased.
Where are you getting the ASIC bit from? The post above the one I am quoting from doesn't say "only". It says a "lender can sell a property if". It doesn't say "a lender can only sell a property if".
Honestly Shadow,
I think it's time to drop this bone. It is now across two forums and the outcome certainly looks similar.
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?
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.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?
T. Do you have a link to an actual regulated mortgage contract, with a clause that allows the lender to take action just because house prices fall?
Whether or not you work is something you have control over, however I don't believe you have any ability to prevent house prices falling. Therefore I think it would be unjust to declare that someone has defaulted on a loan because they didn't prevent house prices from falling.
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?
Will answer once you've addressed this which I asked on the last page. Equally as simple: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?
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.Can you link and quote to where it says that in the NCCP rather than the secondary site that you used?
Hey Shadow!
Properties in a PIT or HDT structure don't come under NCCP right?
Thanks.
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.
http://www.comlaw.gov.au/Details/C2010C00248
(2) In determining whether a term of a particular credit contract, mortgage or guarantee is unjust in the circumstances relating to it at the time it was entered into or changed, the court is to have regard to the public interest and to all the circumstances of the case and may have regard to the following:
...
(e) whether or not any of the provisions of the contract, mortgage or guarantee impose conditions that are unreasonably difficult to comply with, or not reasonably necessary for the protection of the legitimate interests of a party to the contract, mortgage or guarantee;
They are just summarising the law.
Hi JIT... no idea. It covers investment property loans since 2010, but whether the HDTs are excluded from that, I wouldn't know.
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.
It all boils down to - is it unjust for a mortgagee to have a clause which would give then a right to take possession if the LVR increased.
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.
Almost. I certainly don't believe they can take repossession due to a drop in values. Also, I don't even think they have clauses in their contracts claiming they can do so. As to other justification for taking possession, ASIC identifies only 'payments fall into default' as being such a justification, which is also the conclusion of the law firm that I linked to previously.
Banks may declare all manner of events to constitute a 'default' but whether such clauses are enforceable by law is another matter. Consumers are very well protected in Australia, and banks are simply providers of credit. As such, they must obey the law. Regardless of how much power they believe they hold, they can't enforce a contract in an unlawful or unjust manner.
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.