How Is This Loan Possible?

Discussion in 'Loans & Mortgage Brokers' started by C-mac, 20th Jun, 2017.

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  1. C-mac

    C-mac Well-Known Member

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    So I read this article this morning and some alarm bells went off in my head:

    Chinese buyer who defaulted on Cate Blanchett's home takes out precarious loans on $8m home

    All this time over the past 2 years, APRA/ASIC have been slapping lenders with harsh rules ('because it is good for them - we want to avoid a US 2008-style collapse'...)

    So I'm wondering, how does such a horrible loan structure become allowed in this example? I don't believe our government should directly police individual lenders on loan products; but at the same time, how does such a buying/loan structure like this ever get green-lit? (Be it by the lenders, the government(s), or the individuals' legal council?

    The mind boggles. Something fishy is going on with this one... sounds like the buter is expecting some massive lump-sum windfall to come through in the next couple of months to pay out all these short term loans... hhmmm.... wonder where that windfall is gonna suddenly appear from? Hope APRA's forensic accountants are all over this purchase...
     
    C-mac, 20th Jun, 2017
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  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    It looks like the loans are through non-ADIs, probably private funders. They're outside APRA regulation. As long as they comply with ASIC (which isn't difficult), it's fine. It would appear that he's also in the category of 'sophisticated investor' where a lot of protections are waived.

    It's not a structure I'd be willing to take on though. Incredibly risky. Some of the other comments in the article do suggest that this person doesn't think the way most people would.
     
    Peter_Tersteeg, 20th Jun, 2017
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  3. big max

    big max Well-Known Member

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    Agree. And i would add, as a seller it should not concern you (provided you have sufficient deposit that can be forfeited on default).
     
    big max, 20th Jun, 2017
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  4. Zoolander

    Zoolander Well-Known Member

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    "The remaining mortgages of almost $1.2 million each are both at 18 per cent over the four-month term, extending to 54 per cent if mortgage repayments fall into arrears. "

    Definitely seems like a shady deal- the kind you end up washed up on a beach as a torso only if you fall into mortgage stress. Best of luck to him.
     
    Zoolander, 20th Jun, 2017
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  5. Hwangers

    Hwangers Well-Known Member

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    actually quite common arrangement in current P2P lending environment... especially if your father is a walking wallet, lets put it this way - when you have the capacity and will to buy a property for $19.8m - normal rules don't really apply

    funnily enough what you find are the parents who made their fortunes in the boom of the 90s tend to be extremely low-key and their children are the ones who flash the wealth and attract media attention
     
    Hwangers, 20th Jun, 2017
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    big max likes this.
  6. Ted Varrick

    Ted Varrick Well-Known Member

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    Ted Varrick, 21st Jun, 2017
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