Stop the Sheriff throwing Clients out on the Street! Holistic Approaches to Mortgage Problems

Holistic approaches to mortgage problems: solicitors and financial counsellors working together Stop the Sheriff from throwing clients out on the street! Susan Winfield, Senior Solicitor CCLC Marianna Minhinnick, Financial Counsellor CCLC Rebekah Doran, Solicitor Legal Aid NSW

Aims for today Understand the objectives, strategies and outcomes of the mortgage hardship project Feel confident working collaboratively with financial counselors and taking a holistic approach to mortgage problems in your own practice Broaden your understanding of how to evaluate the ‘success’ the of mortgage hardship matters

Session outline 1. Introduction to the Mortgage Hardship Project 2. The role of financial counsellors 3. Key outcomes and achievements 4. Questions and discussion

MORTGAGE HARDSHIP SERVICE Partnership between Legal Aid NSW and the Consumer Credit Legal Centre Two year pilot project from mid 2009, continued to early 2013 Funded by the Public Purpose Fund

Mortgage Hardship Service: Why? Meeting an identified need Sept 2008 Fitch Rating Report basis for the development of the project mid GFC 5 worst performing regions for mortgage defaults in NSW – Fairfield/Liverpool, Gosford/Wyong, Outer South West Sydney, Outer Western Sydney and Newcastle

Mortgage Hardship Service: Why? Unemployment Reduced employment Accident or illness Business failure or downturn Family breakdown Incarceration Birth of a child Death in the family Over-commitment Interest rate rises Causes of financial hardship

Mortgage Hardship Service: Aims Overarching Goals 1. Assist people in mortgage hardship to save their homes 2. Where required, assisting people to sell their home to minimise the loss and ensure an outcome that is favourable to the borrower

Mortgage Hardship Service: How Individual clients 1. Work with financial counsellors to assess a consumer’s overall financial position and develop workable options 2. Negotiate with lenders through IDR and EDR 3. Where necessary, assist in Court processes

Mortgage Hardship Service: How Systemic issues 1. Identify systemic issues 2. Participate in law reform processes and public debate 3. Education and training

Mortgage Hardship Service: What 1. Expanded jurisdiction of FOS, use of EDR where possible 2. National Consumer Credit Protection Act and the National Credit Code (“the Credit Law”) 3. Industry Codes of Practice Legal framework

EDR No Default s88 Default Notice (at least 30 days to remedy) Statement of Claim served (28 days to file Defence) Judgment against the borrower (enforceable for 12 years) Eviction by the Sheriff Notice to Vacate (at least 30 days notice) Writ for Possession (enforceable for 12 months)

Head in the sand?

Covering your eyes to reality?

Ignoring your mail?

Mortgage Hardship Service: What Working towards outcomes that are Achievable Sustainable In the consumer’s best interests Key strategies Financial counselling Referrals Addressing other legal problems Intro to the holistic approach

What is financial counselling? In NSW financial counselling is a free community service provided by financial counsellors who assist consumers who are experiencing financial problems (FCAN, 2012). Financial counsellors in NSW must be accredited with the Financial Counsellors’ Association of NSW (FCAN) and are either paid or volunteers who work within community organisations.

How does financial counselling work in the Mortgage Hardship Service? The primary focus of a financial counsellor is to find out whether the client(s) can afford to pay the mortgage. A financial counsellor will ask questions about a client’s financial position.

Solicitor/ financial counsellor relationship With the financial counsellor making enquiries into a client’s financial position, gathering information and supporting documents, determining a client’s ability to repay the mortgage and other debts, this frees the solicitor to concentrate on the legal matters of the case. An example of how a mortgage hardship solicitor and financial counsellor work together can be seen in the following case studies.

Mortgage Hardship Service Case Study 1

Mortgage Hardship Service Case Study 2

Law and Justice Foundation Suzie Forell and Michael Cain June 2011 Managing mortgage stress Evaluation of the Legal Aid NSW and Consumer Credit Legal Centre Mortgage Hardship Service

Key features of MHS Joint initiative between Legal Aid and CCLC; New and dedicated positions, both legal and financial counselling; Targets clients at risk of defaulting, before their problems escalate too far; Flexible, multidisciplinary, tailored approach the mortgage hardship assistance; Duty Service established at Supreme court for MH matters

The evaluation of the MHS Examined: Whether the amount of mortgage-related legal assistance provided by Legal Aid and CCLC increased after the MHS commenced; The characteristics of MHS clients and their mortgage issues, including demographic factors, geographic distribution, reasons for hardship and types of lenders; The stage of enforcement that clients were at when first assisted by MHS; Nature of assistance provided by MHS The outcomes for MHS casework clients.

Assistance provided Over 16 months of the evaluation: 3000 occasions of service; Average monthly 37 cases/minor assistance and 250 advices Over 12 months Legal Aid 45% increase in advices and 116% increase in minor assistance over the 12 months; CCLC 64% more mortgage casework (inc Minor assistance)

Areas of mortgage stress Central coast: Wyong, Gosford; Western suburbs: Blacktown, Penrith, Liverpool, Penrith, Campbelltown

MHS clients Loss of employment and underemployment 48% of Legal aid and 33% of CCLC clients on centrelink Higher than expected proportion of those aged 60 yrs and over used the MHS (15%and 17% )

The Lenders Approx 62/63% of MHS clients borrowed from bank lenders; But most of MHS casework clients had borrowed from non bank lenders

Early Intervention/Assistance Better likelihood of a good outcome for clients if they sought help early in the process, ie before a default notice was served, rather than after they have received a Notice to Vacate from the sheriff. Duty roster clients in later stages.

Outcomes For casework/minor assistance clients 116cases 61 retained homes 21 sold before lender reposessed 16 surrendered home or had them reposessed. retained their homes

Follow up Survey Small sample: 38 clients altogether with focus on those whom retained their homes when files were closed Do you still own the property? Are you still experiencing difficulties in making your mortgage repayments? At the moment are you up to date with your mortgage repayments? How many mortgage repayments have you missed?

Are you up to date with all of your other debts and bills? Have you had to borrow any more money in the last (6) months since we assisted you? In the last (6) months have you used a credit card to pay your mortgage payments? Key questions

Current Circumstances What has happened with that property? Where are you currently living? Have there been any major changes in your circumstances in the last (6) months(relationships, family, employment, health other, anything? Overall, would you say that you feel more in control of your financial situation, less in control or about the same as (6) months ago when your file was closed?

Advice and Assistance Given When you first contacted (CCLC or Legal Aid) what type of assistance were you HOPING to receive? What type of advice or help were you given ? Do you think that the assistance given helped you to resolve your mortgage/ housing situation?

Did the assistance given help you in any other way (e.g. reduce stress levels help you with financial planning) if you were to experience any further difficulties with your mortgage now, what do you think you would do about it? Is there anything else you would like to say about the legal service or the help you were given?

Responses 27 felt more in control of their financial situation at the time of follow-up 5 about the same 6 less in control

Feedback “Taken the pressure off now I don't have the house. Much happier as no threat or pressure” “Financial counsellor was very good. Went through everything thoroughly and gave me options and advice” “Solicitor helped draft our defence, and told us what to do and what not to do. Solicitor pulled it all together and got us through. She let me know once the SOC had been dismissed 6 months later”

“It was amazing the amount of relief; could sleep at night and not be absolutely out of my head wondering what to do and being scared of being kicked out of the house”. “I still have an outcome where I’m in control of my property. Thank you for that” “Definitely without (the MHS) we would have lost the house.” “Everything you did helped, it took a lot off our shoulders during a stressful time. The realistic advice that we could not afford the mortgage no matter what variations were done was helpful” “The assistance was successful in buying me time, which is what I was looking for. The home was repossessed but I had the time to arrange my affairs”

Ongoing monitoring: Continue to record the stage of enforcement at the time clients first contact the MHS plus any subsequent occasions; An early ‘intervention goal’ to assist clients prior to a statement of claim being served; MHS continues to assist clients who are at the later stages of mortgage hardship when they first contact us; The effectiveness of the service is measured primarily in terms of achieving he best possible outcome for each individual client rather than the number of homes saved.

Questions?