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Mortgage stress handbook

7. What can I do if the lender says "no" to a repayment arrangement?

This chapter covers:
  • If the lender says “no” to your proposed repayment arrangement or does not respond
  • The lender said “yes” to your original proposal but you still need more time
  • You agreed to a repayment arrangement you could not afford and are now missing payments again
  1. If the lender says “no” to your proposed repayment arrangement or does not respond
You have two options, if the lender says no or doesn’t respond:
  • Continue to try and negotiate with your lender (only do this if the lender is NOT proceeding with any legal action)
  • Lodge a dispute with a dispute resolution scheme
You must lodge a dispute with the dispute resolution scheme before the lender obtains a court judgment. So if you think that may happen soon you should immediately lodge a dispute in a dispute resolution scheme.

If you have filed a defence in court you can still lodge a dispute with a dispute resolution scheme as long as you have not taken a (significant) step beyond filing the defence.

All lenders have a process in place to cover when a person gets behind on their home loan. The main problem you will face is trying to stop that process. It is very common for lenders to commence legal proceedings while you are trying to make a repayment arrangement. You cannot afford to ignore the enforcement steps the lender is taking. See Chapter 3 for the enforcement process.

  1. The lender said “yes” to your original proposal but you still need more time

It is definitely worth trying to make another repayment arrangement. Lenders are often very large organisations where it can take some time to find someone who is reasonable and has the authority to agree to your proposed repayment arrangement. Be persistent.

Most large lenders have a hardship team. Find them. Try calling the dispute resolution contact for the lender. You can find those details by going online to (or calling) the relevant dispute resolution scheme. See Chapter 14 for contact details.

Make sure you are making regular repayments of an amount you can afford so the lender can see you are trying to pay the mortgage and can keep to regular repayments.

  1. You agreed to a repayment arrangement you could not afford and are now missing payments again

Lenders often ask you to make repayments that are more than you can afford. If you felt pressured into making a repayment arrangement you could not afford you need to go back to the lender and say this. Tell the lender the original repayment arrangement was unsuitable and it needs to be changed.

What if my lender is not a member of a dispute resolution scheme?

If your lender stopped making loans before 1 July 2010, they are not required to be a member of a dispute resolution scheme. If this applies to your situation, you will need to make an application to the Court if your lender does not agree to a repayment arrangement. There are forms for this purpose in Chapter 13 but it is recommended that you get legal advice if possible before lodging an application with the Court. If your loan is over a certain amount you may not be able to go to court. Always check whether your lender is a member of a dispute resolution scheme before taking this step.

Lodging a dispute in a dispute resolution scheme

There are three parts to this process:
  1. Lodging your dispute
  2. Conciliation/settlement negotiations
  3. Determination

Lodging your dispute

You can lodge by either:
  1. Filling in an online application form at www.fos.org.au or www.cosl.com.au
  2. Printing out an application form from www.fos.org.au or www.cosl.com.au and faxing it or mailing it to the relevant dispute resolution scheme
  3. Calling the dispute resolution scheme and asking them to send you a form to complete
  4. If you have a disability or you will have difficulty completing the application ask the dispute resolution scheme to complete the application over the phone
  5. If you need an interpreter, the scheme will organise a telephone interpreter for you for free

A sample of the main information required to apply to a dispute resolution scheme

If you are having problems completing the form either contact the dispute resolution scheme or get advice.

The application form requires you to outline your complaint/dispute and what result you want. You can choose one of the following options to complete those sections of the form. If your situation is not covered below, get advice.

Dispute/complaint details

Delete the options that are not applicable:

  1. I applied for a hardship arrangement with (name of the lender) and an arrangement was made for (number of months) months. That arrangement was inappropriate for my financial hardship and I want a more appropriate arrangement.
  2. I applied to (name of lender) for a variation of my home loan on grounds of hardship on      /      /      . A copy of that letter is attached.
  3. I applied to (name of lender) for a variation of my home loan on grounds of hardship by telephone on      /      /      (and      /      /      ) . Give details of conversation(s).
  4. I received a Statement of Claim or Summons on      /      /      , a copy of which is attached. I am applying urgently to (name of lender) for a variation of my home loan on the grounds of hardship and a copy of a letter to be sent to (name of lender) is attached.
  5. I received a Statement of Claim or Summons on      /      /      , a copy of which is attached. I contacted (name of lender) on      /      /      to request a repayment arrangement because I am in financial hardship.
Delete the options that are not applicable:
  1. I received a reply from the (name of lender) on      /      /      , rejecting the application, a copy of which is attached.
    OR
  2. I have not yet received a reply from (name of lender).

Fair and reasonable resolution of the dispute requested

I request the following resolution of my dispute:

Delete the options that are not applicable:

  1. A change in repayments:
    1. repayments reduced to $  per fortnight. The change is requested for (number of months) months. After that time, I/we will return to making the normal scheduled repayments. The term of the loan is extended and the arrears are added to the loan. OR
    2. repayments reduced to nil. The change is requested for 3 months. After that time, if I am still unwell/unemployed, I seek a review of the arrangement to consider whether it needs to be extended. The term of the loan is extended and the arrears are added to the loan. OR
    3. repayments reduced to $  per fortnight. The change is requested for 6 months to give me time to exchange an unconditional sale contract for the sale of my/our home.
  2. A refund of any default fees and interest charged since the date I reasonably made a hardship notice.
  3. No default listing on my credit report.

Conciliation conferences

Once you have lodged a dispute with a dispute resolution scheme you may be asked to:
  • complete a statement of financial position
  • attend a telephone conciliation conference with your lender

Statement of Financial Position
If you need help completing the financial statement of position get help from a financial counsellor. (see Chapter 6 for information on completing a financial statement).

Remember Remember

The dispute resolution scheme will look at the statement of financial position when conciliating (and eventually determining) your financial hardship dispute. So it is important that the statement of financial position is accurate. If you are having trouble working out your living expenses then make a note of this on the form.

Telephone conciliation conference
A conciliation conference is simply a conversation between you, your lender and an independent person from the dispute resolution scheme. The person from the dispute resolution scheme will talk to both parties to understand the issues. A telephone conciliation conference is an opportunity for you and the lender to negotiate a repayment arrangement.

You must attend the telephone conciliation conference. Do not agree to a time for the conference that you may not be able to attend. If something happens and you cannot attend a telephone conciliation conference, ring the dispute resolution scheme as soon as possible and reschedule the conference.

Information on the telephone conciliation conference can be obtained at www.fos.org.au or www.cosl.com.au

Some guidelines to remember when you are at the conciliation conference:

  1. Get advice before the conciliation conference to discuss what a realistic outcome from the settlement should be.
  2. Remain calm. Try not to take anything personally; just concentrate on getting an arrangement that suits you.
  3. You do not have to come to an agreement at the conference. If you do not agree, the dispute resolution scheme still has the power to determine your financial hardship dispute.
  4. Do NOT agree to an arrangement that is:
    1. Not affordable
    2. Requires the payment of a lump sum you are not sure you can get
    3. Is not long enough or the lender won’t agree to review it after an initial period, if needed
    4. Requires you to agree to a court judgment
    5. Does not cover what will happen at the end of the agreed period of lower repayments/no repayments
    6. Is just generally unsuitable
  5. Make sure your settlement is a workable arrangement. See below for a checklist to use.

Settlement checklist

This checklist is a guide to what your agreed repayment arrangement should cover.

  • An agreed repayment arrangement. Some examples are:
    • Repayments of $ per fortnight/month for 6 months with the term of the loan extended and the arrears added to the loan. After 6 months return to the normal scheduled repayments.
    • Return to making the normal scheduled loan repayments of $ per fortnight/month on (date) with the term of the loan extended and the arrears added to the loan.
    • Make no repayments for 4 months and then return to making the normal scheduled loan repayments with the term of the loan extended and the arrears added to the loan.
    • Make reduced repayments or no repayments for 5 months, then make higher repayments with the arrears added to the loan with the loan term remaining unchanged.
    • Make reduced repayments of $ per fortnight until the loan is repaid. The term of the loan is extended. (Only for small home loans and the repayments must repay the loan within a reasonable term.)
  • Does the repayment arrangement need to be reviewed? If you are unemployed or ill then you may not know when you can return to work. In this situation you should make it clear that the agreement is for an initial period and is subject to review and a request for an extension of the arrangement. Remember: this will not be able to continue indefinitely.
  • What happens at the end of the reduced repayment arrangement? You should request that any arrears (the amount you are behind in repayments) be added to the loan and the term of the loan is extended. Lenders often ask for you to:
    • Make higher repayments to repay the arrears over time­—make sure to ask how much higher repayments will be!
    • Pay the arrears in full
Exclamation
Do not agree to this unless you are sure you can do it and insist that the lender agrees to notify you about what the new higher repayments will be at the end of the reduced repayment arrangement.
  • If you need time to sell your home (see Chapter 8,) you will need a reduced repayment arrangement until your home is sold.
  • Your credit report. Request that any default listing on your credit report is removed (if a listing has been made). This won’t always be possible, but it is always worth asking, particularly if your lender should have known you were experiencing financial hardship when they made the listing.
  • Legal costs and default fees. If you have requested financial hardship previously and the lender did not respond reasonably, then you should ask for all legal costs and default fees to be refunded back to the date of your request.
  • If a Statement of Claim/Summons has been issued (see Chapter 9), ask the lender to discontinue the Statement of Claim or Summons. This means that the lender withdraws the court proceedings.
Exclamation
Do not agree to the lender getting judgment without getting legal advice.

Determination

If you and the lender cannot come to an agreement the dispute resolution scheme can determine the matter.  In making a determination the following will be considered:
  • Are you in hardship because of unemployment, illness or other reasonable cause?
  • Have you demonstrated that you cannot meet your regular repayments now as a result of hardship?
  • Are you likely to be able to meet the new repayment arrangement requested?
  • Will you get back on track and pay out the whole loan within a reasonable time?
  • What assistance has the lender offered you?
If the dispute resolution scheme has told you that your matter will now go to Determination, or is pressuring you to settle or drop your dispute, get advice immediately.