SUBJECTS: Mortgage stress, Western Sydney, ACCC, Managing Your Mortgage
Good afternoon Chris, or … the minister
CHRIS BOWEN:
Chris is fine, and good afternoon.
JOURNALIST:
I might just, by way of introduction, just talk; it was prompted by the fact that you believe there are a lot of unscrupulous practices by some real estate operators who are actually forcing people to sell their properties. How widespread is this?
BOWEN:
It's not so much real-estate agents, to be precise. This matter was first raised with me by Jason Clare, who is the member for Blaxland, which covers Bankstown and Cabramatta in Western Sydney. And what it is, is organisations that set themselves up and their business model is to buy houses off people who are in mortgage stress.
If you drive around Western Sydney, in my own electorate, you see signs and photographs on almost every second telegraph pole saying 'are you having trouble with your mortgage', 'are you under mortgage stress?', 'call us, we buy houses quick'. And there's about eight or nine websites running, where these businesses say 'we can take your house of your hands, very, very quickly, in a matter of days.'
Now the problem with that is, if you're under mortgage stress you've got people knocking on your door, debt collectors etc., you're really under pressure and this seems like a very quick out. You think 'ok, I'll sell my home and get the money in a few days', but these people pay less than the market rate.
There are a couple of good operators, but generally-speaking, these people pay less than the market rate, so you deal with your short-term problem by getting some cash quickly, but at the same time you leave yourself in debt, you sell the house for less than the debt is, so you leave yourself with an ongoing debt or at the very least you sell it for less than it's worth than if you'd planned a bit more, taken a bit more time and got some more advice you'd have got a much better price. Or you may have had a different way through and in the long-run would've been much better off.
JOURNALIST:
Is that the purpose of the website or is it really just to give people some advice?
CHRIS BOWEN:
The ACCC has a new page on their website called 'Managing your Mortgage' which really says 'look, if you're under pressure, if you've been talking to people like this here are your rights'. Firstly get second and third opinions, talk to real-estate agents. Contact your lender if you haven't already; a lot of banks will say, in many cases it's not in the bank's interest to force you out of the house so a lot of the time the banks will say, well lets sort out a plan to get you through this, without you having to sell your house, lets extend the loan longer or lets reduce your payments for a period of time.
So if you haven't spoken to your lender, do so. Think about refinancing or if you do feel that selling your home is the right way to go, that's perfectly legitimate. Please don't rush in and make a rash decision because once the property has settled it will be too late. Now the ACCC told me that they think they could argue that this is what's called unconscionable conduct, which is illegal conduct under the Trade Practices Act.
With unconscionable conduct the problem is the ACCC would need to be involved very early. Once the house is sold, basically the house is sold and it's very hard to undo the omelette. But if people have signed a contract and they think 'oh gee, listening to Don and Kevin I'm not sure I should've done that', you should get on to the ACCC immediately because there may be things the ACCC could do.
But we took the decision that by far the better approach is prevention, rather than cure. By far, the better approach is talking to people and through programs like yours people maybe people will look at the ACCC's website and don't rush into it because there are a lot of people either doing this or contemplating this.
JOURNALIST:
Do these people turning these properties over Chris or are they buying them and holding on to them?
CHRIS BOWEN:
They're buying them and unusually selling them, a period of time later for a higher price.
JOURNALIST:
So the basic advice, I'll never forget the two greatest philosophers produced by this country, of course Mike and Mal Leyland, once said when you bog the Land Rover, boil the billy.
CHRIS BOWEN:
That's right. Take your time, think about your way through and don't feel pressured or make a rash decision. I can understand it's very tempting, you're really under pressure and you think 'oh geez, here's a quick way out', but in the long run it's probably not in your best interest, so what we're telling people is get advice – there's lots of financial counsellors out there, whether they're government or charity, or pay some money to actually go and see someone who will do it for you. There's lots of different sources of advice out there. Don't sit there on your own.
JOURNALIST:
And will the ACCC steer you towards those…
CHRIS BOWEN:
Yes, yes.
JOURNALIST:
Oh that's fantastic, great news. It's nice to think that there are services like that.
CHRIS BOWEN:
Yeah and there are a lot of services out there and whether it's the ACCC or, as I say, you go to look up financial planning charities or churches who have financial planners associated with them. They'll just make their services available to you.
There are a lot of different services out there and there are a lot of people doing it tough. But as I say, every second telegraph pole in Western Sydney means that there's money in this for people. I have concerns about any business model which relies on vulnerable people. Any business model which is relying on people under stress and pressure and trying to get them to make a quick decision, is a business model which puts my antenna up, to say there's something going wrong here.
JOURNALIST:
Alright, well good to know that there's people around like you Chris that are fighting the fight.
CHRIS BOWEN:
That's nice of you Don, that's what we're here for. That's why we get into it, to try and help people.