Author: Jonathan Dart
Date: April 12, 2008
Publication:  Sydney Morning Herald

It follows concerns by welfare groups that some institutions have been engaging in "fire sales", where a property is sold quickly to cover their own liability but leaves the homeowner with little of their share of equity.

Under the amendments, due to be brought before Parliament in the budget session, stringent conditions will be placed on a mortagee, including a responsibility to properly advertise and auction a house.

If it can be proved a house was sold under market value, the mortgagee will be liable to pay damages.

Figures cited by the Reserve Bank last September show voluntary house sales regularly attract a price 15 to 20 per cent higher than mortgagee-in-possession sales.

A study by the bank last month showed NSW households were dealing with record levels of mortgage stress: 40,000 home owners were 30 days or more behind in their payments, with 15,000 of those 90 days or more behind.

A spokesman for the Lands Minister, Tony Kelly, said the Government's measures would ensure that in a forced sale, the "mortgagee will be required to ensure a fair market price is achieved".

A Nationals MP, Don Page, put a similar bill before Parliament this week; it was rejected by Labor because it did not cover a broad range of issues, such as sales carried out under powers of attorney.

Mr Page said Labor had to act quickly to get legislation through Parliament because hundreds of households were set to default on loans in the next month.

"Quite often [houses don't] go to auction and the real estate agent just rings up some investor who buys it quickly and at a cheap price. That needs to be stopped - I find it disappointing that we fell down at the last hurdle," he said.

A Commonwealth Bank spokesman welcomed the new laws: "We always look to maximise the position of our customer."

The Australian Bankers Association's chief executive, David Bell, said banks had acted in good faith. He blamed the "substantial increase" in repossession actions on non-bank lenders.

He said research showed that banks accounted for only 20 to 35 per cent of total applications for repossession in NSW. "[The association] does not understand the need for further regulation," he said. "The current law requires the mortgagee to conduct the sale in good faith and not to sacrifice the interest of the mortgagor."

But the Salvation Army's Money Care financial counselling co-ordinator, Tony Devlin, said the new laws were needed to "plug the holes" which vulnerable homeowners fell into.

"Whenever we see people who are in such dire situations that the sale of the house is the only option, we do encourage them to try and sell it themselves before going in to a mortgagee sale," he said.

"It's important to get a good price because it's often not just the mortgage people have to cover.