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NSW Separation - Obligation to Advise Bank and Mortgage Broker?

Discussion in 'Commercial Law Forum' started by MikeHen, 29 December 2014.

  1. MikeHen

    MikeHen Member

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    My wife recently purchased a property with the intention that the family move there. Her 2 children from a previous marriage and myself. She has a 80% deposit, but inadequate income to meet serviceability requirements.

    The Mortgage broker requested a letter from me stating that I cover the monthly expenses and would continue to do so, which I provided, stating in the letter that I was aware it would be used by the bank. I am not a party to the loan.

    The mortgage has not been advanced yet.

    Some major issues materialized in the last week that make it impossible to stay with my wife and we are in the process of separating. We do not have an ANC and there is no obligation for me to make any financial contribution to her bank account.

    Do I have an obligation to tell the bank and mortgage broker of the change in circumstances (of our separation). What are my risks if I don't advise the bank?
     
  2. Tracy B

    Tracy B Well-Known Member

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    Hi MikeHen,

    I'm sorry for the sudden change in plans.

    In relation to the letter, is this a letter of guarantee or a contract? What monthly expenses will you be paying for under the letter (i.e. will it include mortgage repayments or bank fees or interest)?

    As far as I know, there is no obligation to inform the bank of any change in circumstances. However, your bank may expressly require this from you in the letter or your wife in her loan agreement. Chances are, your wife may need to disclose this information under the loan agreement. Hopefully someone else on here may be able to shed more light on this issue?

    Are you happy to continue your obligations under the letter or are you also asking whether the letter is legally binding and enforceable?
     
  3. MikeHen

    MikeHen Member

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    Thanks Tracy

    It's a letter of support. It states in will cover all monthly expenses including mortgage repayments.

    It also states "that I am aware that the letter is to be used by the bank to grant a loan"
     
  4. Tim W

    Tim W Lawyer

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    Even if you are not a co-borrower, or a guarantor, I suggest that this bit:
    and this bit:
    place you in the position of having information that is material* to the lender's decision.

    I suggest that this letter, and the fact that you know its purpose,
    gives rise to a duty** to disclose your change in circumstances to the lender.
    Bear in mind that it is also a change in the circumstances of the loan applicant.

    What you want to do here is protect yourself from the lender
    coming after you later (when/if your estranged wife defaults on a loan she can't afford).
    They may do this on the basis that you "knew, or should have known"
    something that would have been used by the lender to decide the original loan application.***

    So, I tend to favour disclosure, as an act of self protection.
    I suggest that it may be better to disclose it to the lender - not the broker.
    The broker is only interested in their commission, and getting the loan written.
    You do not need the risk of your disclosure being <ahem> inadvertently overlooked.

    One thing though - making the disclosure will very probably aggravate the Family Law aspects.
    In short and simple, it will probably blow up into accusations by your estranged wife
    of making the disclosure out of spite and malice - to "get back at her" over the breakup.


    ----------------
    * ie relevant, and potentially, decisive
    ** in equity, at least
    *** even if you don't have a statutory or contractual duty of the type referred to by @Tracy B above
     
  5. MikeHen

    MikeHen Member

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    Thanks Tim

    As you have clearly identified - that the potential for Family law aspects, is a very real issue.

    I understand that there is a duty to disclose and that it is for my protection. As she has only a 20% loan, what is the likelihood of the bank coming after me - they have a mortgage over the property.

    Would my 'duty' to disclose be fulfilled by sending an official letter to my wife informing her to advise the bank, as I don't even know what bank it is, as my dealings have only been through the broker.

    I would not like to aggravate the family law side, but I want to maintain integrity and do what is legally correct.

    Cheers
     
  6. Tracy B

    Tracy B Well-Known Member

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    Hi MikeHen,

    A letter of support is a letter relied on by the bank where you certify that your wife has the funds to meet the monthly repayments. It is akin to a guarantee letter that the bank will rely on, and may go after you personally, in the event your wife fails to make the repayments in time. In any case, the details in the letter have been relied on by the bank to calculate the riskiness of the mortgage and the level of interest rate. As such, you should disclose any chance in circumstances with the bank.

    You could write a formal letter for your wife informing her of her duty to disclose this information to the bank within X number of days (e.g. 7 days), or else you will disclose the information given that you have been put in a position akin to a guarantor of the loan. To protect your family law matter, make it clear in the letter that you are not doing this out of spite but that you believe you and/or your wife owe a duty to the bank to disclose any change in circumstances.

    You can also speak with your local community legal centre for some advice before writing the letter, then mention in the letter that you have spoken with the legal centre and what they have advised you or your wife to do.
     
  7. Tim W

    Tim W Lawyer

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    Without knowing more about your circumstances (no, don't tell me)
    I could not (indeed, would not) speculate about likelihood.

    I suggest that you write to the lender directly. The lender, not the broker.
    I do not recommend relying on other people, especially not in complex circumstances.
    You might reasonably write to your estranged wife advising her that you have made the disclosure,
    if only so that in any later proceedings, you can use it at evidence of acting transparently and in good faith.

    I recommend seeking the advice of a lawyer who works in the field of family law.
    If only because it is a very bad idea to make big decisions based on what some guy says on the internet.
     
    Victoria S likes this.
  8. MikeHen

    MikeHen Member

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    Thanks everyone for your comments. I will go to a lawyer and progress it.

    Cheers mike
     

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