Pittwater Life June 2023 Issue

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Business Life: Law with Jennifer Harris Business Life Managing mortgage stress: Communicate with lenders Following the global financial crisis in 2009 and 2020-21 COVID lockdowns, it was said that business had “returned to normal”, but its ramifications had not. All over the peninsula it was becoming quite common to see and hear of businesses closing – and mortgage stress rising. The Governor of the Reserve Bank Dr Philip Lowe seemingly reassured the market that interest rates, then at record lows, would remain stable and virtually unaltered through until 2024. Then early last year he reversed his observations and began increasing interest rates every month for 11 months, with one small pause before it started again. While it is still unusual to see property repossessions and mortgagee sales, there are an increasing number of mortgage ‘delinquencies’. With cost-of-living increases, people are experiencing substantial financial hardship. If you have a home loan – ie, a loan covered by one of the industry codes of practice – you should be able to have recourse to sections of the code which cover financial hardship and how the lender should respond to a request for a repayment arrangement, if sought. However, is your problem one of urgency? If you have defaulted in making payments to the lender, quite possibly. If you have received a default notice which gives you 28-30 days to repay the areas, then yes. If you have received a statement of claim or summons from the court seeking possession of your property in payment of your loan – yes. In all these circumstances you should seek advice immediately. In fact, if you have circumstances – a say illness, or unemployment which may cause you to miss a payment – it is wise to notify the lender before you default. If you call the lender you should ask to be transferred to the financial hardship team. You need to tell the lender you are in financial hardship and in these circumstances what you can afford to pay per month, and how long you can afford to make reduced repayments. If the period of lesser payments is uncertain, ask for between three to eight months. You may seek a variation of the term of the loan if you can’t afford new repayments. If legal action has been commenced request default fees and interest cease while your request is under consideration by the lender and ask that you not be listed on the credit reference listing. Banks operate a comprehensive credit report which notes a positive reflection and a negative 50 JUNE 2023 The Local Voice Since 1991
eflection and usually is reviewed monthly. Whatever you do keep a note of your conversations and agreement if any with the lender and confirm the conversations in writing with the lender. You may find dealing with the matter quite difficult, particularly if the lender rejects your offer of repayment. If this is the case, you may find it more efficient to seek External Dispute Resolution (EDR). EDR is a service for resolving disputes between consumers and credit providers (including mortgage managers and finance brokers). Under EDR, lenders are held to account under their industry code of practice and the National Credit Code. Enforcement action is put on hold and negotiations should take place. This service has been found to be particularly effective in cases of real financial hardship. External Dispute Resolution (EDR) is free and can be accessed via the Financial Ombudsman Service at 1300 78 08 08 and fos.org.au; or Credit Ombudsman Service 1800 138 422 and cosl.com.au Other helpful areas are Money Smart, which is the Australian Securities and Investments Commission’s website on money matters. It contains helpful and practical information and videos for people who are struggling to pay their mortgages. www. moneysmart.gov.au Finally, there is the Consumer Credit Legal Centre (NSW) 1800 808 488 and cclcnsw.org.au This is far from an exhaustive list of matters; there are many more issues to consider and to which you must attend. It is not an option in this country to offer to vacate the premises and give the lender the keys. You are responsible for repaying the lender, even after the property has been repossessed and sold. Any shortfall from the sale of the property is your responsibility. What is required is that you seek help early and try to resolve the problems ahead. Seek legal advice if you need help on any of these issues. Comment supplied by Jennifer Harris, of Jennifer Harris & Associates, Solicitors, 4/57 Avalon Parade, Avalon Beach. T: 9973 2011. F: 9918 3290. E: jennifer@jenniferharris.com.au W: www.jenniferharris.com.au Business Life The Local Voice Since 1991 JUNE 2023 51
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