AFCA Submission on Inappropriate Lending after Mortgage stress
Background
Our clients, a married couple with two children, were approached with a proposal to purchase an investment property in a regional Australian town. The couple owned and lived in their family home, with a mortgage, at the time.
After electing to proceed with the proposal, additional loans were arranged and provided to the couple in order to finance the purchase of the investment property. Shortly after its purchase, the couple’s investment property suffered a significant decline in value, and the loan amount quickly became higher than the realisable market value of the property. The property was also failing to generate anywhere near its forecasted rental income.
With their additional loan facilities in place, the couple’s repayment obligations increased significantly, which the couple immediately struggled to meet. Following years of hardship under this unsuitable arrangement, the couple were left with limited options, and decided to sell their family home in order to pay off its mortgage and minimise their ongoing loan repayments.
By the time SR Group met the couple, they were living in rental accommodation with their children, while continuing to pay down the sizeable loan on their investment property. The couple had lodged a complaint against their lending bank with the Australian Financial Complaints Authority (AFCA), however the bank had indicated that it considers that it had acted appropriately and that the couple had no viable claim.
Actions Taken
SR Group conducted an analysis of our client’s financial position at the time they were approved for new loans to finance the purchase of the investment property. SR Group determined that the decision to approve and provide the loan facility for the investment property was unsuitable and inappropriate, as it created monthly repayment obligations that were greater than the borrowers could sustainably afford to pay.
SR Group then prepared a submission to the Australian Financial Complaints Authority (AFCA), highlighting the inappropriateness of the lending decision and seeking compensation for our clients. Representing our clients at mediation and throughout an extended negotiation, we prepared a number of further submissions, which ultimately were successful and led to our clients receiving a settlement pay out from the bank.
Outcome Achieved
Under the settlement, our clients received a six-figure pay out, as well as a moratorium on interest on the outstanding loan funds until its finalisation.
Following the settlement, our clients were able to sell their investment property and pay down the entire remaining loan balance and be debt free, with a small pool of surplus funds available for use towards a new family home.
Call SR Group on 02 8304 9300 or email us via info@srgroup.com.au to see how we can assist you.
Our clients, a married couple with two children, were approached with a proposal to purchase an investment property in a regional Australian town. The couple owned and lived in their family home, with a mortgage, at the time.
After electing to proceed with the proposal, additional loans were arranged and provided to the couple in order to finance the purchase of the investment property. Shortly after its purchase, the couple’s investment property suffered a significant decline in value, and the loan amount quickly became higher than the realisable market value of the property. The property was also failing to generate anywhere near its forecasted rental income.
With their additional loan facilities in place, the couple’s repayment obligations increased significantly, which the couple immediately struggled to meet. Following years of hardship under this unsuitable arrangement, the couple were left with limited options, and decided to sell their family home in order to pay off its mortgage and minimise their ongoing loan repayments.
By the time SR Group met the couple, they were living in rental accommodation with their children, while continuing to pay down the sizeable loan on their investment property. The couple had lodged a complaint against their lending bank with the Australian Financial Complaints Authority (AFCA), however the bank had indicated that it considers that it had acted appropriately and that the couple had no viable claim.
Actions Taken
SR Group conducted an analysis of our client’s financial position at the time they were approved for new loans to finance the purchase of the investment property. SR Group determined that the decision to approve and provide the loan facility for the investment property was unsuitable and inappropriate, as it created monthly repayment obligations that were greater than the borrowers could sustainably afford to pay.
SR Group then prepared a submission to the Australian Financial Complaints Authority (AFCA), highlighting the inappropriateness of the lending decision and seeking compensation for our clients. Representing our clients at mediation and throughout an extended negotiation, we prepared a number of further submissions, which ultimately were successful and led to our clients receiving a settlement pay out from the bank.
Outcome Achieved
Under the settlement, our clients received a six-figure pay out, as well as a moratorium on interest on the outstanding loan funds until its finalisation.
Following the settlement, our clients were able to sell their investment property and pay down the entire remaining loan balance and be debt free, with a small pool of surplus funds available for use towards a new family home.
Call SR Group on 02 8304 9300 or email us via info@srgroup.com.au to see how we can assist you.