Liquid paper and shattered dreams: homeowners brought to their knees in the face of lending practices

Jason Hannagan had to sell his house and investment property after a financial lender gave his family a loan they couldn’t afford to repay.

Mr. Hannagan’s family took out a loan of $ 590,750 from a lender called Pepper Money in 2012.

He estimated the family’s monthly income to be around $ 9,500 and their monthly expenses to be around $ 4,000.

But their mortgage broker recorded their expenses at just $ 15,600 per year, which works out to $ 1,300 per month.

“It’s for [a family of] five people, ”Hannagan, who runs his own delivery business, said at 7:30 am.

“He’s an imaginary character.

Mr. Hannagan says they could never afford the loan.

“If the bank looked at it, it looked at what the income and living expenses were, it doesn’t match,” he said.

“I am not a financial advisor, but I see that number is not true.”

After a few months, the Hannagans had to sell their investment property in Sydney. Three years later, they were forced to sell their family home in Brisbane.

Now they want to sue their broker.

“It has been a very difficult task. Very difficult. I have good days and bad days,” Hannagan said.

In a 7:30 a.m. statement, Pepper Money said it applied a multiplier to Hannagan’s expenses to make sure they could afford it.

“Although the applicant has provided a stated amount of living expenses in [the] request, Pepper applied a measure which meant that the figure we used was 3.5 times higher than what the borrower said, “the statement said.

“This was done to ensure that the applicant can repay the proposed loan.

“In addition to reviewing the company’s bank statements that verified the client’s income at the time, Pepper called the client to confirm the income numbers shown in the request, type of business, purpose loan and the ability to meet proposed repayments. “

“He took all our money”

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Kevin Canavan says there were several errors in his <a class=loan application.” class=”_1sqAO WIJbJ _1fCxM” data-component=”Image” data-nojs=”true” src=”″/>
Kevin Canavan says there were several errors in his loan application.

Kevin Canavan found himself in a similar situation. He applied for three loans totaling $ 720,000 from the National Australia Bank to purchase investment property.

He said his monthly household income was close to $ 9,000 and expenses were $ 4,000.

“It wasn’t until months later, until we signed the loan, that I saw the loan application that I saw $ 3,500,” Canavan said at 7:30 a.m. .

The lower spending figure meant he was missing $ 236 each month.

“It was very difficult. I had to sell my car and I relied on my family members for some support,” Canavan said.

“He took all our money, everything we have at the end of the month.”

The NAB said at 7:30 a.m. in a statement that Mr. Canavan’s claims “have been assessed in accordance with NAB’s home loan policies, including auditing their income, accounting for their expenses and audits. from the credit bureaus “.

Banks should crack down on loans

Both Mr. Canavan and Mr. Hannigan were caught off guard by what in the banking industry is called the Household Spending Measure (HEM).

It is a tool that financial institutions use to calculate your monthly expenses.

It was designed to determine the bare minimum on which customers can survive.

The Royal Banking Commission has put a torch on the banks for irresponsible lending.

Westpac shares collapsed on Thursday after documents released by the Royal Commission revealed that an analysis of 420 Westpac mortgages revealed:

  • 29 percent had not completed all minimum income checks
  • 86 percent had living expenses equal to the HEM benchmark
  • 66 percent had not received itemized living expenses,
  • In 30 percent of the sample, the borrower’s financial situation was suggested to be distorted;
  • And in 9 percent of the sample, the loan would not have been approved if true financial information had been used in the functionality assessment.

Following the royal commission, JP Morgan chief economist Dr Sally Auld expects banks to crack down on loans or the regulator to force them.

“This does not necessarily mean that house prices will go down,” she said.

“But I think it’s a fair guess to say that in a world where banks are tightening lending standards, house price growth is likely to be slower than it would otherwise.”

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