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Important for re-finances and bad lending .....s70 of the
Consumer Credit Code (WA)
The Panel has found, for the reasons set out in this Determination, that the member was unable to contract out of its obligations under s 70 and that it granted a loan in breach of those obligations. The Panel found that the member was liable to compensate the complainants for the loss that it had caused............the Panel considers that the complainants’ suffered a capital loss of $60,000 by virtue of the complainants being granted a loan by the member and not selling the property.......
Mortgage loan by trust company; unjust transaction s 70 Consumer Credit Code (WA); agency of mortgage originator and trust manager
https://forms.fos.org.au/DapWeb/CaseFiles/ILIS/22169.pdf
Summary
This dispute arises from an action by the member to recover monies from the complainants, owing under a loan used to refinance the complainants‟ mortgage. In 2007 the complainants refinanced a home loan with the member with the assistance of a mortgage broker who, without their knowledge, allegedly included fraudulent information in the application forms.
The complainants allege the transaction was unjust within the meaning of s 70 of the Consumer Credit Code (WA). The member denied this and, amongst other things, submitted it had contracted the decision to grant the loan to either the mortgage originator or trust manager.
The Panel has found, for the reasons set out in this Determination, that the member was unable to contract out of its obligations under s 70 and that it granted a loan in breach of those obligations. The Panel found that the member was liable to compensate the complainants for the loss that it had caused.
The Panel determined that there were a number of alternative ways in which this dispute could be resolved. The complainants could: pay the sum of $418,750 to the member in full settlement of its claim within 45 days and retain the property; make arrangements with the member in that period for the transfer of the property to the member upon payment of $108,750; or cooperate in that period in facilitating the sale of the property. If the property was sold, it was to be done at the member‟s expense and the sum of $108,750 had to be paid to the complainants from the proceeds of the sale in full and final settlement of any claim that they have against the member.
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22169
Background to the Complaint
1 This dispute arises from a claim by the complainants, a husband and wife, against B, a member of FOS, who had taken over a mortgage loan that had been provided to the complainants by B’s predecessor J, also a member of FOS in 2007. The member was and is the trustee of the MAM Trust (“the Trustee”) which was established in 2006 in connection with the M Master Trusts securitisation program pursuant to the M Master Trust and Security Trust Deed.
2 The Trust was established for the purposes of dealing in a broad range of assets including mortgage loans. M Financial Services Pty Ltd, by way of Agreement, was the Trust Manager and Master Servicer.
3 The member, as the Trustee, appointed MOS as Master Originator pursuant to a Master Originator Agreement to originate mortgage loans for investment in the Trust. MOS had the power to appoint a delegate or sub-contractor to perform its obligations under the Master Originator Agreement. MOS entered into an Agreement with L Financial Services in May 2007 pursuant to which L Financial Services was appointed to introduce mortgage loans to MOS. MOS subsequently was placed in external administration.
62 The Panel recognises that there is a legitimate place for low doc loans to cater for those self-employed borrowers who are unable to provide more traditional evidence of their income. However, regarding a borrower’s self-certification of financial details, the Panel does not consider a declaration from the borrower will protect a lender from having the loan considered unjust if the circumstances were such that the lender ought to have made inquiries but chose not to do so. A borrower’s incorrect or false declaration, whether knowingly or inadvertently, is a relevant factor to be taken into account, although not necessarily decisive of the issue8.
72 Clause 3.16.1 of the OOM also notes:
“All [M] Loans are documented to comply with the requirements of the UCCC as to disclosure and documentation even though the loan may not be regulated. As a consequence, the provisions of the UCCC must be complied with. Section 70 of UCCC empowers the Courts to re-open “regulated” contract, i.e. contract, mortgage or guarantee if it is satisfied that, in the circumstances when it was entered into or changed, it was “unjust”. One of the statutory criteria where a loan can be deemed unjust is that the loan cannot be repaid “without substantial hardship”.
127 In 2007 the property was valued at $450,000. Accordingly, the Panel considers that the complainants’ suffered a capital loss of $60,000 by virtue of the complainants being granted a loan by the member and not selling the property.