Australia housing bubble

[hayseed]

Originally Posted by mr smith

Another risk people forget about is that if the value of the property falls lower than than the mortgage then the bank will want some cash. There will be nowhere to lend this from (other than friends or relos) and the bank will forclose the mortgage.

Provide the payments are up to date, I reckon you'd be right...
The last thing a bank wants to do is Write Money Off..

However, If you get behind......

[Trendseeker]

You’re right, hayseed. A mortgage is different to a margin loan. The bank will not demand extra cash if the value of a property falls below the loan amount. As long as the borrower is meeting their repayments there would be no issue.

[anobserver]

Originally Posted by Trendseeker

You’re right, hayseed. A mortgage is different to a margin loan. The bank will not demand extra cash if the value of a property falls below the loan amount. As long as the borrower is meeting their repayments there would be no issue.

Don't be too sure about that. Plenty of loan contracts will have that clause, but the lender may be unlikely to exercise it on residential property. Why not? Because the loans are full recourse, meaning if the borrower slips into negative equity, they can't walk away from the deal by posting the keys to the lender, aka 'jingle mail'.

So if a house in negative equity is sold for less than the amount owing, the borrower will go after the former owner for the difference. Many times the only option is bankruptcy. Ie extreme example -

https://australianpropertyforum.com/...-t-t17044.html

But to reiterate...the average suburban dweller just needs to communicate with the lender and stay current with their payment obligations. The major banks do not want to become mass landlords. Doing so would crystallize their losses by marking the debts to market, drive up their (already rising) funding costs and expose their Inherent insolvency. But that's another story.

[Trendseeker]

Originally Posted by anobserver

Don't be too sure about that. Plenty of loan contracts will have that clause, but the lender may be unlikely to exercise it on residential property.

Plenty of loan contracts? Perhaps the lenders should be referred to the Australian legislation that prohibits lenders from repossessing property unless the borrower is in default and the lender has issued a notice giving 30 days for the borrower to pay. There are a few conditions where they don’t have to give notice, such as the borrower gave false representations when applying for the loan.

http://www.lawright.org.au/_dbase_upl/Repossession.pdf

You may be confusing mortgages with secured margin loans on investments. The lender can ask for the borrower to stump up more money if the LVR on their securities falls below a certain threshold.

[Bossxr8]

Banks don’t want to be repossessing houses of paying customers. They are still making money off them.

Different story if they are falling behind in payments. But that would also apply if the house was worth much more than what is owed.

[Trendseeker]

Just to be clear, banks, or other lenders, cannot repossess and sell houses when the borrower is fulfilling their obligations by regularly repaying their loan. It is against the law set out in the Consumer Credit Protection Act (2009) and there are penalties for breaches.

Here is an extract:

Division 2—Enforcement of credit contracts, mortgages and guarantees
88 Requirements to be met before credit provider can enforce credit contract or mortgage against defaulting debtor or mortgagor
Enforcement of credit contract
(1) A credit provider must not begin enforcement proceedings against a debtor in relation to a credit contract unless:
(a) the debtor is in default under the credit contract; and
(b) the credit provider has given the debtor, and any guarantor, a default notice, complying with this section, allowing the debtor a period of at least 30 days from the date of the notice to remedy the default; and
(c) the default has not been remedied within that period; and
(d) if the credit contract is for a reverse mortgage, the credit provider has spoken to one of the following persons by telephone or in person in that period and has thus both confirmed that the debtor received the default notice and informed the person of the consequences of failure to remedy the default, or has made reasonable efforts to do so:
(i) the debtor;
(ii) a practising lawyer representing the debtor;
(iii) a person with a power of attorney relating to the debtor’s financial affairs.

You can read the whole act here:

https://www.legislation.gov.au/Details/C2018C00302

[MITCHAY]

I would bet that a lot of people are paying LMI but that only comes into play when you default anyway.

I just don't understand why you would even bother (if legal anyway) when someone is meeting their contractual obligations, it makes no sense.

Funny how it is, I was more worried about mortgages before I had one than when I actually got one

My LVR is less than 80% which means no LMI and a better rate so there is some risk I would be up for any shortfall should the worse happen.

Considering houses would have to plummet in value and I would have to default for that to be a issue, I'm not concerned about it much.

[anobserver]

Originally Posted by Trendseeker

Plenty of loan contracts? Perhaps the lenders should be referred to the Australian legislation that prohibits lenders from repossessing property unless the borrower is in default and the lender has issued a notice giving 30 days....

You may be confusing mortgages with secured margin loans on investments. The lender can ask for the borrower to stump up more money if the LVR on their securities falls below a certain threshold.

Perhaps things have changed since i signed people up. All i recall is that a borrower in negative equity needs to be very careful in managing their affairs, and give the bank no cause to exercise any of the more overlooked clauses in the loan contract.

[anobserver]

[/QUOTE]

Originally Posted by Bossxr8

Banks don’t want to be repossessing houses of paying customers. They are still making money off them.

Different story if they are falling behind in payments. But that would also apply if the house was worth much more than what is owed.

Agree. The lender would prefer not to crystallise a loss by taking possession of an asset and selling it for less than the amount owed. In large numbers it would also upset their capital ratios and require additional capital raising, which might be difficult in a credit crunch. No doubt the interest rate on such would be much higher than we might expect, especialy if the currency keeps falling.

Though i think you meant LESS than what is owed....?

[Syndrome]

Regardless of which side of the argument you support, it is clear by the significant increase in attention this subject is receiving that something big is brewing.

[DoreSlamR]

Originally Posted by Syndrome

Regardless of which side of the argument you support, it is clear by the significant increase in attention this subject is receiving that something big is brewing.

I jump on news.com.au a couple of times a day, just to see what’s going on, it’s mostly click bait rubbish, but there seems to be a doom and gloom story about the housing market every other day.

Often those stories are click bait too, but I just wonder how much influence this constant barrage of negative stories has on people.

[Trendseeker]

Originally Posted by anobserver

Perhaps things have changed since i signed people up. All i recall is that a borrower in negative equity needs to be very careful in managing their affairs, and give the bank no cause to exercise any of the more overlooked clauses in the loan contract.

Hopefully you weren’t signing people up after 2009.

[anobserver]

Originally Posted by Trendseeker

Hopefully you weren’t signing people up after 2009.

Nope.

[vztrt]

Originally Posted by DoreSlamR

I jump on news.com.au a couple of times a day, just to see what’s going on, it’s mostly click bait rubbish, but there seems to be a doom and gloom story about the housing market every other day.

Often those stories are click bait too, but I just wonder how much influence this constant barrage of negative stories has on people.

Same stuff was going on during the GFC. Did nothing really.

[.:4:.]

If the bank is a bit sus if your income can support the loan they will either deny it or do what they did to me and make me spend more for loan insurance. Loan insurance will scare enough people off but i had the funds available. 12g. Yeah on top of deposit and stamp duty that wasnt what i was wanting to spend, but hey, not complaining about not having a house. My old man does own a brokerage but that didnt get me any form of deal, thats illegal. Good advice was what got me over the line.

[hayseed]

Originally Posted by Trendseeker

Plenty of loan contracts? Perhaps the lenders should be referred to the Australian legislation that prohibits lenders from repossessing property unless the borrower is in default and the lender has issued a notice giving 30 days for the borrower to pay. .

It's called non monetary default There was a whole session concerning It recently in the Banking Royal commission currently underway.
It's a very common clause in nearly every Business Loan.

A Queensland farmer was actually given His farm back. After a fight of course..

https://www.smh.com.au/business/bank...26-p4zns8.html

[FPV8U]

Originally Posted by Cav

Politicians should stop fiddling let the market burn and it will eventually put its own fires out.

Hey I got an idea.

The family home is not included in the asset test for the old age pension.

For a married couple the threshold is a little under $400,000. After that there is a sliding scale of reduction until the pension is no longer available.

So why not include the value of the family home in the asset test?

This will mean that oldies living in a huge home worth $$$ would be forced to sell and move into something smaller, thus opening up the market with more supply of family type homes and therefore reduce prices.

If this seems a bit onerous, the asset limit could be varied or how about we introduce a sliding discount scale on the % $$$? The longer they are on the pension, the lower the discount % becomes.

Why should older people, who worked and paid taxes all their lives, who have lived in their family home for decades be forced to uproot and move or be blackmailed out of their pension?

[Trendseeker]

Originally Posted by hayseed

It's called non monetary default There was a whole session concerning It recently in the Banking Royal commission currently underway.
It's a very common clause in nearly every Business Loan.

A Queensland farmer was actually given His farm back. After a fight of course..

https://www.smh.com.au/business/bank...26-p4zns8.html

That was a business loan for a farm, which included his house. However, even in that situatuion, the outcome was that the bank had to hand back the farm.

We’re talking about mortgages on private dwellings and the statement further back in this thread that put forward a hypothetical situation where house prices may fall in the future and banks could reposses houses when the LVR falls. They cannot.

[danzvtil]

Originally Posted by FPV8U

Why should older people, who worked and paid taxes all their lives, who have lived in their family home for decades be forced to uproot and move or be blackmailed out of their pension?

And why should Shazza and bazza, who have been on Centrelink all their lives, who have no assets or interests get the most pension.
The pension should be the same for everyone and not means tested.

[MITCHAY]

Originally Posted by FPV8U

Why should older people, who worked and paid taxes all their lives, who have lived in their family home for decades be forced to uproot and move or be blackmailed out of their pension?

Agree entirely and it must be annoying when the goalposts shift around super and what not.

If you want people to downsize then offer an incentive to them by exempting them from stamp duty at the very least.

I'm sure plenty want to but stamp duty is BS that is quite a blocker for some people moving around. Not to mention all the other stuff that goes into moving around.

[DoreSlamR]

Settlement tomorrow.

Been a bit of a struggle, but I got there in the end.

[FTE217]

onya mate congrats.

[nuthin' fancy]

Originally Posted by Trendseeker

Plenty of loan contracts? Perhaps the lenders should be referred to the Australian legislation that prohibits lenders from repossessing property unless the borrower is in default and the lender has issued a notice giving 30 days for the borrower to pay. There are a few conditions where they don’t have to give notice, such as the borrower gave false representations when applying for the loan.

http://www.lawright.org.au/_dbase_upl/Repossession.pdf

You may be confusing mortgages with secured margin loans on investments. The lender can ask for the borrower to stump up more money if the LVR on their securities falls below a certain threshold.

There is a general clause about 'adverse material change'.

The death of the borrower is an event of default.

[Franco Cozzo]

Originally Posted by danzvtil

And why should Shazza and bazza, who have been on Centrelink all their lives, who have no assets or interests get the most pension.
The pension should be the same for everyone and not means tested.

Its a WELFARE payment, not 'you've paid taxes all your life so have free money on behalf other tax payers' system.

You get the pensions because you've got nothing to your name and its not like people live the life of luxury on it.

[MITCHAY]

Well my rates went up by 0.15 this week, after 0.08 in October so expect a letter in the mail I reckon. You'd think the banks might be shamed by the royal comission but it's business as usual

[Adamz Ghia]

Originally Posted by MITCHAY

Well my rates went up by 0.15 this week, after 0.08 in October so expect a letter in the mail I reckon. You'd think the banks might be shamed by the royal comission but it's business as usual

The banks are already starting to push back on some of the measures being implemented. At the end of the day they’re not there to be model citizens, they’re there to make money for their shareholders and themselves.

[MITCHAY]

Originally Posted by Adamz Ghia

The banks are already starting to push back on some of the measures being implemented. At the end of the day they’re not there to be model citizens, they’re there to make money for their shareholders and themselves.

Absolutely that's what is it is all about. They are **** ****s though

[Syndrome]

I wish dave289 was still on AFF to participate in this discussion.

[vztrt]

Originally Posted by MITCHAY

Well my rates went up by 0.15 this week, after 0.08 in October so expect a letter in the mail I reckon. You'd think the banks might be shamed by the royal comission but it's business as usual

Yet my credit union (whom I have my home loan with) hasn't raised rates in 3 yrs.

As opposed to when I was with the bank that slowly kept raising rates. Best move I made and easy enough.

[Bossxr8]

Originally Posted by MITCHAY

Well my rates went up by 0.15 this week, after 0.08 in October so expect a letter in the mail I reckon. You'd think the banks might be shamed by the royal comission but it's business as usual

Most economists are predicting a couple of rate cuts this year. The banks are most likely raising rates now, so that when the reserve bank cuts the rates later in the year and they follow suit, they can say what great people they are by cutting rates alongside the reserve bank. Although the actual rate will be the same that it was now.