MFAA introduces new hardship assistance for borrowers
The Mortgage and Finance Association of Australia (MFAA) has introduced new measures to ensure non bank lenders, mortgage managers and brokers assist borrowers who find themselves in financial difficulty.
The Association has amended its Code of Practice in response to rising levels of community concern about the small number of borrowers who are finding themselves in some difficulty in servicing their loans.
“Essentially, our members must now consider whether it is appropriate to vary the terms of repayment on a loan once they are aware a borrower is in financial difficulty,” said Phil Naylor, CEO of the MFAA.
“MFAA members owe their business success to the strong relationship they have built with borrowers. About 55% of all mortgages in Australia are written by non banks, mortgage managers and mortgage brokers and it is appropriate that they assist borrowers who find themselves in financial difficulty,” said Mr Naylor.
“It is crucial, however, that borrowers who are in some financial difficulty, to advise their lender or broker immediately to ensure the best result can be achieved.”
Under the new provisions, MFAA members can consider:
- the borrower’s request to vary the payment terms in good faith and within a reasonable time, giving regard to the borrower’s financial circumstances;
- suspending any action to recover any payments due under the credit facility and, if it has not listed a default already, not list a credit default in respect of the credit facility against the borrower until the matter is decided;
- encouraging the borrower to make payments the borrower can afford pending the Member informing the borrower of its decision to alter the payment terms.
Further, MFAA members must act reasonably in assessing the borrower’s request to vary the payment terms under the borrower’s credit facility and must not require:
- the borrower to apply for the early release of any part of his or her superannuation entitlements; or
- the borrower to obtain funds from family members, friends or other third parties, prior to the Member considering whether to, or agreeing to, vary the payment terms.
