NCCP Act 2009: Lenders not permitted to 'call in' loans unless borrower is in default
- Thread starter Shadow
- Start date
Granted these are commercial loans, however wouldn't be surprised to see banks act in the same manner for high risk residential borrowers in some situations:
http://m.dailytelegraph.com.au/news/banks-dastardly-act/story-e6freuy9-1226268653429
Other peoples opinion about me is irrelevant. I think you should know by now that I couldn't care less what other people say about me. You should also know that I like to get to the bottom of things. My questions here seem to be bothering you, as you keep evading the hard questions, and failing to provide any hard evidence to back up your claims, instead resorting to personal abuse, deliberate misspelling of my name, vain attempts at belittlement, calling me 'silly' etc. Your usual childishness. A bit like your efforts on APF, where more than 50% of your posts as 'Yossarian' have been unprovoked personal attacks on me.
Are you saying that every single clause in the CBA booklet is in every single CBA contract, and that no other clauses (apart from those in the booklet) exist in any CBA contract?
So show me an actual contract with those T&Cs in it. I have looked at various mortgage contracts and not seen those T&Cs included. Even if the T&C was included, I believe it would be there to cover events such as the borrower damaging the house or triggering a revaluation in some other way.
I don't believe the bank could use such a clause to revalue the house and declare a borrower had defaulted just because (through no fault of the borrower) house prices happened to fall.
I'm not a legal expert of course, but this just seems logical to me. I know that legally, a default is a failure to fulfill an obligation or duty.
Let me ask you the question that everyone keeps avoiding...
Do you believe it would be 'unreasonably difficult' for a borrower to fulfill an obligation to prevent house prices from falling?
Have you (or anyone else) ever dealt with a case where a bank took action against a borrower simply because house prices fell? If the answer is 'no', then you have just as much legislative experience in this area as me. Also, if the answer is 'no', it shows that even if that clause is in a contract, it has no teeth, as the lender has clearly never been able to enforce it in the manner being discussed here.
Any chance you could post an actual mortgage contract with a clause that allows the lender to take action simply because house prices fell?
If you don't have one, just say so...
That has already been established - we've covered it in great detail across 18 pages on APF. But that's not what we're discussing here. We know it's not going to happen. The question is whether lenders by law have the right to use a clause in that manner - i.e. are they legally permitted to take action against a borrower simply because through no fault of the borrower, house prices happened to fall. What they put in their T&Cs is one thing, but the question is whether they can legally enforce a clause in that manner. The fact that it has never been done (under a regulated mortgage) would suggest no, they can't enforce a clause in that manner, even it it exists.
This and the APF thread really are definitive of your issues Shad.
You've gone from vehementy stating a fall in value would not constitute a default on the loan to now, it would appear, accepting it does exist but that it can't be enforced.
So, before I move on, do you agree that lenders can and do impose contractual obligations on regulated residential borrowers that would require them to take remedial action in the event the security value drops to a level unaccaptabe to that lender?
I hope, but don't expect, a simple yes/no.
In case you're still unsure, here's some further assistance from the good people at ING (section 13.5 will help you out)
lol... aww terry, you are confusing the 'vibe' of the act with the actual words... Shadow does not work that way.
Because of this thread I spent a lot of time reading and re-reading my existing contracts and a new one I am about to sign but couldn't find anything.
Did either of them refer to secondary information which also governs the loan?
e.g. My old mortgage contract (5 years ago) doesn't have a clause like the ING or CBA T&C booklets, but does have a section I had to sign which said I have read and agreed with the terms and conditions booklet which accompanied the contract (no longer have the booklet to check for details)...
As far as I'm aware (perhaps Aaron or someone else can correct me if I'm wrong) even if the original contract and T&C booklet don't contain information pertaining to default in this manner (by not maintaining an appropriate LVR) I believe a bank can add additional clauses to their T&C provided the customer is advised of the change (e.g. via letter or provided with an updated copy of the T&C). This being the case many contracts which in the past didn't have such clauses could be amended through the lender updating their T&C, so these T&Cs from CBA/ING may apply to mortgages which didn't previously have such clauses.
amirite?
amirite?
I went through the consumer lending terms and conditions several times and the terms and conditions for the package I am using and found nothing remotely like what you keep making out is in existence.
More ad hominem attacks, and deliberate misspelling of my name. How typical of your style of 'debate'.
Incorrect. My argument was always about whether the lender can enforce such a clause. As mentioned previously, lenders can put whatever they want in a contract and call it a 'default', but these things they define as a default may not always be legally enforceable under the NCCP Act in the manner being discussed here.
So TF, I contacted Treasury directly and asked them the question. This is their official response...
Dear Mr xxxxxxxxx
Thank you for your inquiry.
We understand that some lenders will require the borrower to reduce their liability to a specified amount to reduce their risk exposure where property values fall. However, this is restricted to lines of credit or interest only loans where the principal is not required to be reduced until the end of the contract.
We are not aware of any normal ‘principal and interest’ home loans where the lender has the right to sell a property simply because property values fall. However, a provision of this type, if included, could infringe the unfair contracts terms legislation in the Australian Consumer Law.
We trust that this information is of assistance to you.
Consumer Credit Unit
Retail Investor Division
The Treasury, Langton Crescent, Parkes ACT 2600
Anyone who wishes to verify this response can contact Treasury themselves.
The email address I used was [email protected]
So... Token Funder... you were saying?
(BTW, I note that in your response you once again evaded all the questions I asked you, so I won't bother asking them again. Clearly you prefer to engage in general 'hand waving' about this topic, and you are too determined to score pedantic points than to actually get to the bottom of the issue.)
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From the local papers in Qld, there is going to be over 5 auctions like the 1k one over the next few weeks,i have been along before and watched
what happens and from the way i see if not many turn up on the morning then it's open slaughter,,I will let you know what happens..
Seems a matter of semantics, the way I understand it, the banks can't sell you home, just because of the negative equity, but can if you don't do something about it, ie stump up!, so basically they can act if you fall into negative equity.
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I saw the ING document. It wasn't actually a contract - so I didn't pay much attention to it past the first page where it describes itself as T&C 'booklet', and where it notes that... 'These Terms and Conditions do not contain all of the information that we are required to give you before you enter into the contract.'
Anyway, regardless of what clauses ING decide to put in their actual contract, the question is whether those clauses are enforceable in the manner being discussed here. The response from Treasury proves they would generally not enforceable in the manner being discussed...
'We are not aware of any normal ‘principal and interest’ home loans where the lender has the right to sell a property simply because property values fall. However, a provision of this type, if included, could infringe the unfair contracts terms legislation in the Australian Consumer Law.'
And if you say 'sorry no I can't stump up'... then what would they do?
Nothing - they have no ability to enforce the clause. They can't sell the property if you refuse to stump up.
Sure, they can ask you to stump up (they can 'ask' you to do anything), but they can't enforce it.
(and the ING doc wasn't a contract anyway)
Once again you are mis-interpreting things. Look at the bold bit in the quote from Treasury. ie "could infringe". It doesn't say "does", or "will".
It may infringe the NCCP. I don't know. But I do know that you are making things up again.
Also, what do you consider a contract to contain? It contains 'terms and conditions' (hopefully).
For me, it's not about being right or wrong, it's about getting to the truth.
Bears have often claimed that banks can just start calling in loans if house prices fall.
This thread has demonstrated that...
1. It is not legally possible on normal P&I residential home loans, including investment property loans (i.e. the vast majority of mortgages)
2. Nobody can provide an actual regulated mortgage contract that includes such T&Cs
3. There is no evidence of it ever happening, apart from anecdotes from the nineties (probably unregulated loans), or commercial property anecdotes
4. It would rarely be in the banks interest to do it anyway
I'm happy with this conclusion. Others are welcome to nitpick about pedantic points and declare that I was 'wrong' if they wish. However you should note that I did not at any time claim that it is never possible under any circumstances. This thread was triggered by the frequently stated bear belief that banks can just call in loans when house prices fall, a generic and now demonstrably false claim. If the bears wish to revise their claim to say that banks can technically call in a small minority of loans if house prices fall, then I'm fine with that.
My job is done - the bear myth that banks can just call in loans 'en masse' when house prices fall has been well and truly busted. Although there may be a small minority of loans where lenders are legally permitted to do this, there is no real evidence of it ever happening, nor would it be in their interest to do it.
I expect there will be some more pedantic nitpicking now, and declarations of my 'wrongness' from the usual suspects, but that's fine. I'm quite happy with my response from Treasury.
I would suggest the vast majority of investment property loans are infact interest only or lines of credit.
Also there is no way that all your nit picking in the thread on AFP is attempt to get to the truth, it was an attempt to prove yourself right until you realised you were wrong at which point your angle changed...
