Mortgage stress: your alternatives

Are tougher economic times squeezing your household budget? Know your options and rights if you're struggling to make mortgage repayments.
 
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  • Updated:3 Feb 2009
 

04.Financial counsellors plus case study

If you're in a difficult financial situation due to the interest rate rises it's a good idea to talk to a financial counsellor.

A counsellor can help you consider the options you have. For example, you may be able to take advantage of hardship provisions under the Consumer Credit Code (UCCC). The counsellor may also assist you in negotiating with your lenders. Contact details are below:

If you need to resolve a dispute with your lender, contact:

The Australian Competition and Consumer Commission publishes advice for those in mortgage stress. Go to ACCC factsheet for more information.

More information from CHOICE

Case study

David Tennant, Principal Solicitor with the Consumer Law Centre of the ACT, is at the front line of the battle against predatory lending. Most of his current clients have had problems with their mortgages and have either lost their homes or are facing repossession. Many of the problems arose after switching to a non-bank lender.

“Many of the clients I speak to have borrowed from non-banks. Often they’ve refinanced — once or several times — usually from mainstream to non-mainstream lenders. The problems might become obvious when they failed to pay their utility bills and other commitments like credit cards, and then they miss a mortgage repayment. Their whole financial situation is often so tenuous that one stumble and the whole household budget starts to unravel. Mostly this is the reality of too much borrowing, and not enough capacity to repay the loans. There isn’t an easy solution for that.”

David says clients frequently contact the centre when they’re already at crisis point and facing foreclosure. “If they’d contacted a financial counsellor earlier, there could have been better communications with the lender to ensure the borrower’s right to a hardship variation under any relevant industry code or the credit legislation was enforced.”

David says the response of some lenders to borrowers who are in default or clearly close to missing repayments is inadequate. He co-authored a 2007 report that found non-bank lenders, including non-mainstream and ‘predatory’ lenders, as well as larger more well known non-banks, and companies that are the trustees behind these lenders, are involved in a disproportionate number of the court actions to repossess borrowers’ homes (see Non-banks to blame?). He says the sources of funds for this type of lending are often larger, well known and apparently mainstream institutions.

“The ‘warehousing’ [wholesale] type non-bank lenders don’t have systems in place to deal with borrowers experiencing financial hardship,” David says. "They just don’t care. And because the UCCC isn’t strict enough on how lenders should treat borrowers in these circumstances, far too often they can get away with hopeless responses or by just ignoring the customers’ pleas for help altogether.”

 

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