2015 - 2016

Lending

Property lending

Mr K took out a bank loan of $390,000 using his house as security. The house valuation was set by the $590,000 Government Valuation (GV). After falling behind in repayments, Mr K borrowed from his sister as the bank agreed to defer debt recovery action for three months if he made all payments as they fell due. Mr K continued to miss the required payments and the bank proceeded with the debt recovery via a mortgagee sale.

Mr K complained the bank failed to get a registered property valuation when he took out the loan. He believed the bank should have had more complete information about the property’s value when deciding how much money to lend. Mr K also complained he wouldn’t have borrowed from his sister if he knew the bank would proceed with the mortgagee sale anyway.

We found the bank had no specific obligation to obtain a registered valuation before lending and acted fairly in the lending process. The bank was entitled to make its own risk assessment, including whether the value of the security was sufficient. It was reasonable for the bank to make initial lending decisions based on GVs.

The terms of the agreement to defer recovery action were clear, and it was essential that Mr K made full payments to the bank as they were due. Mr K didn’t do this, so we found it was reasonable for the bank to continue with the mortgagee sale.