Mortgage Brokers - whar duty of care do they owe to residential property investors?
Cordato Partners, Business Lawyers, Property Lawyers and Tourism Lawyers
Responsible Lending Conduct rules have become the loan assessment standard for home loans ever since the National Credit Code started on 1 July 2010. The Code was part of the tightening over credit standards around the world after the GFC. And for the first time, the Code applied to residential investment loans.
Many attrirbute the GFC to lax home lending practices, especially in the USA (but also found in Australia) - lending to NINJAs as they were known - No Income No Job or Assets.
But what about investment loans? The Responsible Lending Conduct rules apply if the loan is made for residential property to an investor in their personal name AND ALSO if the loan is made to a family company or trust or SMSF, and the person signs a personal guarantee and/or gives a mortgage over their principal place of residence.
Many residential property investors use mortgage brokers to organise property investment loans.
Mortgage brokers owe a duty of care to residential property investpors who might borrow in tthe name of a family company or trust, or SMSF, if there is mortgage security over a family home or if a personal guarantee is given, to make sure that they follow the responsible lending conduct rules. If they do not, they may be personally responsible for the loss if the loan goes into default.
For an analysis, go to my article MortgageBrokers - Do they owe a duty of care to residential property investors -
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