Mortgage registration error had no bearing on couple’s financial difficulties

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Mortgage registration error had no bearing on couple’s financial difficulties

Categories:

Hardship and financial difficulty,

Summary:

Kahurangi and Toby owned their own home, a bare piece of land next door and eight rental properties. In 2021, they asked their bank for a loan to buy a ninth rental property, and it approved their application, subject to registering a mortgage over their home. In mid-2022, they asked the bank for financial hardship assistance, and the bank gave them assistance for 18 months. Towards the end of this period, they learned that back in 2021 the bank had registered the mortgage over the bare land, not their home, whose value was significantly greater.

They complained that this error had caused their financial difficulties and also limited the amount of hardship assistance they received from the bank. They also explained that they would have planned their finances differently had they known their home was freehold. They sought compensation in recognition of this. The bank did not accept their complaint and declined to compensate them. It said their lawyer was responsible for wrongly registering the mortgage and offered to rectify the matter at no cost to them. It said the error had merely resulted in the bank having less security than it thought it had. The bank also said it was the level of their income – and thus their ability to make repayments – that had been most relevant to the hardship assistance it could offer them, not the size of the security it held. Kahurangi and Toby did not accept this explanation and asked us to investigate.

Published:

September 2024

Our investigation

We found it was, indeed, Kahurangi and Toby's lawyer who had been at fault for registering the mortgage over the land, not their home. The solicitor provided a certificate confirming they had carried out the bank’s instructions. The bank could rely on that certificate. We also found the mortgage error had no bearing on their financial situation, but rather – as they explained in their hardship applications – rising interest rates had left them without sufficient income to meet living expenses and make loan repayments. Furthermore, the mortgage error had in no way affected their ability to sell one of their rental properties to alleviate their financial difficulties, and they had briefly attempted to sell one of their rentals.