Disclaimer: The content from The Daily Reckoning Australia’s global cast of characters is their own view and opinion. It is not to be taken as investment advice.
Can you cancel your loan and keep your home?
Recently, a subscriber of Jim Rickards’ Strategic Intelligence Australia wrote in about the mortgage scandals he had been hearing about in the news.
To address that, I handed the reins over to my international contributor, Nick Hubble.
You see, Nick first started writing about fraudulent mortgages in Australia in 2012. Nick found that the more he dug, the bigger the problem was. As a result, he decided to do his thesis on the subject.
Nick’s goal was to show the dark underbelly of Australia’s mortgage industry.
Come 2015 and three different thesis supervisors later, it was suggested to Nick that he should ‘dump’ the subject. Because the idea that Australians had fraudulent loans was ridiculous. Surely our banks and brokers wouldn’t behave in such a manner?
What Nick learnt over those years of research showed a hideous push for profits over people. Loans that were altered by brokers to get an applicant ‘over the line’.
And banks’ complete disregard for people’s ability to pay back the loans.
That was three years ago.
In the wake of the banking royal commission, it turned out Nick was right. He was on the trail of this three years earlier.
Today, I’ll hand you over to Nick.
I’m sure his findings will shock you just as much as they shocked me.
We haven’t seen the end of this, either.
Can you cancel your loan and keep your home?
Nick Hubble, International Contributor
Australians are discovering that property wealth is fickle. At least compared to the debt you need to incur to access that wealth.
Property prices can fall. Loan balances don’t fall with them.
But today, I don’t want to talk about the political issue that is Australian house prices. We have something far more useful on the menu for you. You can judge the implications on house prices for yourself.
A class action lawsuit against Aussie property?
Let’s start with the news.
UBS analyst Jonathan Mott is worried about a class action lawsuit.
Australian borrowers could sue the banks and mortgage brokers that lent them too much money. It’d be ‘banking armageddon’ if the courts wipe off all that debt, according to the Australian.
It sounds unbelievable. Until you dig into the details. The Australian suggests that the lawyers have finally sniffed the opportunity and are on the case:
‘Speaking to The Australian, Maurice Blackburn financial services Principal Josh Mennen said his law firm had been inundated with borrowers looking to make a claim after being sold into an interest-only loan unaware, and were now facing steeper mortgage repayments at the end of the interest-only period.
‘He also said borrowers were seeking to make claims against banks that had low-balled their expense information when applying for loans, and against brokers who had supplied dodgy information to lenders.’
What sort of claim could borrowers who were manipulated into unaffordable mortgages make? They could cancel their loan and keep their home.
I wrote about this opportunity back in 2012.
In fact, back then, I informed my readers at The Daily Reckoning Australia about how they could take on the bank to cancel their mortgage and keep their home.
The great Aussie home loan swindle
Thanks to what I call the Khoshaba Precedent, greedy lenders have unwittingly given the opportunity of a lifetime to a group of Australians. And you might be among them.
You probably don’t believe me, and I don’t blame you. I didn’t believe it myself when I first figured it out. But consider this:
- Manfred Schmidt reduced his $450,000 loan to $0.
- The Di Benedettos reduced their $500,000 mortgage to $0.
- Jill and John O’Donnell, according to The Australian, ‘cut their [$500,000] mortgage by 75 per cent.’
These are just some of the examples I’ve found.
Although the authorities won’t release the exact number, there are other Australian battlers who have reduced their mortgages substantially.
And still, others who have reduced theirs to $0. Right now, Australians are going through the process that makes all this possible. One of them is a personal family friend.
There is an incredible scandal playing out in Australia’s mortgage industry. I’ll reveal how you could find out if you are part of this scandal where altered documents were created to set up a mortgage.
The Khoshaba Precedent
Albert and Rose Khoshaba decided to challenge the validity of their home loan in court.
Their claim was based on what seemed like nothing more than bureaucratic technicalities regarding an unimportant piece of internal bank paperwork.
But it was enough to get Chief Justice James Spigelman, of the Supreme Court of New South Wales Court of Appeal, to agree with them.
The final decision saw their loan reduced by almost $60,000, putting them back on track financially.
That’s how the Khoshaba Precedent was born.
The beauty of this precedent is that we now know the law can be in the borrower’s favour if certain circumstances are met.
Because the law is established, the bank’s hands are tied.
Many borrowers have the potential to cancel and reduce their loans in a much easier way than going to court.
It’s all got to do with that seemingly unimportant piece of bank paperwork and the scandal that’s blown up around it.
In a nutshell, here is what has been going on: Rather than submitting truthful loan applications for their clients, some lending industry professionals have been fudging the numbers.
They literally wrote in whatever they needed to in order to get loan applications approved.
And not just occasionally; it’s standard practice for some of them.
Often, this leads to disastrous results for borrowers while the unethical lenders rake in commissions.
Was your loan fudged?
Now, you may be thinking, ‘I’m pretty sure I didn’t take out one of these loans, so how does this affect me?’
Well, let me tell you: Low-doc and no-doc loans are just the tip of the iceberg. Many types of home loans may potentially have been affected by this scandal.
Through all my research on this subject, across all different types of mortgages, applicants’ income and assets have been grossly exaggerated in order to secure additional finance — for any number of purposes.
NOT exaggerated by the borrower, but by the lender.
And in a large number of the cases I’ve seen, fraudulent information has been added in by the lender after the borrower has signed the application form for the loan.
Granted, it’s laughable when you read stories like a 98-year-old lady being approved for a 30-year loan.
But there’s a much more serious side to this.
It’s predatory lending at its most shameful and disgusting.
At its core, this is about big financial institutions — some of them household names — taking advantage of ordinary Aussies, seducing them with the lure of fast, easy money, dropping them in the deep end and then leaving them to drown. All in the name of making a quick buck.
The good news is that borrowers have been fighting back — and winning.
Before you can do anything, though, you need to get your hands on your loan application form (LAF).
This form will indicate if your mortgage was based on fictitious details.
Here’s the process for getting your LAF, which works most of the time:
- Call your bank’s customer relations or services number.
- Ask for a hardcopy of your whole loan application form (it should be about 11 pages).
- Be prepared for the fact that the bank may refuse.
Hopefully, someone will agree to give it to you.
Some people find it easier to simply keep asking to speak to someone with more authority until they eventually get their LAF.
If you’ve discovered your loan application form does not represent your true financial situation, don’t stop paying your mortgage. You are not entitled to do this.
The next step, though, is up to you.
I cannot advise you on what to do. Anything you decide to do will be entirely at your own risk.
Make no mistake. This won’t be the last we hear of people taking legal action against the banks.
The true magnitude of this is only just beginning to surface.
Until next time,