The Timaru Herald

Family fails to offer hardship proof

- Rob Stock

A family may lose their home to a mortgagee sale after failing to provide evidence to their lender that they were in financial hardship.

During the economic downturn caused by the pandemic, many borrowers reduced or stopped repayments on bank home loans.

But one family failed to give their lender evidence as to why they couldn’t afford repayments, despite having a combined income of $8700 a month, said Susan Taylor, chief executive of Financial Services Complaints Limited (FSCL).

That prompted their lender to send them a Property Law Act notice foreshadow­ing mortgagee sale during the national lockdown in May last year. They complained to FSCL, which is one of four authorised financial services disputes schemes, alongside the Banking Ombudsman, the

Insurance and Financial Services Ombudsman, and Fairway Resolution.

They told Taylor the lender had unreasonab­ly declined their hardship applicatio­n. But Taylor said the borrowers had failed to explain why they could not afford loan repayments of $4000 a month despite having a monthly income of $8700, and nonmortgag­e expenses of $3100.

The couple bought the property with one of their fathers, but, soon after drawing down the loan, they missed a loan payment, Taylor said.

There had been a change in circumstan­ces. The father had lost hours at work, and the woman had unexpected medical costs. The couple contacted their lender, who agreed to restructur­e the loan, but the buyers only made four of the next eight loan payments. The lender contacted them.

The couple said they could not afford the payments, and asked for hardship relief, Taylor said.

After checking their circumstan­ces, the lender said they should be able to afford to repay the loan, but agreed to reduce the payments to $2000 a month for six months.

But, Taylor said: ‘‘When the six months were up, the $4000-permonth loan payments continued to be dishonoure­d, and the family again submitted a hardship applicatio­n. However, the hardship applicatio­n showed they should be able to afford the payments. The lender was not prepared to reduce the payments again, and started mortgagee sale action.’’

The family made a fresh hardship applicatio­n, but was declined, Taylor said. After investigat­ing the complaint, Taylor found the lender had behaved reasonably. FSCL asked the borrowers for bank statements and supporting informatio­n, but the informatio­n was not forthcomin­g.

The family agreed to sell the home, but did not take steps to do so.

 ?? STUFF ?? There’s nothing more awful for homeowners than a mortgagee sale. Inset: Susan Taylor, chief executive of Financial Services Complaints Limited.
STUFF There’s nothing more awful for homeowners than a mortgagee sale. Inset: Susan Taylor, chief executive of Financial Services Complaints Limited.

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