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MFAA Prosper : Mortgage and Finance Brief 07
over 3,000 families to retain their homes in 2010 with the support of a temporary variation to their loan ter ms during their period of genuine hardship -- and he expects hardship cases to increase in 2011. "With the influx of first-home buyers in 2009/10, we expect an increase in hardship applications from this segment in 2011. As interest rates begin to rise, first-home buyers may need to adjust to their repayment terms and it is expected in some cases the slightest impact on household income and expenditure could easily place strain upon this segment," adds Graham. * Statistics from Genworth Streets Ahead: Genworth Homebuyer Confidence Index. The importance of insurance was brought home firmly to New South Wales-based mortgage broker Ashley Churchill when a client phoned with the news of her father 's sudden death. When Churchill, of The Mortgage Professionals in Engadine, had brokered this client's mortgage he had arranged income protection and life insurance at the same time. Her parents were also his clients, and he had organised their mortgage years earlier. "I didn't offer insurance as an option through the brokerage at that time, although we did suggest people arrange their own," he says. "Now that we're offering to arrange insurance at the same time as organising their mortgage, quite a lot of people do take up the insurance. People like the fact that it is a simple process which is all done by us and that they do not have to go anywhere else." The daughter was crushed to learn that her parents had not organised insurance -- and that her mother stood to lose the family home if she couldn't meet the home repayments. Churchill contacted the lender and organised for a repayment holiday followed by an interest-only period while the family got back on their feet, and the lender agreed not to foreclose provided the payments were met. Disaster had been averted -- but a very stressful situation became even harder because there was no insurance cover. "I try to encourage all my clients to get some cover when they take out a loan now," Churchill says. "I keep thinking of my own situation, I have three young kids and I just can't afford not to have insurance, and neither can my clients." Case study: Dealing with sudden death 20% of hardship applications are due to illness or injury* Consumer Credit Code hardship provisions Under the Consumer Credit Code hardship provisions, changes to credit contracts (including mortgages) can be made in special circumstances, which may include job loss, illness or other reasonable causes. Provisions allow for: • extending the length of the loan • reducing the amount of the repayments • arranging a "payment holiday" -- i.e. postponing repayments for a specified period Preventing mortgage stress • Routinely ask clients how they plan to make mortgage payments in case of job loss, underemployment or chronic illness • Encourage clients to consider mortgage or income protection insurance • Suggest clients consult a financial counsellor at the first sign of mortgage stress • Make clients aware of the options available under the Credit Code in case of hardship 34 | Mortgage & Finance brief Indepth
Mortgage and Finance Brief 06
Mortgage and Finance Brief 08