Loan Tip: Outgoing Lenders Deliberately Delaying Refinances

When a person refinances their loan from one lender to another the mortgage must be discharged with the outgoing lender - the one they are moving away from. This means a 'mortgage discharge' form needs to be signed and submitted to the outgoing lender.

In the old days faxes went missing and forms were never received and this allowed the outgoing lender to delay the settlement.

These days it seems forms still go missing even though they are emailed in. But recently we have had one where the client's signature on the discharge form apparently did not match the signature on the banks records. The client had to go into a branch to show ID and prove it was them to submit the discharge form.

Another, actually the same lender, wanted the spouse to sign the discharge form too, but she was not on title and could not have given a mortgage, but she was a borrower.

In both cases it was the day of the proposed settlement that this happened.

Another non bank lender - but under a company owned by the same bank above, they have developed their own special discharge form which is not available online. The client must ring them up to get the form sent to them. This allows the lender a last attempt at discouraging them from leaving by making further offers of discounts etc.

These tactics appear to be
a) delaying tactics to allow the outgoing banks to get more interest, and
b) making it hard to leave discourages people from leaving, and
c) it is a form of punishment for leaving

When refinancing where funds are needed for settlement of another proeprty, I suggest you get in early, send the discharge form even before your new loan is approved.
If there are any delaying tactics ring the lender's complaints section, and threaten reporting them to the AFCA Home - Australian Financial Complaints Authority (AFCA)

I should add one way around this is to use a 'fast refi' type process where the new loan settles without the discharge of the old mortgage. A few lenders offer this, and the first thing the old lender knows about it is the repayment of the loan by the new lender, then the discharge of mortgage.

 

We've got this at the moment. Emailed form, got reference number, and now no sign of anything.

Relodged and told 20 business days to action.

 

It wasn't a bank whose name starts with 'n' was it?

 

Dragon and their Victorian arm.

 

We are refinancing away from Macquarie. I called yesterday to get a discharge form and was told they do this over the phone now to speed things up. I was told to call 2 days before settlement. Can a broker confirm that this is correct? My broker was surprised

 

I haven't experienced this personally - if they can do it over the phone, I'd ask them to do so while you're actually on the phone with them rather than waiting until 2 days before settlement.

That's a recipe for big delays if it's wrong info!

 

This one told me it takes up to 15 business day

 

I'm over 2 months now and still waiting

 

I had that problem with a subsidiary of the N bank. Settlement was delayed about three weeks IIRC.

 

I doubt a bank would ever engage in such unconscionable behaviour...........

Its friday!

 

Yes that is their excuse which is true to an extent.

 

Just to confirm I called Macquarie this morning and we did the discharge over the phone - took about 10 minutes.

 

There is a case where the topic of damages came up for a delay in discharging a mortgage

Nadrak Pty Ltd v Permanent Custodians (1994) 6 BPR 13,344, It was said there was no breach of contract, in this situation, and no grounds for negligence as there was no duty of care for a mortgagee over a mortgagor.

 

There should be a ban against the restriction of Discharge Form availability.

 

This is still happening but is much better than it used to be

 

The latest trip lenders are playing is requiring wet signatures on discharge forms. The client has to print it out sign, scan in and then email it.
More punishment for leaving.

 

There is currently a push to have a maximum limit of 10 days to discharge a mortgage

Associations applaud move to examine home loan price inquiry

 

We've had problems where even a client who hasn't given a mortgage has had to sign the mortgage discharge as they were a borrower. (such as a spouse on title). It could be required for a variety of reasons but it just delays the payment of the loan.