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Mortgage stress handbook

3. Can the lender take my house - What is the process?

The lender must take a number of steps before it can take possession of your home. The sooner you act in the process, the more likely it is that you can make a repayment arrangement.

Default (you missed a repayment)

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Default notice under Section 88 of the Credit Law

Note: You may get other default notices but the important default notice is the one that gives you at least 30 days to fix the default and has a Form 12 or 12A attached (see below).
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At least 30 days to pay the amount of the default and the usual repayment
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If the default and usual repayment are paid then the contract goes back to normal (the lender cannot commence legal action)
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If not, the lender can make the whole loan repayable

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Repossess your home (without commencing court proceedings) to recover the whole debt
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Statement of Claim or Summons served on you for the arrears and/or the whole debt and/or the possession of your home
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You have a fixed number of days (depending on the State or Territory you live in—see Chapter 13) from the date of service of the Statement of Claim/Summons to file a defence or lodge your complaint with the free complaints resolution scheme, AFCA
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If you do nothing, or file a defence and lose, the lender gets a court judgment
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Lender applies for a writ (an order) to take possession of your home
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Letter telling you when the Sheriff will come to change your locks (e.g. Notice to Vacate)
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Sheriff comes to your home, evicts you and changes the locks

Exclamation

It gets very hard to negotiate a repayment arrangement to save your home or even to get time to sell your home after the lender has obtained judgment. Try taking action before that if you possibly can. If it’s already too late, get legal advice (see Chapter 14 for Useful contacts) and see Chapter 12.

Doesn’t the lender have to go to court to get possession of my home?

No, they do not have to go to court but they do in almost every case. This is so they can get a Sheriff to ask you to leave and change the locks on your home by order of the Court.

The most common exception to this is where the property is rented, vacant or undeveloped land. If your home is rented the lender may enter into possession and receive rent without a court order. If these situations apply to you, your matter is urgent and you need to act as soon as you have received a Form 12 or 12A default notice.


This form will be attached to the default notice

Form 12

Information about debtor’s rights after default

Paragraphs 88 [3] [f] and [g] of the Code regulation 86 of the Regulations

If you cannot make a repayment:

1. Contact us immediately

Contact us [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. If there is a reason why you cannot make repayments we may be able to help you by agreeing to vary your contract. The sooner you contact us the easier it will be to assist you.

You have specific legal rights to request changes be made to your contract to help you repay the debt if you:

  • cannot make repayments due to hardship [for example, illness, unemployment or some other good reason]; and
  • expect to be able to make the repayments if the terms of your contract are changed; and
  • entered into your contract:
    • on or after 1 July 2010 and the amount you have borrowed is less than $500,000; or
    • before 1 July 2010 and the amount you have borrowed is less than the relevant threshold *.

You may request that we:

  • extend the term of your contract and reduce repayments; or
  • extend the term of your contract and delay payments for a set time; or
  • delay payments for a set time without extending the term of your contract.

Alternatively, you may request that we negotiate with you to postpone any further action that we may take against you.

If you do not contact us before [insert default notice period end date], we may commence further action against you.

IMPORTANT

There is no guarantee that we will agree to change your contract or postpone any further action.

After we receive your application, we will provide you with a written notice within 21 days stating whether or not we agree to the change.

If we agree, you will receive a written notice detailing the agreement within 30 days.

If we refuse, we will provide you with reasons. You have the right to have the decision reviewed.

2. Right to review

If we refuse your request to change your contract, you can ask us to reconsider. If we still refuse, or if we do not respond to your request within 21 days, you can go to the AFCA scheme by [insert contact details and method(s) for lodging complaints]. You should apply as soon as we refuse your request or fail to respond.

THE AFCA SCHEME IS A FREE SERVICE ESTABLISHED TO PROVIDE YOU WITH AN INDEPENDENT MECHANISM TO RESOLVE SPECIFIC COMPLAINTS.

If we fail to respond, we may have breached our obligation to you. You can contact the Australian Securities and Investments Commission (ASIC) on 1300 300 630 or through ASIC’s website at asic.gov.au.

Alternatively, if we refuse, you can ask a Court to make changes to your contract.

You can also ask a Court to delay enforcement action against you. You may wish to get legal advice, for example from a community legal centre or Legal Aid office, on how to go about this.

There are other people, such as financial counsellors, who may be able to help.

* You can find out what the relevant threshold is by referring to this website – www.moneysmart.gov.au or contacting ASIC on 1300 300 630.


Form 12A

Information about debtor’s rights after default


Paragraphs 88 [3] [f] and [g] of the Code regulation 86 of the Regulations

IMPORTANT

You are in default of your credit contract because you have not made a payment [alternative wording can be used if the default is not the result of failing to make a payment]

YOU NEED TO CONTACT US IMMEDIATELY

1. Are you in financial hardship? Contact us immediately

Contact us* [insert telephone number or email address for dealing with financial hardship applications] to discuss your situation. We may be able to help you to repay your debt by agreeing to vary your contract (for example, changing the amount or timing of your repayments). The sooner you contact us, the easier it will be to help you.

If you do nothing before [insert default notice period end date], we can commence enforcement action against you.

If we refuse to change your contract, we will notify you in writing and you can seek a review of our decision by going to the AFCA scheme by [insert contact details and method(s) for lodging complaints].

If you go to the AFCA scheme, you may have enforcement action put on hold while your complaint is considered. You are not bound by the decision that the AFCA scheme makes and you can still apply to a court if you are not satisfied.

THE AFCA SCHEME IS A FREE AND INDEPENDENT SERVICE TO RESOLVE COMPLAINTS.

2. If you are having financial difficulties you can also contact a financial counsellor on 1800 007 007 (free call)

For information about your options for managing your debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

3. Your other rights

You have other rights, including the right to ask us to postpone any enforcement action before [insert default notice period end date].

*Credit providers may replace the word “us” with the name of a relevant area. For example: “Contact our Hardship Team”.