I'd like to know what hardship provisions exist for owner occupier mortgage holders in financial distress. If someone loses their income and can't make payment how quickly do banks foreclose on the property? Do you think it is fair that if someone has borrowed more than they can afford that the bank pushes out payments so they can continue living in the property? What affect does this have on the market? And does this tie up supply and cause higher prices?
Foreclosures in Australia
gougou8 on 12/05/2025 - 12:56
Comments
Yep would make a great story….
But none of this is an issue for OBers who usually know better
When you can't make repayments, they will send out REAs to your home the next day and sell your home. It's crazy.
REA sign goes up an hour before the foreclosure. Open Day inspection and hour later
Its not crazy at all
The banks must act in the best interests of borrowers to minimise thier loses.Of course this plays right into the banks' favour as well
So you are suggesting if I paid my mortgage for 5 years, then lost my job that the "market" is being treated unfairly if my bank allowed me to extend payments?
Are you a person talking about other people's homes, or are you a "consumer" interested in efficient markets?
Wake up to yourself.How long do you think payments should be extended for? What about someone would like to continue with their weekly serve of caviar and take a more cushy job with lower pay. Does the bank foreclose on this person or is that too harsh?
Are you asking for yourself?
I suspect so given the way the original post was worded, but there is nothing harsh about legal and financial ramifications that you agreed to in the mortgage.
Foreclosure is not harsh. You can look up the statistics on AFSA if you want a ballpark figure about personal insolvencies.
Banks Esquire
Appreciate your response. Of course I'm asking for myself. I'd like to get a better understanding of the forces at play in the market and where prices are going. This helps to decide when to buy or sell.
Are you (a) worried,looking to cash in, or (b) have your eye on a place know to you, and want a head start on vulturing a specific property cheap?
Getting an understanding of the market forces at play. After all it is a market, prices change, and knowing where it is going is a factor on deciding whether or not to buy. Pretty simple really.
The bank doesn't mind doing this because it means when the person finally gets back on their feet, they will be paying more in interest and the bank profits more. Its exactly what they did during covid when they sold it to everyone as the 'banks doing right by the people'.
That would only be the case if the banks were extending the term of the loan or compounding the missed interest payments back into the principle. Neither of which I believe to be true.
Both are definitely true. Banks aren't just copping a loss on the missed mortgage payments.
https://www.slatergordon.com.au/blog/consumer-and-the-law/is…
Of course it's fair. Banks will negotiate and make arrangement to suit temporary hardship, but if they can't see that you will eventually recover, is it fair that get to live there with your unrealistic hopes and dreams and not pay like the rest of us have to?
Supply and demand set the price. The bank sells the property. How does that affect supply or demand when the evicted person is back to looking for a roof again?
Only more supply or reduced demand will prevent the housing cost problem escalating. That won’t make the prices of houses plummet (if you buy a house for $1.6 million, are you going to sell it for $1.2million).
Is it fair that government creates vote-buying first home buyer schemes that give people a little more money to put towards a house without addressing the supply issue. With more cash, first home buyers can pay a little more and that drives prices up.
"How does that affect supply or demand when the evicted person is back to looking for a roof again?"
No change. House becomes available to others, at a price determined by the market, evicted person can enter market buying at a lower price point if they desire.
I'm arguing that loan extensions and hardship provisions distort the prices heavily to the upside.You answered your own question: "evicted person can enter market buying at a lower price point if they desire". If they go for rental instead, the puts pressure on rental shortages, leading to higher rental costs. Of course, that assumes every action has immediate impact.
The reality, is the market is always in a state of flux. People die, people trade down; people move; people go into old people's homes, migrants, temporary residents and students arrive; people emigrate; people take temporary work overseas or go on long-term holidays… One person's luck or misfortune is a drop in the bucket.
Government earnings are finite. People cannot expectat government or anybody else can bail them out of trouble for making bad decisions or having a run of bad luck.
Yet government continues to bail out distressed loans. You think the mortgage bond holders don't get paid? This can go on for a while yet I think.
@gougou8: In other words, government is being reckless with taxpayer's money. Collectively, that's our money, not theirs. While I don't lack empathy, I disagree with the concept of bailing out reckless spenders.
Politicians with vested interest in investment properties, greedy investors and overseas investment aren't making life easy for those who want to get their first house. Some of those make reckless decisions. I see the issue mostly as a personal problem, not something for taxpayers to solve. Like all things, there are exceptions. I suspect government and banks try to help those who may deserve a bit of help. Telling lies to get a big loan does not make someone deserving.
evicted person can enter market buying at a lower price point if they desire
Do you think a bank after foreclosing on a mortgage is going to rush out and give that person another loan anytime soon? What about another deposit?
Yeah why not? Unless the person declares bankruptcy they may continue to have capacity to service a loan of smaller size.
@gougou8: May be so but if you've been under hardship provisions for long enough that the bank eventually foreclosed on you (and it's a drawn out process, with many steps that banks must adhere to first) then it will be a long time before another bank will take a chance on lending you more money. Hardship gets reported on your credit report.
Just anecdotal, but I know of a large waterfront Mc'mansion near where I live, that is owned by a bank due to asset seizure from a company back in the late 2000s. They had it on the market (recently) for maybe 6 months or so. They found a buyer. I'd love to know how much was paid for it.
I'd love to know how much was paid for it.
$50
A real estate website may have a history under the 'Sold' tab. If the price is suppressed, you may be able to get an idea by talking to the selling agent.
Why do you guys bother responding to this?
Because that's what people do on forums. We are programmed to respond.
Speak for yourself.
Perhaps learn to use your brain.
Catch-22
You're asking vague questions about things that vary on a bunch of factors, you don't throw your toys out of the pram when someone says it's chatslop.
It would be unfair for a bank to foreclose and kick someone out of their home if they were a day late on a payment and it would also be unfair for a bank to forgive repayments for 10 years and let the person live in the place repayment free, so I guess the fairest approach would be settling on some time period between those two, based on the circumstances.
And that's how long a piece of strong is, you're welcome, thanks for the question.
Of course, but do you agree that the level of leniency shown by the bank in this regard has an effect on supply and therefore market price of property?
@gougou8: Well, it would have an effect.
I think it would be ridiculous to say it's 0% of the problem. But on the other hand, I think it would also be excessive to say it's 100% of the problem.. so I suppose the correct answer would be a number somewhere between the two, based on the circumstances.
Don't know how this works in detail, are there different protections for falling behind on poor vs investment property.
you should try being such a hopeless investor that you lose money on your IP, that way the government gives you a handout
Best to wait until there's an election in the near future.
BuT WiTHOuT InVEstORs WHeRe WOuLd RentERs REnT.
NegATiVe GearINg ISN't A SubSIDy FunDED By ThE TaxpAYErS.
REEEEEE.
Wholeheartedly agree.
_someone loses their income and can't make payment
why pay after the loss?
If you think the banks are lenient for late payers, and that is somehow responsible for high prices is misguided.
This isn’t some crypto pump and dump scheme, it is people’s houses.
We should be encouraging people to remain housed, not being critical that banks don’t turn them out fast enough to make a property crash for predatory buyers.
If you think this isn’t aligned with your interests (as a first home buyer or investor?) consider what happened in America after the GFC where Blackstone and other hedge funds bought up a swag of residential property.In a crisis buying situation individuals don’t get the bargains, the rich do.
Foreclosures are not the same as the states because it's expensive for the banks. If you have no willingness to make payments, they'll try hardship, then legal then foreclosure. Contrary to popular expectation, banks don't want to recover the house. It's a problem for everyone involved - as in no one wins. Besides, if the bank forecloses on you, aside from tanking your credit score, if they're still out of money, the bank will chase you.
As a side note, when the bank tries to recover the property, legal bills add up. Guess who has to pick it up? Hint, it's not the bank or their legal team.
It all depends on how you approach the bank and come forward with realistic payment plans.
They want to protect their loan and the interest thereafter. The bank is already secured as they have kept a 30 to 40% margin on the loan, and mortgage insurance covers the gap between the actual loan amount and the amount you have paid.
If you fail to pay according to the payment plans, they have no option but to initiate loan recovery by giving enough notice. Eventually, they will appoint a real estate agent (REA) to place the property on the market. If you fail to vacate the property, the sheriff will come, change the locks, take possession, and hand it over to the lender's agent.
Once the property is sold, every cost incurred to vacate and recover the loan will be recovered first, followed by the overdue interest, penalty interest, and finally the principal amount. Any shortfall in recovery will be covered by mortgage insurance. Then, mortgage insurance will initiate a recovery process from your future income and place a caveat on your title, preventing you from owning any new property in the future until you have paid their mortgage gap loss.
Therefore, it is advisable not to consider foreclosure of the loan and walk away. It is not that easy.
The government has put this procedure in place so that banks can continue to provide loans at competitive rates and keep defaulters away.
The banks dont come in the day after you lose your job and sell your house.
People should speak to their bank as soon as possible there are arrangements that can be made.
"What affect does this have on the market?"
SFA. At the start of COVID we were all told that there'd be mass unemployment thus there'd be tonnes of properties hitting the market, even with all time low interest rates, which would drive down prices.
The last thing any lender wants is to become a property managers so they'll do whatever it takes to avoid foreclosures. They have a few levers to pull if a mortgagee falls on hard times. And there's no closing time BBQ chook type deals if they end up having to auction off a property that they've repo'd. Prospective purchasers may be told that the seller is "motivated" but that could mean anything.
Damn, journalists at its laziest