Handle mortgage defaults by confirming the arrears, requesting hardship assistance early and tracking the lender’s deadlines. Keep the client’s housing and repayment position ahead of commission concerns.
Arrears, Default and the Australian Timeline
Arrears are overdue contractual payments. Lenders commonly group them at 30, 60 and 90 days, but those reporting buckets do not postpone a borrower’s obligations.
A mortgage default is a breach of the loan contract that allows the lender to issue a default notice. One missed payment can trigger that notice. A credit-report default listing has separate notice and overdue-payment rules.
Under section 88 of the National Credit Code, the usual default notice must give at least 30 days to remedy the default before enforcement. Read the actual remedy date and amount on the notice.
If the default remains unresolved, the lender can begin court proceedings to recover the whole debt, subject to applicable hardship protections. Enforcement can lead to possession and a mortgagee sale. This is the Australian process, rather than the US-style foreclosure terminology clients might recognise.
Section 72 allows a borrower who cannot meet their obligations to request hardship assistance orally or in writing. Use a written request so the file records what was asked and when.
The lender must generally give a written decision within 21 days if it needs no further information. If it requests relevant information, the response timetable changes. Supply it promptly and diary the applicable deadline.
A borrower can request hardship assistance while a default notice is current. Moneysmart explains hardship and the enforcement sequence. Get legal help immediately if court papers arrive.
Why Clients Fall Behind
Income loss, other debts, illness, relationship breakdown and budget strain can all leave a client unable to make the repayment. Ask whether the cause is temporary or whether the household’s ongoing income has changed.
A short income interruption can point towards a temporary hardship arrangement. A lasting shortfall needs a sustainable restructure or a discussion about selling the property. Base the proposal on a household budget, with help from a financial counsellor where needed.
What a Default Costs the Client
A recorded default damages the client’s credit file and can restrict future borrowing. Paying it later updates the listing but does not remove it immediately.
Financial hardship information is different. The Office of the Australian Information Commissioner explains the hardship markers. Temporary arrangement markers disappear 12 months after the final repayment under that arrangement. A permanent variation marker disappears 12 months after the arrangement starts.
Credit reporting bodies cannot use hardship information to calculate a credit score. A future lender can still see it while it remains on the report. An agreed arrangement, with repayments met, is easier to explain than an unpaid default.
Prevention Work That Pays Off
Assess serviceability with the applicable buffer at application, then check the client’s loan terms at each annual review. Ask about income changes and upcoming expenses before the next missed debit.
When rates or circumstances change, compare refinancing costs and repayments against staying with the current lender. Include discharge costs and any loss of loan features. A lower advertised rate alone does not establish that switching improves the client’s position.
What to Do When a Client Misses Repayments
Check the lender portal when the first debit is missed, then confirm the account position with the lender. The trail statement can reveal a payment change, but it does not establish the client’s arrears balance.
- Confirm the exact arrears amount, fees and oldest unpaid repayment with the lender. Obtain copies of any default notice and record its remedy date.
- Check available savings, offset funds or redraw. Confirm access and whether using those funds leaves the household able to pay its other bills.
- Lodge a written hardship request when full catch-up is unrealistic. Explain the cause, expected duration and affordable payment. Obtain the client’s authority before acting for them.
- Diary the 21-day hardship follow-up and the default notice’s actual remedy date, which ordinarily allows at least 30 days. Track any further-information request separately.
If the lender proposes interest-only repayments or a longer term, write down the repayment reduction and the increase in total interest. Compare both figures with the current loan. Explain any repayment increase when an interest-only period ends.
Do not lodge a refinance while the loan is 30 or more days behind unless the proposed lender accepts recent arrears. This is an application screening rule, not a legal ban. Obtain the lender’s acceptance before lodging.
A new loan does not clean the repayment history. Discharging a recent loan can also trigger commission clawback under the relevant agreement. The client’s interests govern the recommendation even where clawback applies.
Before closing the immediate action, confirm the lender has received the request. Record who owns the next follow-up and tell the client which payments remain due until an arrangement is agreed.
What Arrears Do to Your Trail
Lender commission terms commonly suspend trail when a loan falls into arrears. Some terms exclude back-pay for the suspended period, even after the client catches up.
YBR Aggregation’s published commission policy gives examples of suspended trail and periods that are not paid retrospectively. The trigger and restart conditions depend on the lender and agreement. Check each lender’s current commission terms before treating a missing payment as an error.
Compare the lender portal with the aggregator statement and record when trail stopped. Check whether the loan remains active, whether arrears explain the gap and what the agreement says about restarting payments.
Use the guide to how mortgage broker trail commissions work for the payment rules. To spot suspended payments on the statement, follow the steps for tracking trail commissions.
The client’s interest governs the advice, not the trail payment. Record the hardship or refinance recommendation on its merits, with the commission consequence treated separately.
Support Services Worth Knowing
The National Debt Helpline connects clients with free financial counselling on 1800 007 007. A counsellor can help with the household budget and negotiations across several debts.
If financial stress is affecting the client’s mental health, suggest professional support. Moneysmart directs borrowers to Beyond Blue on 1300 22 46 36. Court papers need urgent legal advice as well as a repayment discussion.
The Australian Financial Complaints Authority (AFCA) can review a lender’s handling of a hardship request. Its complaints guidance covers declined requests, missing responses and debt recovery after a request for help.
Raise the issue with the lender first. Use the guide to AFCA complaints and hardship handling for the complaint process. AFCA is a dispute resolution service, not a refinance provider.
Rebuilding After a Default
On-time payments, falling debt balances and steady income help a client demonstrate recovery after default. Check the credit report for errors and keep evidence of settled debts or completed arrangements.
Disclose the history up front on the next application and explain what has changed. Set expectations around the proposed lender’s requirements. For the separate lending assessment, see home loan options after bad credit.
Set Up Your Process Now
Set a diary rule for any file more than five days behind on a repayment. Assign a person to contact the client and confirm the lender’s figures.
Keep a prepared list of lender hardship contacts and the evidence each requires. Record the request date and 21-day follow-up date in the client file. Where a default notice exists, add its remedy deadline and escalate court documents for urgent legal advice.
