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MFAA Prosper : Mortgage and Finance Brief 07
Dealing with hardship Mortgage brokers can have a role to play in helping clients who run into tough financial circumstances; from taking precautions at the outset of a loan to helping restructure loans down the track. Words Fran Molloy Australia has been one of the more fortunate of OECD countries, riding out the now-notorious global financial crisis of 2007-10 relatively lightly. Despite this, an increasing number of Australians are experiencing mortgage stress, with a recent report from Fitch Ratings agency estimating that 1% of bor rowers were a month or more behind in their mortgage payments in the 12 months to September, 2010. And a 2009 report prepared for the Australian Workers' Union (AWU) fou nd that 8% of workers sur veyed had difficulty meeting at least one mortgage payment. Unemployment, under- employment and over- commitment by individual bor rowers were the main reasons bor rowers failed to make mortgage payments, according to the Fitch report's authors. Hardship provisions are now enshrined in Australia's credit code, with the National Consu mer Credit Protection legislation and responsible lending obligations in force from 1 July 2010, and all brokers are now expected to do their part in recommending a product that is not unsuitable for their clients, to avoid them falling into mortgage stress. What was previously an ethical responsibility has become a legal requirement: the new regulations require that brokers make reasonable enquiries and take reasonable steps to verify their client's financial situation before recommending a suitable loan product. Maintaining an ongoing relationship with existing clients is important, and that includes being available to provide advice for a client who has fallen on tough times. "We think that it's the proper thing for a mortgage broker to get involved if a client finds themselves in hardship," says Phil Naylor, MFAACEO. 1% of bor rowers were a month or more behind in their mortgage payments in the 12 months to September 2010 Mortgage & Finance brief | 31 Indepth
Mortgage and Finance Brief 06
Mortgage and Finance Brief 08