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Two people who lost their $ 150,000 deposit when their home was sold in a mortgage sale received a life-changing settlement payment of more than $ 155,000 from their lender.
The couple bought a home for $ 550,000 in 2017, with a deposit of $ 150,000.
But they had problems when one was fired.
They refinanced the loan as an interest-only mortgage with a non-bank lender who charged them $ 3,000 a month in payments.
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The man got another job, but was later fired again and his pay was defaulted on July 1, 2018.
They were told to make the pending payment, as well as to pay a penalty interest of nearly $ 2,000 and a predetermined fee. Then they also defaulted on their August 1 payment.
In late August, they were issued an Intellectual Property Law notice to pay $ 450,000, including the full loan amount plus interest and fees.
The lender warned that it would sell your property in a mortgagee sale if the amount was not paid.
He then sold the property for $ 500,000 and the pair kept $ 10,000.
They complained to Financial Services Complaints (FSCL), a third-party dispute resolution service, saying that the house had been sold for too low a price.
The lender, who has not been identified, disagreed, saying he used a respected real estate company and sold the home at auction with more than one bidder.
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The owners originally lost almost all of their deposit.
FSCL investigated and found that there were no obvious flaws in the sales process.
“We note that properties sold by mortgage sale almost inevitably underperform than if they were sold in a willing seller / buyer situation.
“However, we did notice significant flaws in the PLA notice. The law says that a lender can only sue on a PLA notice for the amounts that are actually outstanding (the payments the borrower had defaulted, plus the associated default interest / fees). “
He said owners should only have been asked to pay the default amount of $ 4,400, not $ 450,000.
The penalty interest had also been incorrectly calculated.
“The lender demanded almost $ 2000 in penalty interest, when he was only entitled to demand about $ 20. Nor was he entitled to demand a predetermined rate, which means that, without their knowledge, [the borrowers] They caught up with their July 17 payment. It appeared that the lender had incorrectly treated the loan as a business loan when making the demand for payment, rather than a consumer credit agreement. “
FSCL recommended that the lender reimburse the required interest and fees of approximately $ 21,000.
The lender was invited to make an agreement proposal to the borrowers.
Jin Cowan / Waikato Times
Susan Taylor: There may be more complaints about the way lenders treat distressed borrowers.
“The lender took a principled approach to our suggestion. Without admitting liability, the lender made a payment to Lee and Brian of about $ 155,000. For Lee and Brian, this effectively put them back in the position they were in three years earlier, when they had $ 150,000 saved for a deposit. This was a life-changing result. “
The case was one of hundreds investigated during FSCL’s last financial year.
The scheme has issued its latest annual report, showing a 36 percent increase in complaints in the year through June 30.
The plan received 2,654 inquiries and 768 complaints. That is the largest number ever received.
FSCL said that complaints against insurers remain the largest proportion of cases investigated at 25 percent. The second largest category was complaints against lenders at 29 percent.
Travel insurance was the most demanded product, with 27% of complaints.
Executive Director Susan Taylor said the rate of travel insurance complaints had risen significantly in the last six months of the year as Covid-19 triggered the cancellation of plans.
“Some travel insurance policies have a blanket exclusion for losses resulting from a pandemic, but other insurers rely on ‘government intervention’ exclusions to deny claims,” Taylor said.
Consumer credit complaints accounted for 22 percent of the workload. There were more complaints about home loans and travel cards during the year, but fewer complaints about trading platforms, credit cards, and KiwiSaver.
“We urge lenders to ensure that the borrower understands the agreement they are entering into and that any insurance product is suitable for the needs of that particular borrower,” Taylor said.
He said there had been a small increase in the number of consumer complaints related to severe financial hardship due to job losses. Some felt that their lender was not giving them enough relief.
“We hope to see more of these complaints as the various government financial aid packages wind up in the coming months.”
