Australian retirees face a $1billion property loss

The Westpoint, Fincorp and now ACR could see thousands of small investors lose up to $1 billion, with many retirees sucked in by TV advertising.

Collapsed property group Australian Capital Reserve targeted retirees in a string of advertisements offering returns of up to 9 per cent -- much less than a professional investor would require for the same risk.

ACR advertised heavily on TV in the "retirees'' timeslot -- 1pm to 3pm -- and through newspapers.

The company, which went into voluntary administration on Monday, had raised more than $300 million from about 7000 small investors.

ACR issued unsecured deposit notes, using the money raised to finance apartment projects being developed by its development arm, Estate Property Group, in NSW and Victoria.

In 2005, ACR's Prospectus 7 offered one-year returns of 8 per cent and up to 10 years at 8.9 per cent.

Real estate consumer advocate Denise Brailey said she alerted the Australian Securities & Investments Commission to the company's activities in December 2005.

"ASIC should have gone into a heavy campaign to warn them about the model being presented,'' she said.

ASIC placed a final stop order on ACR's ninth prospectus in April. The regulator's handling of property-related collapses such as Westpoint and Fincorp is already under scrutiny from the Senate Estimates Committee.

The role of trustees will also come under the spotlight in committee hearings with Bendigo Bank-owned Sandhurst Trustees involved with both Fincorp and Westpoint, while Sydney-based Trust Company is trustee for the ACR noteholders.

In a statement yesterday, Trust said it was not aware of a "breach of the obligations by ACR under the terms of the Trust Deed''.

Trust's executive general manager, Vicki Allen, said Trust had appointed an independent expert to review ACR and its property arm's financial position.

A statement from ASIC said Trust had been in talks over ACR's financial position for the past two months. Trust was also looking for updated valuations on ACR's properties, ASIC said.

Adminstrator McGrathNicol will oversee the 26 companies in the group which own 21 property developments in NSW and Victoria.

The first meeting of creditors and a separate noteholder information session will be held on June 4.

Ms Brailey, who is employed by litigation funder IMF (Australia) Ltd, said yesterday the group had lured mum-and-dad investors through a network of referral agents that included accountants, solicitors, real estate agents and financial planners.

Source: The Australian

Mortgage lending coasting as property prices are yet to boom

Owner occupier home lending hit $14.52bn in March Investor finance dropped 5% to $6.29bn Property prices aren't booming yet.

The housing sector is showing early signs of recovery with four consecutive months of housing approval loan growth but analysts say it is not the start of another property boom.
But investors remain reluctant to spend because the stock market is offering superior returns.
Economists said a combination of stable interest rates, easing inflation pressures and jobs growth will stimulate a surge in house prices nationally over the next 12-18 months.
Yesterday, Australian Bureau of Statistics data showed that borrowing for owner-occupied housing, driven by the influx of new migrant workers, was up 1.7 per cent to a record $14.52 billion in March.
Investors stick to sharesInvestor concerns, later proven to be unfounded, that the Reserve Bank of Australia would lift interest rates in March or April resulted in investment loans dropping 5 per cent to $6.29 billion.
CommSec equities economist Martin Arnold said the reluctance of investors to cash out of the booming share market, which has delivered returns of almost 12 per cent since the start of the year, was delaying the expected upswing in the property market.
In the 12 months to March, national house prices were up 8.6 per cent on average as the boom in Perth prices had been offset by the lacklustre Sydney market.
"The share market is likely to start trading sideways over the next few months and we then expect a pick up in the investor segment of the property market,'' he said.
"It is likely to be more of a gradual improvement in the housing sector rather than a massive turnaround. The strength of the jobs market is one of the only reasons there is any growth in the property market.''
Dollar liftedby dataThe Australian dollar lifted on the release of the ABS data and closed at US83.34 as some financial market participants bet on a interest rate rise later this year.
But most economists are forecasting the RBA will leave rates on hold at 6.25 per cent until early 2008 after Governor Glenn Stevens earlier this month said annual inflation levels were likely to fall to below 2 per cent over the next couple of quarters.
Westpac senior economist Andrew Hanlan said that the three rate rises in 2006 have lost their sting. Source: Herald Sun

Housing affordability puts pressure on low income earners

The Howard Government's Budget cash splurge had failed to address key issues facing low income earners such as housing affordability, advocacy groups claimed yesterday.
With new figures released yesterday showing the Australian house price index rose 1.1 per cent in the March quarter, the Australian Council of Social Services said the Federal Government's priorities were wrong.
ACOSS executive director Andrew Johnson said the Government should have funded a range of initiatives to tackle the issue, rather than focussing on tax cuts.
"Rather than cutting taxes, we were looking for the Government to invest more in making housing more affordable,'' Mr Johnson said.
The Australian Bureau of Statistics showed that in the March quarter, house prices rose in every capital city except for Sydney.
In Brisbane, house prices rose by 2.9 per cent.
The Brotherhood of St Laurence claimed that the climate change measures announced in the Budget did nothing for low income earners, the group executive director Tony Nicholson said were the most vulnerable to the impact.
"The solar rebate will only assist homeowners who can pay $14,000 or more upfront for solar panels, making them eligible for the $8000 rebate,'' Mr Nicholson said.
"Renters and home owners on low incomes are left out.''
Source: Courier Mail

More forbearance needed for defaulting mortgagors

Mortgage Lenders must improve procedures for dealing with customers in financial trouble in repaying their home loans.
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
But the reality is few people would know their lender has such a facility, so poor is the communication about this area of banking. Problems that could be fixed end up getting worse.
The Banking and Financial Services Ombudsman has warned lenders they need to improve this area of their business. The office says it has advised some lenders their communication with customers about hardship provisions needs to be better, as does their staff training.
It cited examples where requests for assistance were ignored by staff, even after repeated approaches. It said some lenders risked being disciplined for maladministration of loan accounts. Among the complaints the ombudsman recently dealt with was a case where a lender made an inappropriate request for detailed medical evidence when a borrower reported financial difficulty resulting from illness.
In another case, the credit provider transferred the balance owing on a credit card account to a personal loan at a lower interest rate to assist a borrower having difficult making payments - but failed to cancel the credit card account.
Several lenders had made default listings on customers' credit reference files while requests for assistance were still being negotiated.
All lenders report increases in the numbers of borrowers falling into arrears with their loan repayments. For example, the Bank of Queensland reported a 56 per cent increase in arrears over a six-month period. Loans payments 90 days or more past due jumped from $60.3 million at August 31 last year to $94.4 million at February 28. Borrowers affected included home loan, credit card and personal loan customers.
Increases in interest rates last year hit borrowers hard and it is not just low-income earners feeling the pinch. Financial counselling services such as Canberra's Care Inc report they are seeing more middle- and high-income earners with financial problems. Care's David Tennant says: "When I started working here in 1995, the country's credit card bill was about $5 billion. Today it is $40 billion."
In the latest issue of the Banking and Financial Services Ombudsman Bulletin, published in March, the Ombudsman cautions lenders to review their obligations under the Code of Banking Practice. Section 25.2 of the code says: "With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us. We would, for example, work with you to develop a repayment plan. If, at the time, the hardship variation provisos of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them."
The ombudsman says: "While the outcome [of a response to an application for assistance] is a commercial matter for the bank, whether or not the steps taken amount to compliance with the promise (made in section 25.2 of the code) falls squarely within our jurisdiction.
"At the centre of compliance with these obligations is that the credit provider responds when put on notice that the customer is in financial difficulty and gives real and genuine consideration to the relevant information their customer has provided about their financial position."
Catriona Lowe, the co-chief executive of the Consumer Action Law Centre in Melbourne, says borrowers need to be aware that compliance with section 25.2 of the Code of Banking Practice extends beyond signatory banks: "The ombudsman uses that provision of the code as the benchmark for all lenders under its jurisdiction."
Lowe says banks are better at handling approaches from customers experiencing financial difficulty than organisations in some other industries. She says the telecommunications industry probably has the worst record in that respect.
But the banks are well behind other industries.
"The utilities industry is well advanced in this area. Companies in the industry have developed tools to assess their customers' capacity to pay and they put these to use in working out payment plans.
"Yarra Valley Water has an incentive plan for customers in financial hardship where if they make five payments on time the next one is waived. We have not seen anything of that nature coming from the banks.
"To be fair to the banks, section 25.2 of the code is relatively new; it was added as part of a review in 2003. But I would say it is time they engaged with it. They need to make it a higher priority for their staff. And they need to make sure staff are listening to the customer and responding with flexibility, rather than dealing with approaches in a legalistic fashion," she says.
The ombudsman says one of the biggest systemic problems is that lenders tend to devise short-term assistance programs, usually no longer than a few months, when longer-term programs would be more appropriate in many cases.
Lowe agrees. "The lender has got to take a realistic view of what the borrower is capable of managing. If it is not a realistic plan, it will fall over and then the borrower will have another black mark on their file."
A finance sector organisation called the Code Compliance Monitoring Committee has also reviewed the way the banks deal with approaches from customers in financial hardship. It reported that "generally, banks have good systems and staff in place to ensure they are meeting their obligations under section 25.2 of the code.
"However, the committee has some concerns about the possibility that not all customers suffering hardship are being identified and referred for assessment to the appropriate area of the bank."
The committee says there is a tendency for lenders to apply a "one-size-fits-all" approach to dealing with customers, which is not appropriate. It is critical of the approach taken by some lenders of not raising the issue of financial hardship with customers in default but relying on the customer to raise the issue.
As a result, "some customers in genuine hardship may not receive the assistance they are entitled to under the code because they do not, for whatever reason, provide unsolicited information about their financial circumstances".
What you should doIf you find yourself in financial trouble, you should act quickly.
■ Raise the issue with the lender. Lenders have been criticised for not being more upfront about their obligations in dealing with customers in financial difficlty. So it is up to you to let them know.
■ Get advice. Some organisations that will help consumers with money problems include the Consumer Action Law Centre in Melbourne, the Consumer Credit Legal Centre in Sydney and Care Inc in Canberra.
■ Complain. If a lender will not discuss your problems with you, find out what complaints body they are part of and get in contact with it. The most commonly used is the Banking and Financial Services Ombudsman.Source: Sydney Morning Herald

More Forebearance needed for defaulting mortgagors

Mortgage Lenders must improve procedures for dealing with customers in financial trouble in repaying their home loans.
Mortgage borrowers who fall behind with their home loan repayments should be able to go to their lender and nut out a plan to help overcome the crisis without pushing the borrower into foreclosure.
But the reality is few people would know their lender has such a facility, so poor is the communication about this area of banking. Problems that could be fixed end up getting worse.
The Banking and Financial Services Ombudsman has warned lenders they need to improve this area of their business. The office says it has advised some lenders their communication with customers about hardship provisions needs to be better, as does their staff training.
It cited examples where requests for assistance were ignored by staff, even after repeated approaches. It said some lenders risked being disciplined for maladministration of loan accounts. Among the complaints the ombudsman recently dealt with was a case where a lender made an inappropriate request for detailed medical evidence when a borrower reported financial difficulty resulting from illness.
In another case, the credit provider transferred the balance owing on a credit card account to a personal loan at a lower interest rate to assist a borrower having difficult making payments - but failed to cancel the credit card account.
Several lenders had made default listings on customers' credit reference files while requests for assistance were still being negotiated.
All lenders report increases in the numbers of borrowers falling into arrears with their loan repayments. For example, the Bank of Queensland reported a 56 per cent increase in arrears over a six-month period. Loans payments 90 days or more past due jumped from $60.3 million at August 31 last year to $94.4 million at February 28. Borrowers affected included home loan, credit card and personal loan customers.
Increases in interest rates last year hit borrowers hard and it is not just low-income earners feeling the pinch. Financial counselling services such as Canberra's Care Inc report they are seeing more middle- and high-income earners with financial problems. Care's David Tennant says: "When I started working here in 1995, the country's credit card bill was about $5 billion. Today it is $40 billion."
In the latest issue of the Banking and Financial Services Ombudsman Bulletin, published in March, the Ombudsman cautions lenders to review their obligations under the Code of Banking Practice. Section 25.2 of the code says: "With your agreement, we will try to help you overcome your financial difficulties with any credit facility you have with us. We would, for example, work with you to develop a repayment plan. If, at the time, the hardship variation provisos of the Uniform Consumer Credit Code could apply to your circumstances, we will inform you about them."
The ombudsman says: "While the outcome [of a response to an application for assistance] is a commercial matter for the bank, whether or not the steps taken amount to compliance with the promise (made in section 25.2 of the code) falls squarely within our jurisdiction.
"At the centre of compliance with these obligations is that the credit provider responds when put on notice that the customer is in financial difficulty and gives real and genuine consideration to the relevant information their customer has provided about their financial position."
Catriona Lowe, the co-chief executive of the Consumer Action Law Centre in Melbourne, says borrowers need to be aware that compliance with section 25.2 of the Code of Banking Practice extends beyond signatory banks: "The ombudsman uses that provision of the code as the benchmark for all lenders under its jurisdiction."
Lowe says banks are better at handling approaches from customers experiencing financial difficulty than organisations in some other industries. She says the telecommunications industry probably has the worst record in that respect.
But the banks are well behind other industries.
"The utilities industry is well advanced in this area. Companies in the industry have developed tools to assess their customers' capacity to pay and they put these to use in working out payment plans.
"Yarra Valley Water has an incentive plan for customers in financial hardship where if they make five payments on time the next one is waived. We have not seen anything of that nature coming from the banks.
"To be fair to the banks, section 25.2 of the code is relatively new; it was added as part of a review in 2003. But I would say it is time they engaged with it. They need to make it a higher priority for their staff. And they need to make sure staff are listening to the customer and responding with flexibility, rather than dealing with approaches in a legalistic fashion," she says.
The ombudsman says one of the biggest systemic problems is that lenders tend to devise short-term assistance programs, usually no longer than a few months, when longer-term programs would be more appropriate in many cases.
Lowe agrees. "The lender has got to take a realistic view of what the borrower is capable of managing. If it is not a realistic plan, it will fall over and then the borrower will have another black mark on their file."
A finance sector organisation called the Code Compliance Monitoring Committee has also reviewed the way the banks deal with approaches from customers in financial hardship. It reported that "generally, banks have good systems and staff in place to ensure they are meeting their obligations under section 25.2 of the code.
"However, the committee has some concerns about the possibility that not all customers suffering hardship are being identified and referred for assessment to the appropriate area of the bank."
The committee says there is a tendency for lenders to apply a "one-size-fits-all" approach to dealing with customers, which is not appropriate. It is critical of the approach taken by some lenders of not raising the issue of financial hardship with customers in default but relying on the customer to raise the issue.
As a result, "some customers in genuine hardship may not receive the assistance they are entitled to under the code because they do not, for whatever reason, provide unsolicited information about their financial circumstances".
What you should doIf you find yourself in financial trouble, you should act quickly.
■ Raise the issue with the lender. Lenders have been criticised for not being more upfront about their obligations in dealing with customers in financial difficlty. So it is up to you to let them know.
■ Get advice. Some organisations that will help consumers with money problems include the Consumer Action Law Centre in Melbourne, the Consumer Credit Legal Centre in Sydney and Care Inc in Canberra.
■ Complain. If a lender will not discuss your problems with you, find out what complaints body they are part of and get in contact with it. The most commonly used is the Banking and Financial Services Ombudsman.Source: Sydney Morning Herald