Question for the brokers of the forum.

Discussion in 'Loans & Mortgage Brokers' started by Jane1, 15th Apr, 2021.

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  1. Jane1

    Jane1 New Member

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    Hypothetical question for brokers of the forum.

    Might a bank call in a residential loan if one of the co-borrowers goes to jail for an unrelated matter - for instance repeat drink driving - even if the other borrower keeps paying down the loan on time?
     
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  2. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    I'm not sure how they'd know?
     
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  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Cant see such a thing

    Spending time in the can isnt a breach of the loan agreement I expect

    ta
    rolf
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    If its not in default - no. You may need to read the full T & Cs of the loan contract.

    https://www.commbank.com.au/content...line/download-printed-forms/utc-home-loan.pdf = CBA example
    • Clause 9 "Default" which adopts a view in 9.3 that a default must be remedied. If that doesnt occur then yes they can sell the property to realise sufficient funds to discharge the arrears and debt. But if arrears are discharged first the default ends (but could impact a credit file) and the loan continues.
    • Clause 11.23 "Proscribed person:
    Drink driving is not a matter likely to ever attract the proscribed person rule. This appears to relate to espionage, terrorism, laundering etc

    That said there are some interesting example of when a loan may trigger a bank to act:
    • The law says you cannot assign or dispose of the property unless you have the Bank’s, or the court’s, permission.
    • You must also look after the property.
    • You may need to update the lender with details of your finances at anytime on request. When we reasonably consider it necessary to ask you, you must: (a) fully and truthfully tell us your current financial position; (b) provide us with the information and documents necessary to establish your identity and the identity of any person you authorise to operate on your Loan Account; and (c) provide us with any further information we may reasonably require about your business or your conduct of this Loan.
    • Clause 4 contains details you must provide when you request further credit
    • Clause 9 lists ways you may default
      • Overdue amounts you dont pay
      • Breach of contract ie dont pay, dont maintain property,
      • A claim is made by a third party to security over the property (eg unpaid rates, land tax or a court order)
      • False information was provided
      • You wilfuully damage the property. Note that unauthorised demoloition could invoke this rule
      • You dont insure the property for its replacement value
      • There is unsatisfactory value is the security
      • A crossed home or investment loan is in default, you provide false information for that loan or that other property is uninsured
      • A creditor commences action and includes the property
      • You become insolvent or someone seeks to make you insolvent
     
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  5. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Unlikely to be an issue if the crime is not related to the loan and the convict is able to maintain their financial commitments.

    I'm not aware of a conviction appearing on a credit report, but if a bank know of a certain past offences they might not be willing to lend that person in the future.

    The risk of this is easily mitigated by catching a cab.