In response to COVID-19, lenders offered consumers the ability to enter “mortgage holidays”, effectively pausing repayments on their mortgage for a period of up to 6-months. While these have been extended for those most in need, a significant portion of these repayment mortgage holidays will be expiring over coming months.
Australian corporate regulator Australian Securities and Investments Commission (ASIC) has issued its expectations of the mortgage lenders as we go through the process of gradually restricting access to mortgage holidays, phasing them out all together early next year.
Over 800,000 Australians have paused their mortgage repayments since March, when mortgage holidays first began. These measures were always intended to be temporary, but when the end date cited coincided with the end dates of JobKeeper and JobSeeker, banks were forced to extend mortgage holidays for fear of causing an economic crash. However, the extensions are not all encompassing, some people will fall through the cracks as banks restrict access throughout the phasing out process.
As a result, ASIC has publicly advised the banks of its expectations for lenders and how they handle the expiry of mortgage holidays in the coming months. Here is what that means for you:
- Lenders should contact borrowers to notify them before their deferral period expires.
- In the event that borrowers do not initially respond to lenders communication efforts, lenders are expected to attempt a number of other communication channels to prove their efforts were adequate.
- Borrowers should be provided with any information that can ‘assist their decision-making’ e.g. financial implications of further deferrals, going interest only, or making partial payments etc.
- If a borrower notifies the lender that they will be unable to go back to making full repayments, lenders should contact them directly (e.g. via a phone call) to assess the situation and make a ‘fair and appropriate’ decision based on the individual circumstances.
- Lenders must provide support tailored to the needs of the individual borrower, rather than providing broad ranging support.
- If a borrower misses a repayment after the mortgage holiday period has expired, lenders should make ‘reasonable efforts’ to contact them and assess whether any further assistance needs to be offered.
- If a borrower is dissatisfied with a lender’s response or actions, lenders must ensure that they comply with the requirements set out in ASIC’s Regulatory Guide 165: Internal and external dispute resolution.
- If a borrower notifies a lender that they will be unable to meet their repayment obligations after the expiry of a mortgage holiday and a lender makes a decision to not provide further assistance by way of varying the consumer’s credit contract, a consumer must be notified of their right to complain to the Australian Financial Complaints Authority.
ASIC also made a point to remind all lenders of their obligations under section 72 of the National Credit Code, whereby a lender must consider varying a consumer’s credit contract if a consumer notifies them that they are or will be unable to meet their credit obligations.
Finally, ASIC informed all lenders that it will continue to closely monitor how lenders are assisting consumers who are experiencing financial difficulties due to COVID-19.
If you are having difficulties with your mortgage repayments, please read this article.
One option that wasn’t discussed is the option to refinance. Mortgage rates are at all time lows for both variable and fixed loans, there has never been a better time to find a better deal on your home loan. Contact us at Difficult Loan Company to speak to the experts.