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Kevin Rudd, Australia’s Prime Minister is to announce his mortgage relief plan that will freeze mortgage payments for up to 12 months for financially stressed homeowners.

In an unprecedented move, Australia’s big-four banks have reached the landmark agreement to help prevent struggling families from losing their homes.

Part of a comprehensive package of assistance for workers down on their luck, the Commonwealth Bank, National Australia Bank, Westpac Banking Corporation and ANZ Bank will put a freeze on mortgage payments in hardship cases. Mr Rudd will announce the welcome relief at a community employment forum in Melbourne in front of 150 people, some of whom have recently been retrenched.

In his speech, the Prime Minister says the stress of paying mortgage and car payments are “real bottom-line concerns around kitchen tables right across Australia”.

This plan help families whose income earners have lost their job/s to focus on that one problem of returning to gainful employment, which would in turn solve their financial problems and regain their ability to make timely mortgage repayments and car repayments.

“That’s why, some time ago, I asked the Treasurer [the nuggety Wayne Swan] to negotiate an agreement with Australia’s big-four banks on a comprehensive package of assistance to workers who lose their jobs.” Mr Rudd says the move will provide for a better handling of borrowers in hardship through job loss.He says banks will postpone mortgage payments for up to 12 months, with interest to be capitalised into the loan.

The banks are also considering extending the period of mortgage contracts and reducing payment amounts. Waiving fees in financial hardship Banks also indicated that on other loans, including car loans, where appropriate, they would consider interest-only repayment options, and will also consider waiving fees in hardship cases.

“Of course, these options won’t be appropriate in every case, and banks will make assessments based on the borrower’s ability to meet new contractual obligations,” he says.” But the Government’s purpose in its negotiations with the banks has been clear – to ask the banks to provide maximum flexibility for borrowers suffering temporary hardship. through enforced unemployment for the 12 months ahead. “

“I’d like to thank the banks for the goodwill they have demonstrated in this area.’ This is just another reason why Kevin Rudd is doing such a great job at keeping the economy ticking over in a business as usual mode, underpinning property values for all of us, whilst the rest of the World struggles to get out of the global financial crisis.

American politicians seem just to talk about doing things for home owners, and meanwhile 10,000 people a day are losing their homes in the US. Where are these people to go.

In contrast, Kevin executes plans and then talks about the results,and gives credit where credit is due. Mortgage lenders and homeowners are both winners in this,, it ensures that house values remain solid. This outcome is good for lenders security and all homeowners, whether secure in their jobs, or down on their luck, and hopefully this will filter down to all mortgagors in Australia from all mortgage lenders. Maybe the long suffering American jobless homeowners will get this security and peace of mind, and hopefully soon.

Government plans to give banks the ability to collect credit reports and a full credit profile of  mortgage credit  applicants before you get your mortgage

The banks have been taking a beating lately. After all they have been lending “irresponsibly” over the last few years, and the Government has has the tie down solution: new responsible lending requirements placed on the banks, and due to come into effect from January 2011.

Banks remedy is a bitter pill for most of us. They want to have a full financial credit profile of everyone so that they can ensure you can afford the mortgage loan [or any other credit] that you are taking on.

In case you are thinking that this is happening already, think again.

When you currently apply for credit of any kind, including a home loan, you sign a privacy Act statement that authorises the mortgage or other credit provider to access your credit reports and discuss your credit with other lenders.

They essentially only get access to all defaults, all utility account transactions. For instance, phone bills that you or your partner, or even ex partner have not paid can be a deal breaker and unpaid judgements against you. they also get a handle on how many credit enquiries you have made over a 90 day period. That can also be a deal breaker when it comes to getting finance approved. That is, banks just need the bad stuff on you to decide if you a good credit bet. And only when you apply for credit. Now a default is considered only after 60 days of unpaid bills.

But the banks new model is to view every aspect of your finance and credit affairs, including accounts with other institutions, relationships with utility companies, when accounts are opened and closed, and, crucially, the repayment history of all accounts going back two years [currently this can be as low as 6 months to 12 months].

Can you spot the change? They now want all the credit stuff on you, the bad and the good, and will be able to credit profile you.

And the time lapse will shrink, so conducting a credit account can have a worse outcome that some of us would like.

The banks view is that by knowing more about you, will give then a better ability to ensure you are able to repay your bills and credit when due. This could be based on your payment cycle, so 30 days may be the number that is settled on.

The Australian Government believes that the proposals are in the consumers’ best long term interests because the current system allows only bad information to be considered.

Will new credit responsibility laws put a lid on house prices?

Will this affect house prices? It could well dampen demand for housing, based on the fact that many people are in my view over committing on their mortgage credit, and if this happens we could see home prices flattening, just as the decade of relaxed credit we have experienced has increased demand. It seems that the days of easy credit for home loan finance are numbered.

Author: Rick Adlam, Mr Mortgage