Unprofessional Lender

[argentina]

I am going through an appalling situation with my current lender. We have a loan set up in 2010 which is for three investment properties. They are cross-collateralised (not the best, I know... but that's another story). 2 months ago I contacted my lender to advise we had a buyer for one of our properties. I advised

• Selling property at break-even point
• Living circumstances changed with my husband and I living apart
• We would need to look at raising LVR and asked what would be involved in altering LVR

Lender told me that in the first instance valuations needed to be done. And then if necessary an LVR variation. I pressed him for more details about the process but he wasn't interested.

I was not happy with the outcome of this conversation and decided to make contact with one of their brokers to help me navigate through the system. I filled him in on everything.

Some weeks later, whilst the valuations were being done I communicated with the Partial Discharge Department that again we would need LVR raised. I specifically asked what did we need to do to get the ball rolling, forms to fill in etc. I have an email from him saying "you might not need to worry about this. let's get the vals in first".

To cut a very long story short........as I predicted, an LVR variation is required or I have to come up with 21K which I don't have. In the latter stages of the process I was advised by lender's Variations Department that an LVR variation is actually an entirely new loan set-up, requiring serviceability checks and an application. Despite the fact that my husband and i are now back living in same house we do not meet serviceability. I find this unbelievable as

• We already are paying the loan without default
• We are actually selling a property and reducing our debt
• We earn more than we did in 2010 when loan was taken out

The process has been fraught with unprofessional behaviour including

• Lenders broker advising me that we did meet serviceability
• Broker telling me had liaised with the lender
• Lender telling me they had not received anything from the broker
• Lender finally getting information from the broker and telling me they did not understand it
• Lender telling me the loan was not serviceable
• Lender sending me an application form understating my husband's income by 20K
• Lender filling in the application as P/I rather than interest only
• Lender not answering my direct questions about the process
• Lender not letting me know early in the process what an LVR variation really meant in terms of paperwork and offering me an early serviceability check

We are now a month off of settlement on the sale of the property and i am waiting for the lenders assessors to look at it on a case-by-case basis. I started dialogue with them back in August ! And, then because I didn't trust what they were telling me (they were very vague) I went to one of their brokers to help me navigate through the process and was told that an LVR variation is exactly that (a variation to LVR NOT an entire new loan application whereby we have to prove we can service the loan again). The misinformation has been ongoing.

I have been told that before the assessors can look at the paperwork I need to provide originals of all supporting documents. I explained in an email that nowadays so much is done on computer that traditional "original" documents don't exist (ie payslips, e-tax returns, payment summaries). Even if I can get original tax returns from ATO, this will take up to 28 days ! So, could they please tell me what they consider to be "originals". Guess what..... I didn't get an answer. I have sent all my supporting paperwork off and I fully expect to be told on Monday that some of them are not considered originals.

The whole situation has become farcical. We are being treated as if we have done something wrong. All I have ever done is send copius emails and made telephone calls to disclose all the facts (as a responsible mortgagor should do). I don't understand why they did not tell me that serviceability requirements have changed since 2010 and recognise that what i was telling them needed to be dealt with sooner rather than later. I am so distressed and at a loss as to what to do next other than wait and hope.

 

[Weasil007]

I suspect the issue is the remaining properties are now worth less than when the original loans were taken out and the financier is now taking the view of utmost protection for themselves in the event of default or fire sale?

 

[alexlee]

[*]We already are paying the loan without default

Which doesn't have any bearing on a serviceability calc. A person could lose the job but have savings to keep making payments, but they would not be able to qualify for the loan if they re-applied today. Making payments in full and on time is a minimum obligation, not something to your credit.

[*]We are actually selling a property and reducing our debt

Reducing the absolute amount of debt, yes, but you might be decreasing the level of security the bank holds. The bank doesn't assess risk based on dollar amount of the loan outstanding, but the amount of security behind it.

[*]We earn more than we did in 2010 when loan was taken out

Serviceability calcs change all the time. The banks are pretty much allowed to assess you on whatever interest rate they want. 2 years is a long time ago. Banks will follow the current serviceability calcs.

 

[jrc77]

You mention "the banks broker" a number of times. Is this truly an independent mortgage broker who happens to have your bank on their panel? Or is it really someone else employed by the bank.

Jason

 

[Terry_w]

I don't imagine the bank's "broker" would be too keen on helping you as they are unlikely to make any commission on this.

Don't forget the golden rule - its the bank's money and you must play by their rules. It seems their staff don't really understand their policies, so I would suggest you contact the complaints section of that bank and they can apply pressure to the right people to get things moving.

 

[Qlds007]

Sorry to hear the issues you are having but as you mentioned this is one of the issues of cross collateralising your loans.

Have you considered in refinancing the other 2 loans and trying to get them settled on the same day as your sale goes thru. That way you wouldn't have to worry about your current lender / brokers unprofessionalism.

 

[Weasil007]

Don't forget the golden rule - its the bank's money and you must play by their rules. It seems their staff don't really understand their policies, so I would suggest you contact the complaints section of that bank and they can apply pressure to the right people to get things moving.

This may be relevant ?

http://www.watoday.com.au/business/borrowers-hit-brick-wall-on-refinancing-20121016-27ob3.html

 

[Rolf Latham]

They are cross-collateralised (not the best, I know... but that's another story). 2 months ago I contacted my lender to advise we had a buyer for one of our properties. I advised

My response is NOT to have a go aat you, but to make others aware, that specifically, the circumstance you are now in is most likely ONLY due to the cross coll.

One obvious option is to hop out and take it all to another lender in a hurry ?

As has already been pointed out by Terryw, you do need to go a to a complaints resolution process, NOT becaus you are looking to escape the circumstances of the cross coll, but the rubbish you are putting through on top of it,like original tax rtns etc

t
arolf

ta
rolf

 

[Aaron_C]

I'd try to get a real independent broker to get a refinance done to hopefully get you out of those lender and settle your properties when the sold one's money comes in.

 

[argentina]

I suspect the issue is the remaining properties are now worth less than when the original loans were taken out and the financier is now taking the view of utmost protection for themselves in the event of default or fire sale?

No, they are worth more. The LVR is being increased only by 6% and still remains under 80%

 

[argentina]

My response is NOT to have a go aat you, but to make others aware, that specifically, the circumstance you are now in is most likely ONLY due to the cross coll.

One obvious option is to hop out and take it all to another lender in a hurry ?

As has already been pointed out by Terryw, you do need to go a to a complaints resolution process, NOT becaus you are looking to escape the circumstances of the cross coll, but the rubbish you are putting through on top of it,like original tax rtns etc

t
arolf

ta
rolf

Thanks Rolf. I agree with your statements. Cross Coll has caused a problem. Unfortunately, if the issue of cross-coll and selling a property are not explained by the broker, the lender or the loan contract, then how is a person to even know that a problem exists. This forum is great for getting information but the professionals should be advising customers. Much the same as accountants advise on capital gains tax implications when their clients are purchasing investment property. I see it as a duty of care on behalf of the professional whom has been engaged to advise.

 

[Rolf Latham]

Thanks Rolf. I agree with your statements. Cross Coll has caused a problem. Unfortunately, if the issue of cross-coll and selling a property are not explained by the broker, the lender or the loan contract, then how is a person to even know that a problem exists. This forum is great for getting information but the professionals should be advising customers. Much the same as accountants advise on capital gains tax implications when their clients are purchasing investment property. I see it as a duty of care on behalf of the professional whom has been engaged to advise.

From a broker pov I agree with you, from a legal aspect, because neither the previous nor current lending and consumer protection laws cover this sort of thing in detail, I expect unless the written fact find you presented to the broker/lender states you are looking to sell a property AND you have a suspicion the vals may be so so or your income security may be so so, the loan structure will not be "unsuitable". Thereby

Is that bad, yep, but the legal and disclosure environment is not yet sophisticated enough to drill to this sort of detail and implications, current NCCP regs are more concerned about major obvious shortcomings like "obvious" conflicts of interest like a brokers / bankers incentive tickets to the football or a competition to win an I pad or the like.

Many will argue with me, but in the bottom line analysis, in 95 % of cases xcoll does represent a conflict of interest in the transaction in favour of the broker and/or the lender, because it alters the balance of power...........but this thread isn't the place to drag that out. You need and deserve a practical, sensible and emotionally balanced solution .

With the lvr below 80. I'd say you have an OK chance of getting this through with another lender, though the docs ie tax rtns aspect may be problematic if you are self employed.

I'd get onto the phone or email TODAY and chase some options.

If nothing else, at the very least, this will help you get the feeling of getting some control back, though it also means having to trust another person to properly advise you

Ta
rolf

 

[Peter_Tersteeg]

Unfortunately you can't enforce competence (or otherwise) through regulation.

There are also plenty of lenders and brokers who will happily tell you that cross-collateralisation is a good thing and works in your favour. There are experienced investors who are happy to say they couldn't get to where they are without cross-collateralisation (to which I might agree in part, but I've never seen a situation where cross-collateralisation gave a strategic advantage for the first 5 properties).

 

[argentina]

Unfortunately you can't enforce competence (or otherwise) through regulation.

Hi PT_Bear. I might have to disagree with that because competence comes under duty of care. Although I understand what you mean.... despite the duty of care that professionals have NOT all of them are truly competent. I work in the accounting field so take my duty of care very seriously.

For me, in this situation, I think there are two separate issues going on here.
1) General unprofessionalism, bad communication and lack of knowledge by the people I am dealing with in regard to finding resolution. I agree with others on this forum that I should search a broker elsewhere to help navigate me out of this. And I will raise a complaint with the lender through the appropriate channels.

2) The X Coll complication (when selling) was an unknown to me when the loan was set up. My loan contract does not even tell me what the LVR is. I have poured over all the documentation multiple times.
There are no clauses in the documentation to explain X coll
There was no explanation by the broker
There was no explanation by the lender and worse;
when i did actually tell the lender we were selling a property, imho, they had a duty of care at this time to explain the potential complications in the event LVR needed to be raised. Particularly as the had the "inside information" that lending criteria had altered in recent times. Our work history and income is stable.

I have a plan now on how I am going to proceed. Thanks everyone for your advice. it is much appreciated

 

[Terry_w]

Hi PT_Bear. I might have to disagree with that because competence comes under duty of care. Although I understand what you mean.... despite the duty of care that professionals have NOT all of them are truly competent. I work in the accounting field so take my duty of care very seriously.

For me, in this situation, I think there are two separate issues going on here.
1) General unprofessionalism, bad communication and lack of knowledge by the people I am dealing with in regard to finding resolution. I agree with others on this forum that I should search a broker elsewhere to help navigate me out of this. And I will raise a complaint with the lender through the appropriate channels.

2) The X Coll complication (when selling) was an unknown to me when the loan was set up. My loan contract does not even tell me what the LVR is. I have poured over all the documentation multiple times.
There are no clauses in the documentation to explain X coll
There was no explanation by the broker
There was no explanation by the lender and worse;
when i did actually tell the lender we were selling a property, imho, they had a duty of care at this time to explain the potential complications in the event LVR needed to be raised. Particularly as the had the "inside information" that lending criteria had altered in recent times. Our work history and income is stable.

I have a plan now on how I am going to proceed. Thanks everyone for your advice. it is much appreciated

I know of no specific category of duty of care regarding a lender or broker explaining cross collateralisation to a purchaser. It is not like that of a doctor and a patient/lawyer and client where there is legal precedent that establishes a duty of care.

The loan documentation would surely provide that the mortgage is secured by the security properties and it would be common sense that to sell a property would result in discharging the mortgage. To discharge a mortgage you would have to pay out the loan or introduce new security.

 

[Marty McDonald]

This is the classic you dont know you have a problem until you have a problem. X-coll. They have the gold and in return you provide security. If you want to change their position by deleting a security then your position has to be re-evaluated. See the power that gives them?

Be thankful that it's not like commercial where they ask for updated financials every year or whenever they feel like it and your loan is at call if some bofin somewhere deep in the banks credit department doesn't like the look of them. We are lucky this doesn't happen in residential lending!

Others have pointed out now is the time to correct your set up by taking the two remaining securities to a new lender (and making sure they are uncrossed). Don't even bother staying with current lender once a file gets messed up like this my experience tells me you will only suffer more pain. Cut and run!

 

[alexlee]

I might have to disagree with that because competence comes under duty of care. Although I understand what you mean.... despite the duty of care that professionals have NOT all of them are truly competent. I work in the accounting field so take my duty of care very seriously.

I thought duty of care is associated with the idea of negligence, not necessarily competency. For an accountant whose clients all just have a group cert and a few shares, are they negligent if they don't advise on SMSFs, for example? The reasonable person and 'ought to have known' concepts are a little blurry here.

In any case, whether you take the bank or broker to court for negligence doesn't help you with the loan. Talking to an independent broker might.