Pledge to help struggling homebuyers

The banking industry says all home lenders should sign up to the federal
government's initiative to support borrowers who have lost their job and are
struggling with mortgage repayments.

Treasurer Wayne Swan announced on Sunday that 144 retail banks, building societies
and credit unions have now signed up to the government's set of "principles" that
assist borrowers who are experiencing financial difficulties during the tough
economic times.
"People will have some more flexible options if unfortunately they become unemployed
and experience difficulty paying off their mortgage," Mr Swan told the Nine Network.
"While Australia is weathering the global recession better than most countries, we
are not immune to its impacts, including an expected rise in unemployment."
The government is forecasting the unemployment rate to reach 8.25 per cent in mid
2010 compared to 5.7 per cent in May.
In April the government had made an agreement with just the ANZ, the Commonwealth
Bank, National Australia Bank and Westpac to sign up to the protocol.
Now all members of the Association of Building Societies and Credit Unions (ABACUS)
and all retail members of the Australian Bankers Association (ABA) with a focus in
the mortgage market are now signatories to the Principles.
ABA chief executive David Bell said he would like to see all other lenders not under
the regulatory eye of the financial watchdog do the same so that all borrowers get
access to the same assistance.
He said after examining Supreme Court applications for repossessions, the ABA found
that between 65 and 80 per cent do not relate to banks, but to other lenders.
"Unlike banks, non-conforming lenders - which are not regulated by the Australian
Prudential Regulation Authority - are not prudentially supervised and often need to
act more quickly on a mortgage default than a bank," Mr Bell said in a statement.
Mr Bell said banks are different because they want to work with their customers to
look for solutions to problems with their loans, especially as the difficulties may
be short-term and banks want to keep long-term relationships with their customers.
The government's protocol means that financial institutions will be able to offer a
range of options to assist mortgagees who are facing financial hardship.
These options include postponement of mortgage payments for up to 12 months, a
reduction in the amount of each payment due under the contract, interest-only breaks
on loan repayments and fee waivers.
"It also backs up with the ability of people to basically question whether banks or
building societies or credit unions carry through this protocol by the ability of
people to access the Financial Ombudsman Service," Mr Swan said.
"Of course, these options won't be appropriate in every case, and financial
institutions will make assessments based on the borrowers ability to meet new
contractual obligations in the long-term," Mr Swan said.