Australians are again flocking to smaller banks and lenders for their home loans after the big four banks recorded their biggest drop on record of mortgage-broker loans.

 The big four bank account for just 59.8 per cent of new home loans taken out nationally through mortgage brokers, compared with 64 per cent a year ago.

 In Victoria, the figure has fallen from 63.9 per cent to 62.3 per cent.

 According to independent research firm Market Intelligence Strategy   Centre, the big four banks have lost all their gains in market share that they clawed back during the global financial crisis and are now back to pre-GFC levels of 2007 and 2006 when smaller lenders were rapidly gaining popularity.

 Aggressive competition, switching incentives and discounted rates and products catering for clients suffering Mortgage Stress, have helped the non-major banks increase their market share, a MISC spokesman said.

 Better deals: Mortgage broker ResiMortgage chief executive Lisa Montgomery.

 Although the big four banks, Westpac, ANZ, Commonwealth and National, have had a slightly lower market share of broker initiated mortgages, the latest June statistics show it is the biggest single drop on record, down 4.2 percentage   points in 12 months.

  Mortgage broker ResiMortgage chief executive Lisa Montgomery said the dramatic change in market share indicated increased competition and a “win” for borrowers, particularly those seeking Debt Consolidation.

“Major banks aren‘t getting as much market share because the second-tier banks and other lenders are becoming more popular. And the reason they’re more popular is because they’re offering better deals, so that’s got to be a win for borrowers,” Ms Montgomery said.

 She said it had been a deliberate strategy of the smaller lenders to offer good value to brokers and their customers. “What we are seeing now are the results of their hard work and their efforts to offer better value than the big four banks.” She said.

“During the financial crisis, there was a fight to the big four banks because of the uncertainty and fear surrounding those times and the uncertainty about smaller lenders not as being as safe. Not that more people understand the financial system, the volume of new mortgages is being steered across many lenders, not just the major players.”

We would like to Acknowledge Karina Barrymore for this Article

 John Dickinson explains in an article in Broker News, that Court judgements can be a stain on a client’s credit record, but capable handling of their removal can see clients gain a fresh start.

Whether court judgements can be removed from a credit file is is a question that we are asked regularly and knowing the answer could make all the difference to your business so let’s take a quick look at what a court judgement actually is.

i.                     Definition of A Court Judgement and

ii.                   Tackling Court Judgements

The definition of a Court Judgments, and its impact on Clients who are looking to Debt Consolidation, as well as those wishing to ensure their tarnished Credit Report cannot provide difficulties in the future.

Those with Credit arrears are particularly also affected as they try to get a fresh start, and if they are unable to source a Non Conforming Loan for this Debt consolidation, will also need to absorb the options 

This can be  worthwhile ,as the process to apply for  Debt  Consolidation when the Credit Report shows unpaid or incorrect entries can affect Lenders  considering a facility ,at reasonable terms , or indeed provide the facility that can save the client the Mortgage Stress which may have been caused by Illness , Injury , Family or Business failure .

This is one of many additional factors that they can do without ,and can further delay the solution which will stabilize their situation and avoid further penalties .

It is worthwhile , particularly for the Long Term perspective , if there is time, to perhaps remedy eg. Some Mortgage Arrears, to follow the Legal Process to correct these, bearing in mind the cost and time factors involved 

i.                    A court judgement

A court judgement is a legal order that makes a person or organization liable for an amount of money, and  If someone feels they are owed money by another party they have the option to commence legal proceeding in an attempt to recover the amount outstanding.

   This process would normally involve the services of a solicitor who would begin by preparing a statement of claim. In these proceedings the party that is commencing the legal action is known as the plaintiff or claimant and the party being sued known as the defendant.

  A statement of claim will outline the claim and what the defendant may do to resolve the matter. Typically a Statement of Claim will give a 28 day period for the defendant to either file a defense or settle the matter with the Plaintiff. This process does vary slightly from state to state, but for the most part the fundamentals are the same.

“Even in extreme cases the situation can often be overcome with negotiation”                     

  One thing that does differ is the process of the defendant being served as a statement of claim. In the state of NSW this does involve the defendant being personally served while in other state the plaintiff need only mail this document.

We often talk to people in NSW that were not served and yet a judgement was entered, in some cases without them even knowing and  while it is possible this could indicate a flaw in the process followed by the plaintiff or their solicitors, this can also be caused by what is known substituted service.

 If a party such as a process server makes repeated attempts to serve the defendant, they may make an application to the court to be awarded substituted service . once this is awarded the plaintiff is seen as have fulfilled their obligations of serving the defendant and the notice period of the Statement of Claim would begin at this time.

  A court action is recorded on a credit file for five years however the limitations period under law is twelve years and It’s also worth mentioning that the credit reporting agencies gain this information from the public records that the courts produced and not from the plaintiff or solicitor.                                                                                                                                     

ii.                  Tackling court judgements

  The short answer is yes, in most cases a court judgement can be removed from a credit file and the process of removing a court judgement from a credit file begins with having the plaintiff agreeing to sign a Notice of Discontinuance or Consent Order depending on the state the judgement was entered into.

By signing this document the plaintiff is agreeing to formally discontinue their action, not an unreasonable action  if it is paid or settles the debt but r this can be a very different matter if this is not the case. If the judgement is unpaid there's very little chance thePlaintiff will agree to discontinue their action.

From experience  it can be beneficial if the defendant has not paid the judgement but is in a position to settle with the plaintiff at the time we approach them, nothing motivates a plaintiff more than the prospect of getting paid and  in most cases even if the judgement has been paid prior, the plaintiff will agree to sign the necessary documents, given they are approached in the right way of course.

  One exception is if there is "bad blood" between the two parties with an example of this would be a situation where prior to the judgement being entered , both parties were essentially at war and interaction may have become personal. In these cases the plaintiff may not want to do anything that could be seen as assisting the defendant and  even in these extreme examples this situation can often be overcome with effective negotiation.

  Once these documents have been executed by the Plaintiff the process does differ from state to state however one thing does remain consistent is that the documents need to be returned to the court where the judgement was entered to be filed and stamped. Depending on the state the necessary supporting documents can range from just the Notice of Discontinuance or Consent Order itself to a number of other documents including a comprehensive Affidavit from the defendant.

  Once the court has filed and stamped the necessary documents it's a matter of providing the stamped order to the credit reporting agencies. With this information in hand, in most cases they will delete the listing from the defendant's credit file , however many eg. Telcos  promise to do so but need several reminders to take the action required .

  As you can imagine, there are a number of steps to this process and it does take time and therefore costs   which include ,dealing with the plaintiff to having the documents filed and stamped to the actual deletion of the listing, and  it can be  quoted  for up to eight weeks to achieve this goal, longer if the plaintiff does not initially cooperate.

The good news is if you have a client that cannot secure finance , whether through a Non Conforming Broker  or Lender  or other Financial sources  ,because of a court action listed on their credit file, all is not lost ,as with the right skills and knowledge these listings can be permanently removed from a credit file if there is enough time and the Plaintiff acts in the appropriate time space .  

We Would Like to Acknowledge John Dickinson  in a Broker News Article

Westpac believes that, the potential of the Self-Managed Super Fund market is clearly very significant as Superannuation in this country is worth about $1.3trn, of which about a third sits in SMSFs.

With the  expectation to double in size over the next 10 years, so by 2022 we are looking at about $800bn in assets  it's very, very significant.

Looking at the raw figures, it is not surprising that lenders have been falling over themselves to launch into the SMSF market as they try to balance their Mortgage loans portfolio, as this will lower the proportion of Loans with Mortgage Arrears.

As this will also remove any Mortgage from the Individuals Assets & Liabilities reports, this could assist with any clients who may require Debt Consolidation. 

Lenders over the last two years have instigated a myriad of Investment & Loan products, as they are encouraged by the Australian Taxation Office clarifying its stance on these funds.

The result is a fast-expanding universe , one in which brokers could have a central role as  SMSFs have become much more mainstream among superannuation clients  due to the Trustees looking for diversified investments, and there has been a very strong penchant for property in this country.

There are about 900,000 Australians who are members of an SMSF and it has certainly become more mainstream with the acronym being now better understood and it is a taste that is being propelled further by the lackluster performance of share markets.

With flat interest rates and equities flat as well, people are looking to other asset classes to invest their money into for long-term investments, and good returns out of property have been demonstrated in the past.

The products fit with a long-term preference for property among Australian investors as Property has long been a cornerstone of retirement strategies.

“People take comfort in bricks and mortar, an asset that they can see and touch. Property is something that people are comfortable with, and since borrowing to invest through super was introduced, a whole new way of investing in property for retirement has become available.”                            

The two key emotional drivers are control and flexibility as you've got clients who want to take greater control of their retirement savings and they are also looking for greater flexibility of what they have to invest into.

In terms of the origination process itself, there is a little bit more rigour and compliance around it, but the process is by and large the same as borrowing money for any other investment property lending and Lenders certainly want to understand who they we are lending money to, and how the money will be paid back.                                     

The most important thing is knowing where the line is in the delineation between advice, and the knowing customers have spoken to their financial planner ,their accountant and Finance Broker to ensure that an SMSF and the product on offer, is most appropriate for them, so they are able to provide clients with best-in-class service.

The ever changing Landscape needs potential clients to research extensively the potential for this solution which has great potential benefits.

Extract from the Australian Broker Magazine September 2012 edition

 

Check for classic warning signs of cash flow stress, so you can provide funding solutions before your clients’ cash flow problems become too dire creating Mortgage arrears or other financial difficulties

Small businesses in Australia are experiencing worsening business conditions, so it is very important that their trusted advisers should be on the lookout for warnings signs of cash flow stress,

Over the last few months, three studies have illustrated how tough the current environment is for many small businesses and  ASIC statistics show that 1123 companies were placed into receivership in February 2012 – the highest number on record since the statistics were introduced in 1999.

A recent Dun & Bradstreet Business Expectations Survey showed declining expectations for projected sales and profits for Australian businesses in the coming September quarter .

Also the Bibby Barometer Small Business Survey, based on research with non-retail Small & Medium Enterprises ,  showed that from February this year increasingly-challenging local and global conditions are set to impose greater cash flow problems on Small Business Enterprises .

Forty three percent of these s claimed that their cash flow is more difficult to manage now than it was a year ago, and 36% expect payment terms to continue to worsen in the near future .

Given this research finding’s, it’s worthwhile for Advisers and their clients  making time to check for classic warning signs of cash flow stress,  to ensure that you can obtain  funding solutions before the  clients problem become too dire:

•      Rapid sales growth – a simple question of ‘do you have adequate levels of working capital?’ might uncover issues
  

•         Debt Levels rising 
  

•   Difficulties meeting creditor payments and statutory obligation – tax/PAYG/wages
  

•       Loss Of Discounts due to late payment of Creditors 
  

•        Additional time and resources spent juggling finances – what are the Opportunity Costs? 
  

•        Blow outs in debt turn and credit notes
  

•        Client losses.
  

We are increasingly seeing Small Businesses where the Principles’ whose home is used to fund the business ,and they are experiencing  and suffering from mortgage stress due to declining property values.

In this situation, Debt consolidation by an increase in bank Funding due to the worsening shape of the Profit & Loss & or Balance Sheet  may not be feasible or recommended .

Instead, if their business is fundamentally sound, debtor finance which can provide Funds based on the value of the Debtor list may be an appropriate solution for these clients. 

The fact is that more  of these Businesses  are looking beyond debt relief  from traditional real-estate-secured sources of funding  ,and are seeing that debtor finance options is a reality  which is being reflected in the growth of the debtor finance industry.

As a result, it is not surprising that the Finance broker channel can provide the best option as the demand for this source of funding is growing significantly and rapidly maturing.

We Would Like to Acknowledge Mortgage & Finance Magazine August 2012 Edition

 

 

Small changes to your weekly spending really can deliver huge long-term benefits for all borrowers and savers, as well as those who have bad credit loans as a new analysis has found that cutting back on

• One takeaway coffee each day can save you $45,000 over the life of a mortgage, 
  

• Eating out a little less would save you $ 72,000 in interest costs and cut four years off the loan, 
  

• While swapping a fortnightly cinema visit for DVDs can save $38,000.
  

Wealth management firms have crunched the numbers on a range of simple weekly expenses that we often overlook , and they found making a few relatively small changes can cut the interest cost of a typical mortgage by more than $200,000 and potentially reduce the Mortgage  Loan Balance .

 There is no magic when it comes to saving money ,if any magic at all  ,it is just in the simplicity of it.

We always assume there's some complex formula and  many people fail to act on cutting their small costs because they don't think it will have much impact on their mortgage arrears , but this can have  a huge impact particularly if due to unforeseen circumstances there may be  need to refinance in the future  .

One of the brightest guys in history is Albert Einstein, who said  the most powerful force in the world is compounding. This is the power of compounding in reverse ,as the process works exactly the same way in terms of saving, but it's a bit more compelling with debt because debt's scary."

On the savings front, eating out a little less often and

·         Diverting the $120 a month into a savings account earning 5 percent interest will grow to $19,000 in a decade.

·         Cutting out a coffee a day would grow to $ 11.000  in that same period.

 Most people  think that rich people get fancy advice , but  It isn’t that  it is because they apply simple rules and they stick to them, day in, day out and week in, week out.

Industry advisers  say that one of the best ways to eliminate those little weekly costs is to review all of the direct debits you have as there's a lot of money being wasted every day, every month, every year on direct debits , including - old mobile phone contracts, mobile internet, gym memberships and unnecessary insurances.

However  Direct debits that should be embraced , are those that put money into savings and investment

accounts before you have a chance to spend it as the money you don't see  ‘is the money you don't miss ‘.

Waiting until you build up a bigger amount won't work because most people will find ways to spend it.

"It's not about how much, it's about doing something,  with the fatal mistake with these things is people never start and they procrastinate. The hardest thing to do is to start and a suggestion is ,asking your pay office to take extra money from your pay - perhaps $200 a month - and pay it directly into the mortgage.

The latest Reserve Bank data shows most Australians are ahead of schedule in their home-loan repayments and Savings are growing.

If you're not part of this population, you have to get on to the game because everyone else has worked  out that this can only be a good process to assist your future .

We would Like to Acknowledge the writer of this article  Anthony Keane

Are you a Self Employed or new Developer who is looking at the options?

Available for Financing up to $5 Million in any of the Capital Cities?

A broad summary below will assist in understanding the usual practices by

Lenders who operate in this space

There are available facilities for a maximum Lend up to 65% of the estimated end value, including the proposed Land content, with a Loan Term of up to 18 months.

Some Lenders will provide this facility where the Security is Residential -low and medium density (eg. Villa, Town House, Units and small Land Subdivisions

All will require that each Loan will be secured by a registered first mortgage and Personal & Directors guarantees will apply, and depending on the size of the Loan a percentage of Pre Sales may well

be required.

The Lender will engage a quantity surveyor to determine the cost to complete the development, and to manage the construction drawdowns throughout the progress of the works, with the quantity

Surveyor being instructed by the lender throughout this process.

The Lender   will arrange a valuation of the security property (or properties ).and the Valuer will be asked to value the property ( or properties) for mortgage lending purposes both on an 'as is' basis and an on completion' basis assuming the completion of the development in accordance with the approved plans.

In addition the valuer will be asked to confirm that the property is readily saleable within 6 months after completion of the development withal costs associated with the valuation will normally be payable in advance by the  borrower

Project risk fees  may apply in certain circumstances. These facilities are  available to Companies, Unit and Discretionary Trusts and Director guarantees will apply in these instances

Builders 'All Risks' insurance will be required throughout construction with Re-Instatement and replacement cover over all existing buildings and for each building on completion and Home Warranty coverage (if required under the relevant State Legislation will also be needed.

New developers  may find this  difficult to obtain  depending on the previous construction experience of the applicants and may needed the services of an Insurance Broker who handles this type of Contract.

These loans are subject to satisfactory credit reports on the borrower/s and or guarantor/s. Borrower/s with bad credit loans are often declined or rather given a much higher interest rates.

There are normally application fees applicable that vary between Lenders and can often payable in two installments, with the Third party Fees eg. Valuations, Quantity Surveyors and Legal Fees all payable in advance by the borrower/s .

All loan and security documents will be prepared by solicitors appointed by the Lender with all legal costs are payable by the borrower/s

Interest Rates are determined differently by each Lender depending on the developers experience, the complexity and period of the Construction.

In summary it is important that advice is sought from professionals with experience in this field before embarking on any new venture, be they Lawyers, Conveyances, Insurance and also Finance Brokers to avoid any costly misunderstandings.