Responsible borrowing

Australia is on a bank-bashing roll currently. As the market (and by that we mean property market – really the only important market in the Dutch Diseased country) rose solidly over the previous decades, the national psyche shifted to one where the expectation of continued growth became pervasive.

To a certain extent, that’s a rational position to take; if everybody, lending institutions and central banks included, is predicting a double digit rise next year there’s wisdom in listening to them.

There’s a similar theory about “technical analysis” of stock charts, that it might not be based on any underlying science but, because everybody believes in “support lines” and “double tops”, it becomes a self-fulfilling prophecy.

However, trees don’t grow to the sky and no market moves in a straight line.

More importantly, if you’re going to make a bet, any bet, you better bloody well know that you can live with the wrong result should it occur.

Westpac has been hit with the first class action against one of the big four since the banking royal commission’s final report earlier this month.

Lead plaintiff Michelle Tate told a media conference in Brisbane on Thursday she and her husband Ian were ruined after the bank lent them more than $1.8 million across five properties, despite the family having just one income.

Ms Tate said Westpac trusted a loan broker who provided information about her family’s financial position, and did not independently verify the situation. She said her family would now lose all of their properties save for a block of land.

Wait, what?

They bought their first home in 2008 but decided to invest in a further three in 2013 and 2014 while Mrs Tate was a full-time mum, all funded through Westpac loans they locked in as interest only and secured against their first property.

Are you insane?

Maurice Blackburn Principal lawyer Ben Slade said Westpac was “required to comply with strict obligations which are specifically designed to protect consumers from irresponsible lending and the risk of financial hardship”.

“This case will seek to prove that Westpac failed to comply with these obligations and that this failure caused substantial losses for many consumers,” he said.

That highlighted claim reminds me of the regrettable line we all mistakenly say once in our lives;

“Honey, does this dress make my bum look fat?”

“No dear, your bum makes your bum look fat”.

Bill’s Opinion

Michelle Tate and her husband knew exactly what they were doing when then went all in on property. It was a one way bet they couldn’t lose.

Blaming the bank that lent you the money in the hope of compensation is an understandable tactic and a common coping mechanism rather than coming to terms with one’s own stupidity and greed.

But you were still stupid and greedy and you absolutely knew what you were doing.

7 Replies to “Responsible borrowing”

  1. Good, for a moment there I thought you were going to conclude differently.

    I don’t know what all the fuss is about anyway, everyone tells a few porkies to get a loan, at least your first one anyway.

    I use a broker and I can tell you right now that there is no way on earth a bank loans officer could have got me the finance the way that he has over the years. In fact I moved over to him after a bank manager that I was on talking terms with told me that I was better of outsourcing that specialty than using his banks loan officer.

    All the bank bird wanted to do was cross securitize me to buggery and had zero idea about time is of the essence purchasing by finance. If they got rid of mortgage brokers the whole settlement process in Australia would double in time overnight and then it would continue to slip further behind after that.

    I was refinancing last year and had a lot of investment loans in ANZ, I had to have a chat with them as part of a process I was going through with my broker. So I thought to myself lets just see what they can do for me, it was the manageress at my local branch where I now live and I have never been in there nor met her before. First up, she asked me how much I was making from my salary, I mentioned that surely she had reviewed this given that my wages have been getting paid into them since Adam was a boy. No she hadn’t manged to do that yet, so I told her and she was like whoa (not boasting here) some folk turned around and I was genuinely embarrassed. She had no idea about tax planning, non cross-securitization, trust structures, loan splitting’loans or anything at all really. If anyone should be sued it should be her.

  2. Things that make you go hmm…

    I just read the article and a couple of points stick out like the proverbials, one of them is already highlighted by you.

    At the end of the day the slippery bastard (single borrower) managed to keep a block of dirt, yet “they” somehow claim to be ruined. Living from one pay cheque to the next with a block of dirt is aspirational to some. How about being locked up and flogged daily in a debtor’s prison, I bet you that she wouldn’t be flashing her cleavage, gold necklace, gemstone earnings and diamond rings and done up nails in there.

    And yes, as you have highlighted it will be interesting to read the loan brokers affidavit, particularly the bit about how he exercised his fiduciary responsibility and what kind of cursory checks he did when establishing on the first meeting with his client what kind of loan serviceability and LVR was most likely within most of the major banks lending criteria and something that she should consider further.

    But at the end of the day it should all come down to whether it was her signature on the various loan applications including her income, outgoings, dependents, assets and liabilities.

    If you tell big fibs to an insurer when they insure you, and then later you make a claim and they discover that you didn’t disclose a relevant previous claim, you don’t get nothing, not even a refund of your policy.

    I have a David & Goliath situation going on right now with a major client and his team of Philadelphia lawyers, whereby I have some very real and substantial delay claims against him under the contract as he has been unable to provide me with the necessary access to the works to enable me to perform my services. So and as usual that means that I get stand down rates for all my blokes, plus their accommodation and LAHA and whatever else and the day rates for all of my expensive gear that is on site in compensation, plus an extension of time to my completion date under the contract by the equivalent duration of the delay for his non-performance under the contract.

    Except he has pointed to a clause under the contract that says that if I didn’t submit a program within 7 days of contract award, which we didn’t, and he never said boo either, we irrevocably waive our rights to pursue a delay claim or receive an extension of time which means that I am now due to this delay of theirs also facing liquidated damages to them for late completion, plus I haven’t yet explained to my next client that I have contracted with to have that same gear and men on his job next month (buckleys) or else, to cap it all off. The PM has now been changed but who do I sue here?

    1. Yes, “lost everything except some land” doesn’t quite make sense does it.

      You do seem to be in a very litigious profession or company. I’ve lost track of the court cases you’ve been fighting over the years. Do you ever find time for real work or are you always briefing barristers?

      1. We done 150 contracts last year, lest say that 10% of them need a little bit of senior management support, so its not as many as you think. We are contractors, we would contract with the devil himself if there was a bob to be made, and sometimes we operate outside of the edge. Its a kind of golden rule thing, our clients have got the gold and its my job to get it off of those trickier ones that don’t want to hand it over. The one I mentioned above has an annual revenue of $6.3b and a market cap of $4bish, so I kind of get into character with those type of dudes and its all about bargaining chips, psychological with a smattering of bush law. As you know I do enjoy it, especially knowing that if I fail I dont get locked up and its not my money.

        I expect to receive my departure terms today from my current firm, one of the clauses should hopefully address my daily rate in the event that I need to provide legal assistance to our many open issues including litigation in Singapore after my departure. It’s not quite QC bucks but its up there. The other aspect in negotiating the quantum of my golden handshake is that I will swear on oath that to never reveal where the bodies are buried and waived my right to turn Queens Evidence in perpetuity.

          1. Even better a discretionary trust with a PTY Ltd Trustee. That way your assets are fire walled, with the full protection of the iron curtain offered by a PTY Ltd company and the tax minimization capability of Kerry Packer.

            We have the very learned and equitable monks of Olde England to thank for the creation of trusts to protect a knights assets from being seized by the crown.

            My Australian discretionary trust which has a corporate trustee has the following clauses in it. Its ridgy didge and you may recall that I have been through the ringer with the ATO and they have no problem with it either.

            Thermonuclear tax efficient distribution of profit from income and capital gains to as per below.

            “Beneficiaries

            (a) the person or persons named in the Schedule
            (b) the grandparents, parents, brothers, sisters, spouses, widows, widower, children and remoter issue and next of kin of the person or person named in the Schedule and the spouses, widows, widowers, children and grandchildren of such parents, brothers and sisters, spouses, children and next of kin.

            then (c) to (g) of all the usual legit stuff including charitable or religious bodies like the Bardon Foundation or The Bulimba Real Estate Learning Institute.

            Vesting Day

            Shall mean the first to occur of the following dates:

            (a) the day upon which shall expire the period of 80 calendar years commencing on the date of the making of this Deed;
            (b) the date upon which shall expire the period of 21 calendar years commencing on the death of the last survivors of all lineal descendants male and female now living of His Majesty King George VI of England;
            (c) to (d) or whatever the trustee nominates.”

            With such an annual distribution of profits and gains available a prolific breeder such as yourself would never have to pay a brass razzoo in tax ever again.

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