Advice needed - LMI in pre-approval but not Loan Agreement

Hi all,

Sorry in advance for the long post :/

Hoping someone has some knowledge of my rights in this situation:

We got pre-approval for a loan for the construction of our new house back in December, this pre-approval included paying out our old loan with the same lender. Due to the size of the loan and the LVR, the lenders mortgage insurance came out to ~$13,500. At the time I thought wow, that's alot - but what can you do.

Next step, I realise that by paying out my old loan (with offset account) I no longer have the benefit of an offset account, so I ask the lender to just leave my old loan as is, as we are going to pay out this loan when we sell anyway, but to use the property as security still.

So the Loan Agreement comes out for the lesser amount (ie. without the payout for the current loan) and LMI is listed as $nil. I figure it's because the loan amount is smaller, or somehow the restructuring changed the LVR ... what do I know, I'm not a LMI expert ... so I sign it and away we go.

Fast forward to July - final payment made on our construction loan. A few weeks later I get a call from the lender saying they stuffed up and they should've charged me the ~$13,500 so they'll be deducting that from our offset account. I say "hold on a second, the loan agreement clearly shows that as $nil" and its a LOAN AGREEMENT. They say they'll get their legal team to look into it.

Just now I get a call from them saying they've looked into it, determined they have the legal right to the money (based on the pre-approval) and deducted the amount from the offset account.

So now I have $13,500 less in my offset account - money i've already committed/spent on interest free days credit card (I never thought the bank would change their mind about the LMI ... I figured their contract writing people would know what the hell they were doing).

Any thoughts? Unfortunately they're closed now, but I'll be speaking to the complaints person tomorrow - just wondering if anyone knew where I legally stand? ... as far as I can see the Loan Agreement is the legally binding contract, so they have no right to any LMI fees, as per the contract.

Thanks in advance,

Liam

What you can be certain of is they will TELL you that they have the right to take the money, regardless of whether they do or not. Like an insurance company whose policy is to deny all claims, hoping people will just accept it give up. It's the most profitable option for them.

i'll say complaint dept, if not satisfied, ombudsman banking will be gladly to be 3rd party to resolve the issue, protecting customer from being abused by financial company

That's what I figured, as they haven't really given me an explanation (ie. as to *why* they can take the money even though it's not in the loan agreement), just taken the money.

Have a complain in with the complaints department, waiting to hear back, hopefully today.

Will let you know how that goes

Having just been going through the terms and conditions of the offset accounts I did find a section which seems a bit scary - to paraphrase "If you owe us money you completely agree to give us access to the funds in this account, that we may take without notice, in order to bring your account into good standing; you waive all ownership of the funds within the account in this instance"

Again.. that was just paraphrasing and my interpretation of CBA's MISA T&Cs- not sure which back you are using but I dare say they are all the same...

Interesting case - would like to know how much success you have here (I am confident you will be successful - just stick to your guns ). Good Luck!

I would have thought that if it is not listed in your Consumer Contract Schedule, they can't charge it - that has been my experience with other fees, but don't know about LMI.

It's a very interesting case - let us know how you go. Good luck!!!

Update:

Complaining to the bank's complaint person seemed to achieve little except a reiteration of "we've taken it because we believe we can".

Have now lodged a complaint with the Credit Ombudsman, will see how that pans out.

I am really curious to see how this one goes.

I notice you work for a broker thlo, any opinion?

Hi lgale, I am in fact the principal broker at The Home Loan Office (tm).

In terms of opinion, I can see both sides of the arguement but I am not qualified to comment on legal matters.

I think it will come down to offer and acceptance in contract law. What you knew was the terms of the offer by the lender before you accepted it. Terms can be express (written into contract) or implied at law.

Any lawyers at homeone?

Believe it or not I too can see both sides, but I think at the end of the day I've signed the contract in good faith (ie. fully believing that there was no LMI payable).

If the bank had come to me before establishing the loan I would have been afforded the opportunity to find ways to reduce or knock out the LMI (eg. by parents going guarantor on the loan) or at least have had the knowledge up front that that amount of money was payable (and not spend it). Coming to me 9 months later doesn't help me one bit ... they haven't even issued me with an updated Loan Agreement, just taken the money.

Anyway, I guess it's now in the hands of the ombudsman, will keep you all posted.

Yes please!