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Desperate homeowners turning

to third-tier lenders to stave off
mortgagee sales
Number of mortgage-holders in financial peril is on the
rise.

Diana Clement
Share
17 Jul 2023

Homeowners are increasingly looking for non-bank solutions to

their mortgage woes, mortgage advisers have told OneRoof.
Artwork / Beth Walsh

Homeowners at risk of having their properties

repossessed by their lender are turning to third-
tier finance companies to avert a mortgagee
sale, OneRoof has been told.

Mortgage adviser Jonathan Battersby, whose

company, SOS Non-Bank, specialises in finding
private lending solutions for clients who have
been refused finance by the banks, has noticed a
big uptick in inquiries from stressed
homeowners.

He said SOS Non-Bank had so far this year

helped around 25 clients who were at risk of
losing their homes, up from around five last year.

“Life’s tough for everyone currently with the

change in cost of living, interest rates, and
employment. Sometimes mum’s had a baby and
stopped working. Or somebody’s had an injury at
work and can’t continue their employment.
People could just be in a situation where they
had a self-employed business and the business is
gone and [the business loan] is secured against
the property. Or people overextend themselves,
or they need to consolidate [debt] to make stuff
easier and more manageable,” he said.

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“I have had quite a lot of dealings with people

who have got themselves into strife and have
missed payments,” he said, with at-risk clients
often receiving a Property Law Act (PLA) notice
from their bank, which precedes the home going
to mortgagee sale.

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“I’m then looking straight away at [third-tier]

finance companies or private lenders who would
be prepared to understand what's gone wrong
for the borrower, to be able to provide them with
a term of a loan, of say up to 12 months.”

Third-tier lenders typically charge higher interest

rates than the major banks and second-tier
lenders, such as Bluestone or Avanti, and are
usually smaller institutions that are willing to
take on higher-risk customers.

Many of the homeowners seeking third-tier

lending solutions are trying to buy themselves
time and stave-off a mortgagee sale. “Maybe
they haven’t been able to sell because the
market’s rubbish, and they just need more time.
Or it is case of, ‘Hey, we’ve got a big injection of
cash coming but it's not coming for quite a few
months.’ Maybe there’s money tied up in probate
of a will or a property that was bequeathed to
somebody and that’s not selling,” Battersby said.

He said there was a lot of emotion involved when

dealing with those who at risk of their losing
their home. “It causes people to be really
stressed. In my role, you have to learn to cut
through the emotion and look at how we are
going to make this happen,” he said.

However, not all third-tier lenders are prepared

to consider clients with a PLA notice and it’s not
always possible to find finance if the owner’s
property has fallen in value, leaving insufficient
or negative equity. “If we can help, we do. But
getting [a home loan] to service isn't always
easy,” Battersby said.

Battersby is not alone in seeing an uptick in

mortgage stress, with data from credit bureau
Equifax showing the number of mortgage
accounts currently in arrears now sitting above
pre-pandemic levels.

EasyStreet mortgage adviser Gareth Veale said

the jump in mortgage rates, from below 3% to
above 7%, had hit homeowners hard. “Despite
what banks think, not everyone can afford to pay
that. Not everyone has the fat to weather the
storm,” Veale said.

EasyStreet mortgage adviser Gareth Veale: “I have clients who

are hurting.” Photo / Supplied

“Christchurch is a lot better because it wasn't so

out of whack in terms of the average loan value.
But I have clients in Hamilton and Auckland who
are hurting with the knowledge that their
mortgage isn't really much less than what the
value of their house is.”

He said he had been able to avert the worst-case

scenario for some at-risk clients. “What I've tried
to do is catch them before they fail. We've been
able to do things around the margins. For
example banks are being more open to interest-
only terms.”

Ray White Manukau agent Rubal Singh said

property traders in particular were finding
themselves in trouble with mortgages. Some
bought in 2021 expecting to resell at a profit, but
haven’t been able to. One investor put five
properties up for sale at once, needing to sell
three. Two sold at auction on July 4, and one
more is under contract.

Singh said he had turned down listings for

properties where the trader was likely to take
large losses because he didn’t want to make
promises he might not be able to fulfil. “I choose
my clients a bit carefully. There have been
people where there’s going to be massive losses
if they sell now.”

He cites an example of two neighbouring South

Auckland properties bought by a trader. “They
were struggling because they got money from a
private lender, which was at a horrific interest
rate.” Singh said the client was paying in excess
of 13% and he chose not to list the property
because he didn’t want to make false promises.

Some clients were finding ways to continue to

hold properties in the hope that the market
picked up. “There are a few clients who are
arranging money from overseas to hold on for
another year or so,” he said.

Singh says it was extremely unlikely that most

clients would have predicted when they bought
that interest rates would more than double in
less than two years. “No one saw that one
coming,” he said.

In addition to fire sales, Singh is aware of sales

where the buyer failed to settle. “Some of these
cases will be going to the court,” he said.

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