WRAPS in Perth

Hi,

What you may have read was a "consumer alert" posted by the Western Austrlian government titled "It’s a wrap! Mortgage wrapping is illegal in WA", here's the link, http://www.docep.wa.gov.au/media/media/2004/April/Mortga.html.

Basically what the Government was "trying" to say is that it is illegal to offer vendor finance (in a business like manner) without a credit providers license.

Exactly the same thing as saying driving is illegal (if you don't have a drivers license).

Regards
Michael G
 
That makes sense and clarifies things Michael.

All the same, there are not too many individuals practising in Perth.
In fact some that I have met from NSW are also giving it away.
Concerns about negative equity for the wrapee one told me.
 
Hi kph

If we were to follow the reasoning of the people you've been speaking with then I guess most of the people in SE Australia who bought residential property in the last 2 to 3 years will all be walking away from their properties because of negative equity.

You know and I know this is not going to happen. Wraps or Installment Sales Contracts are normally written for between 20 to 30 years. Most people weather various cycles during the years they own their PPOR and so it is with people who buy their homes via vendor finance.

It just another way of financing the purchase of your home and if some people are moving out of the wrapping business because there's no longer a quick buck in it, all the better.

For the rest of us in the business for the long term, especially those of us in the Vendor Finance (Wraps) Association of Australia, we'll just keep on providing reputable finance options to those in the market that require our services.

Cheers, Paul
 
Thats a long bow to draw Lofty,
Was not suggesting anything along those lines so thats a whole lot of assumptions on your part.

I was relating a story of a wrapper who was giving me an example where their wrapee was facing zero or negative growth so the concern was that it wouild be difficult if not imposible for them to finance the wrapper out.

Regardless of the fact that the wrap contract may be written for 20 or 30 yrs you would know being an experienced wrapper ( now I'm assumeing you are.....) this is done to set the repayment rate at an affordable amount ( same way the bank works out your repayment rate on a 30 yr loan when in all likelyhood you will pay it out well within that term).
I am sure any sensible wrapper would not be expecting their wrapee to still be there in 30 yrs time ( unless you are planning to will the business to your kids !)
Of course there is a simple way around this problem, where you can still allow your buyer to finance you out with a main stream lender to the amount the lender will lend to the buyer, with the wrapper carrying back the balance.

Don't get me wrong, I am not against the process or criticising wrappers.
I was simply relating a story that a wrapper told me.
They are experienced and intelligent enough to know the ways around the problem.

And in Perth the opposite is occuring, where the wrapee is now up $100k in 12 months, so it cuts both ways..

kp
 
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