How to Avoid Paying Back a Low Doc Loan (in part)

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 14th Jan, 2017.

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  1. Terry_w

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

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    I have never really looked at the Financial Ombudsman Service determinations before and stumbled on an interesting one tonight.


    Case number: 412175
    In this matter the applicant borrowed money from a lender under a low doc facility. After a few years he could fell behind in repayments and complained to the FOS that the lender should never have lent him the money because he could never have afforded the loan.

    He supplied tax returns to the FOS and the FOS went back and checked the serivceability calculations of the lender at that point in time in which the loan was applied for using the applicants real income.

    The FOS then make orders that
    • the FSP is to reduce the LOC balance as at 31 May 2016 from $434,885.48 to $308,176.46(Reduced LOC Balance)
    • as from 1 April 2016 the FSP is to restructure the Reduced LOC Balance by providing two separate facilities to the Applicant, being:
    • a home loan for $105,105 upon which it is entitled to charge its standard variable interest rate and
    • a line of credit facility for$203,071.46 upon which it is to charge only half of its standard Low Doc line of credit interest rate (Restructured Facilities)
    • the Applicant otherwise remains liable to repay the debts on the Restructured Facilities pursuant to their contractual terms

    Read the determination at:

    https://forms.fos.org.au/DapWeb/CaseFiles/FOSSIC/412175.pdf
     
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  2. albanga

    albanga Well-Known Member

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    Sounds like a riveting Saturday night @Terry_w ;).

    I shouldn't make fun, I was asleep on the couch by 10.
     
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  3. Ethan Timor

    Ethan Timor Well-Known Member

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    Interesting case! Seems like first FOS took the side of the lender because they didn't know the financials of the applicant at the time.

    Once the applicant provided his financials, it was clear that he should have failed the original loan and the 3 increase (which he spent on stuff :oops:) so the decision has been overruled.

    Lender is paying for the 'good old irresponsible lending' days :confused:
     
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  4. dabbler

    dabbler Well-Known Member

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    I would not suggest trying it & it is these people who cause things to be harder for everyone else.

    Lo Doc was a very useful thing.
     
  5. Terry_w

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

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  6. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Had a client who has a brain injury and heath issues and low income. Was issued a card by a bank that he couldnt afford. No income assessment. Lender had to write off the debt after a FOS submission
     
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