Case Study showing the Home Loan Arrears Process

Payment Plans with the ATO
July 4, 2014
Payment Plans with the ATO
July 4, 2014

Home Loan Arrears Case Study

The following case study features a recent settlement of mortgage arrears. However, the arrears involved two investment properties, which were close to lenders legal action. Indeed, the mortgage arrears started when the couple had a baby and the loss of one income.

However, other factors had made the issues worse. Therefore, the client was talking to their lender about their arrears and seeking a home loan arrears solution. The result was a moratorium on payments. Although, the clients did not realise the amounts not paid had to be paid in full at the end of the moratorium.

The clients referred their issues to a credit ombudsman. However, through their negotiation process, the clients made reduced payments on their home loan.

As a result, the credit ombudsman ruled against them for two of their three loans. Therefore, the lender requested full payment of the mortgage arrears. Finally, as the account was severely in arrears by approximately $55,000; a new lender would need to pay the total amount.

Also, the clients had tried many lenders' and declined on numerous occasions.

Delays such as these simply escalated the lenders' collection activities. The clients had a pending eviction from their home; plus loss of future investment potential on the other property.

Our Home Loan Arrears Solution

The clients called us in distress. They both now had the income to pay for the loans. However, they did not have the money to bring their existing mortgage arrears back up to date. We assessed the potential to secure finance, and the prospects looked favourable. The properties were in good locations, and their story was strong. Their income had also improved and was able to be proven, so the figures worked.

  • We established our authority on the loan accounts, and successfully (*2) negotiated extensions to avoid pending legal action (due in 2 days).
  • We assessed the available bad credit mortgages that could accept the mortgage arrears.
  • We provided the clients with a written proposal detailing the new lenders’ interest rate, and charges.
  • We obtained an application and ordered new valuations.
  • The lender approved the loan, subject to valuations.
  • Although the valuations came in low, we still had sufficient equity to settle, which avoided the legal action (*1).
  • The settlement was made at an initial interest rate of 5.2%, followed by 5.5% after 12 months. (not reflective of current mortgage interest rates.)

Analysis of the Home Loan Arrears Case

Mortgage arrears are among the credit issues that were significant in this case’s story. Most of the work goes into assessing and obtaining supporting evidence to satisfy the new lenders’ approval guidelines.

Other credit problems may be more straightforward. However, home loan arrears payments tend to be lower than new loan repayments. Consequently, this is where professional assessment can help obtain approval and refinance of your arrears. Therefore, working closely with our clients, we were able to make the whole process straightforward. Plus we were able to structure their loans properly to reduce payments. Finally, this led to a great outcome that was primarily the result of teamwork.

Can Loan Saver Network Help?

Work with a professional who can help you answer questions about home loan arrears and other forms of specialist finance. Contact the Loansaver Network today on 1300 796 850, to see how we can help you.

  • Legal action is a critical milestone to avoid due to their potential additional costs. Also, lenders charge higher fees once an account goes to collections.
  • Multiple extensions need to be obtained, as lenders want to recover their money as soon as possible. Therefore, deadlines are usually extended by one week at a time until achieving Formal Approval.

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