Deferred payments coming back to bite.

Discussion in 'Loans & Mortgage Brokers' started by Codie, 1st Jan, 2021.

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  1. Codie

    Codie Well-Known Member

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    I thought I’d share some of the honest issues that have come from taking a deferred loan payment holiday this year. Which I now regret, however it’s now done. Lesson learned.

    We took 6 months with Rams, which has now reverted back to normal payments. However, I’m now told that we are technically “in arrears” for another 6 months until we prove we can continue with our normal repayment cycle. As this is classed as an “arrear” we cannot Fix, consolidate, apply for more credit anywhere, even re-finance our loans.

    I’ve been told once the 6 months is proven, they will be adding back the 6 months of P&I deferred payments in whole back onto the loan total.. Yes even the principal amount that hasn’t been paid.

    I’ve argued multiple times, that yes of course I owe interest and that can be added. But adding a principal portion on to the loan total that I haven’t paid makes no sense to me, I haven’t borrowed more money? Why would they add 6 months worth of principal to a loan?

    across 5 loans this amounts to nearly $20k of principal (on top of interest) that wasn’t there before.

    I’m waiting to see what happens before I take it further but is there something I’m missing??

    Goodness knows what my credit file says at this point, I was told this would have no effect due to Covid and it would be understood, however it doesn’t appear that this is the case. Very much looks like a black mark, at least for the next 6 months.
     
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  2. Trainee

    Trainee Well-Known Member

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    What do your RAMS statements look like? For the last 6 months, have the only charges been interest, which has been added to the loan balance? Have there been no transactions? Or there have been the normal P&I charges and some sort of 'deferred payment' that looks as if you have been making repayments?
     
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  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    what was the starting balance and the interest rate?
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

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    It was a repayment 'holiday', so principal hasn't changed but interest on the principal and interest has still been charged on what should have been paid.

    It's not double dipping but reflecting the additional interest on the amounts unpaid (effectively a default but you've been protected from any default action).
     
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  5. Beano

    Beano Well-Known Member

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    I would say the black mark will last a lot longer than six months.
    Not having the capacity to weather contingencies would probably mean the borrower runs his business too tight ...a slight puff of wind and he falls over.
    Can you double up your principal payment for the next two or three years to prove to the bank you are a conservative borrower ?
     
  6. skater

    skater Well-Known Member

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    I tend to agree. But the kicker is that this wasn't communicated at the start, what the consequences would be in the future. There's going to be a lot of people hurting over this.
     
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  7. Trainee

    Trainee Well-Known Member

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    Does refinancing with another lender get around this?
     
  8. skater

    skater Well-Known Member

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    Sadly, he may not get refinance with this happening. Hope to be proved wrong though.
     
  9. Beano

    Beano Well-Known Member

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    You are right ...I do not believe it was thought through properly.
    I had several tenants apply also for discounts and deferral.
    I now look at them differently ...tenants that run too close to the wind.
    I like tenants that operate conservatively and can always pay the rent.
     
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  10. Codie

    Codie Well-Known Member

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    I’m happy to show a screenshot, interest has been added to the loan balance normally, even charging $15 a month in arrear fee’s (I didn’t pick up on this) I’m told the principal portion will be added to the loan after the 6 month period.

    I could be wrong but it seems RAMS are doing things completely different to how other lenders like CBA, Westpac etc when it came to this “repayment holiday”

    @Beano i agree this may hurt us for a lot longer. Whilst not the end of the world as we don’t intend on borrowing for another 18 months and will be in a much more solid financial situation. At the end of the day, at allowed us to keep the portfolio of properties and not have to sell any shares.
     

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  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    we have refinanced a few who took the repayment holiday and started repaying again.
     
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  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It shouldn't be arrears if it was done with consent of the mortgagee/lender
     
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  13. Codie

    Codie Well-Known Member

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    Not for at least another 6 months (not the end of the world)

    Don’t plan to borrow for another 18 months at least. And am soley focusing on building a share portfolio but just thought I’d share the experience
     
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  14. Codie

    Codie Well-Known Member

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    That’s my thoughts, I spent hours on the phone going through finances and everything being agreed upon with a special “Covid response”credit team. Seems rams are a lot different to how other lenders have operated this. They are actually calling it hardship.
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    perhaps make a written complaint to RAMS and tell them you will be going to the AFCA if not resolved.
     
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  16. Shazz@

    Shazz@ Well-Known Member

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    I think that if someone had a genuine need for repayment holiday, refinancing etc wouldn’t be a priority. They would probably be happy they were able to keep the asset during these tough times. Focus would likely be to catch up on repayments.
    On the other hand, I remember many people talking about taking the repayment holiday to fund other projects (e.g shares). This is not what this was designed for, so those people may get stung. I even thought about it.. but something in my head told me that if it sounds too good to be true... then it probably is.

    But do agree with you, conditions were not very clear.
     
  17. db9

    db9 Well-Known Member

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    Thanks for the info @Codie. I would push back strongly on the lender for this as I don’t think this looks like a repayment holiday at all. Interesting reading a lot of negativity here about taking a repayment holiday, but regardless of connotations for ones financial well-being I don’t think that means to accept what the bank is doing here.
     
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  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Pls pull your credit file

    ta
    rolf
     
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  19. ff3

    ff3 Well-Known Member

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    Sounds like RAMS are treating you like a standard restructured client whereby the payment behaviour for the next six months is monitored. APRA have made it clear to the lenders that COVID payment deferral clients should not be treated as such.
     
  20. San2018

    San2018 Well-Known Member

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    Same here. I took payment holiday with Macquarie earlier last year and now ANZ approved my refinance application. I had decent balance in my offset account, not sure if it helped to say I was not in financial stress.
     
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