Bad Credit Loans, Bad Credit Home Loans – Bad Credit Finance Australia

Banks are feeling particularly exposed through their $200 billion in commercial loans, many of which are not doing so well.

Of the largest financial commitments made on a geographical basis, four states – NSW, Victoria, Queensland and Western Australia – are now firmly in the sights of lenders looking to reduce the financial burden of commercial property loans on their balance sheets.

In particular, Queensland and WA have been cited by the two largest banks, the Commonwealth and Westpac, as a problem area given a reduced demand for commercial and large residential developments and an oversupply of land.

CBA’s troubles have grown as a result of its acquisition of BankWest whose growth strategy before that deal largely centred on the eastern states, with particular emphasis on lending to the property sector. This was in addition to the market values dropping in WA and associated problems with this.

According to analysis of the big four banks’ latest half-year results by BusinessDay, Commonwealth and the Westpac Group have more than $100 billion tied up in loans to the commercial property sector. In the case of the Commonwealth, its latest figures revealed that commercial property loans make up the largest proportion, 25 per cent, of its most troublesome exposures based on an industry-by-industry breakdown.

NSW is responsible for almost 50%  of its mortgage loans while Victoria is responsible for almost 20 per cent, WA for 12 per cent and Queensland 11 per cent.

The major banks are continuing to report an increase in the level of of bad loans especially in the commercial property sector.

Westpac and St George both blamed the industry for a large part of the increase in their stressed exposures at the announcement of the group’s interim results earlier this month. The industry makes up nearly 33 per cent of the group’s business lending portfolio, and 16 per cent of the loan book is now classified as stressed.

NAB, which prides itself in being the largest “business” bank, mirrored the concerns of its larger rivals. Commercial property makes up $48.6 billion, or 15 per cent, of its total loans and it experienced significant increases in its bad credit loans and loan defaults, write-downs and those that are now past the key 90-day indicator for repayment for the period up to March 31 this year compared with the previous half.

Mortgage arrears are on the increase especially amongst non-conforming borrowers.  This suggests a growing number of home owners are finding themselves in mortgage stress.

According to a recent report by Moody’s Investors Services, 13 per cent of non-conforming borrowers are in arrears on their repayments, up from 12.1 per cent last quarter, despite a drop in unemployment and signs that the domestic economy is improving.  There has been a significant increase in interest rates for no-conforming loan products by most Australian lenders.

The rise in the number of troubled mortgages will cause the big four banks to rethink their decision to lower provisions for bad debt.

In the first half of 2010, the big four banks cut the amount of money they hold in reserve to cover bad debts by $2.2 billion to a combined $4.5 billion in the expectation that an improving economy will lead to fewer losses.

The lower provisions helped the majors boost half year profits to a combined $10.4 billion

A new study by Dunn and Bradstreet suggests that in the next 12 months over a quarter of Australians will fall into arrears with their mortgage.

Younger Australians and those in lower income households are more likely to be late with paying their bills as well as their home loan.

One in five older Australians (aged 50-64) indicated they will pay at least one bill late – this compares to one in three for the two younger groups (18-34 and 35-49).

Meanwhile, 30 percent of people in high income households ($80,000+) said they expect to pay late in the year ahead – this figure jumps to 37 percent for households earning less than $80,000.

One of the most significant findings of this study was that majority of Australians did not understand the implications of paying their bills late.  More than half the people interviewed stated that they would be more likely to pay their accounts on time if they knew late payments were listed on their credit report and could negatively impact their credit profile.

Not enough people understand that a payment can be listed on an individual’s credit record if it is 60 days overdue.  New Australian credit reporting laws – which have been accepted by the Federal Government – will allow payments to be listed on an individual’s record if they are just one day late,” the report said.  Such credit reporting will undoubtedly create more non-conforming loan inquiries over the next 24 months.

There has been a drop in consumer sentiment in May by a huge 7%, based on statistics collated by the Westpac–Melbourne Institute Consumer Sentiment Index.

The Index fell from 116.1 in April to 108.0 in May, but rising rates – not the budget, seemed to host consumers’ biggest concerns.

Confidence among respondents who had a home loan fell by 8.1 per cent in May, compared with average falls of only 2.3 per cent in response to the five previous rate hikes.

Westpac chief economist Bill Evans said the 25 basis point increase in the Reserve Bank’s official cash rate, rather than the release of the federal Budget, was the key contributor to the fall in consumer confidence.

According to the Index, on the question of whether the federal Budget would impact family finances over the next 12 months, most respondents (51 per cent) said it would have little impact, while 27 per cent indicated that their finances would worsen as a result of the Budget.

Eleven percent of respondents believed that their financial situation will improve, while ten percent were unsure.

“This result indicates that the response to the Budget was negative on balance but we expect that the most important factor causing such a large fall in the headline index was the rate hike,” Mr Evans said.

The results make it clear that consumers would experience significant financial difficulty if any further rate rises were to occur.

In a bid to recoup debts from fine dodgers, the Queensland government has implemented new laws which allow them to take charge of the fine dodger’s home and sell the property.  In one example a home was taken possession of over a $6,000 fine debt.

Letters warning of property seizure have been sent to 11 individuals and four businesses in a bid to recoup $257,000 in outstanding fines since a trial of the strategy began on January 1.

The Queensland Government has introduced these new measures to try and recoup some of the unpaid fines owing, with more than $160 million outstanding,

Attorney-General Cameron Dick said a warrant had been issued to sell the woman’s home at public auction after she continually refused to pay the five-year-old debt. The woman paid the fine in full and avoided the auction.

Mr Dick said fine-dodgers needed to accept responsibility for their fine debts and not just ignore the debts.

Government would like to be abler to use the monies owed on schools, hospitals, roads and the like.

Under the measures, asset checks are undertaken on fine-defaulters, allowing the Government to seize property including homes and cars to pay back debts.

Driver’s licences can be suspended for non-motor vehicle offences and people who owe more than $5000 can have their cars clamped.In the first four months, 64 vehicle clamping notices were issued to defaulters.

The Rudd government is looking into the Mortgage Exit fees being charged by banks in an effort to bring down unreasonable charges.

As part of the moves ASIC will outline a new fee structure for banks to stop them charging what are perceived to be excessive mortgage exit fees.  Some banks charge as much as $1000 for exisiting a variable rate mortgage.

Banks that continue to charge excessive fees will be prosecuted under new consumer credit laws due to take effect from July 1.

It follows a class action announced last week against banks over other fees that has attracted thousands of bank customers eager to solicit damages from the case.

The Sunday Mail believes the new exit fee regime will allow banks to charge only what it costs them when a loan is paid out or face prosecution for having an unfair contract.

Treasurer Wayne Swan is also understood to have requested a review of the powers of the Australian Competition and Consumer Commission in relation to banks.

The review is designed to take steps to ensure the competition watchdog has all the powers it needs to control anti-competitive practices between the banks.  There is concern by the government that the current environment is not conducive to competition by the smaller banks.

The  Government would like to ensure that  the banking system is working effectively for the Australian  families  rather than. Mr Swan promised to do something to make it easier to switch mortgages two years ago and has faced criticism from consumer group Choice for failing to act.

Despite the fact that the rate of foreclosures in the US has dropped, repossession numbers are still extremely high.

A recent report by CNN states that 92,432 homes were repossessed across US during April 2010.  This number represents a 45% increase on repossessions this time last year.

If the rate of home repossessions remains the same, over 1.1 million homes will be lost in 2010.

Data from RealtyTrac found more and more homebuyers were voluntarily giving up their homes because the value had dropped so greatly.

These calculated defaults are responsible one in three foreclosures – up 22 per cent from 12 months earlier.

However, the news isn’t all grim, with the number of foreclosure filings falling by 9 per cent in April.

“There were two important milestones in the April numbers that show foreclosure activity has begun to plateau, but at a very high level that will not drop off in the near future,” said RealtyTrac chief executive officer James Saccacio.

Mr Saccacio said he expects the pattern to become the norm for many months, with the overall numbers of  foreclosures staying high, but not increasing, and repossessions remaining at record levels.

Nevada is still the worst state for repossessions, with one of every 69 households receiving some kind of filing – six times the national rate.

Ninety thousand First Home Buyers are expected to lose their homes as a result of ongoing  interest rate increases by the RBA.

The Reserve Bank of Australia has raised official interest rates six times in a row since October 2009 from 3.0 per cent to 4.5 per cent. Standard variable interest rates are well over seven per cent from most major lenders. 270,000 people have entered the housing market since June 2008. Many of the New Home Buyers do not have sufficient buffer to withstand the kind of rate increases predicted to come.

Furthermore, the areas where First Home Buyers have been purchasing their homes are those that have experienced the most hardship with recent price drops

Fujitsu Consulting estimates that up 40 per cent of First Home Buyers may be forced to sell their home because they have not budgeted for rates to go up as far or as fast as they have over the last 6 months. Fujitsu Consulting’s executive director Martin North said that for 95 per cent of people in mortgage stress the only way out was to sell their home.  This is a very sad outcome for many, who will be less likely to afford a home in the future.

According to the interim earnings reports issued to the media by our major banks – they have seen a significant drop in bad debts although home loan impairments are on the increase.

Total bad debt charges for the big four banks have decreased from $6.7 billion in the second half of the 2008/09 financial year to $4.5 billion in the latest half.

It is uncertain whether this trend will continue through the second half of 2010.

NAB’s bad and doubtful debt charge fell 32 per cent to $1.2 billion over the 12 months to March.

The bank’s gross impaired assets increased from $3.9 to $5.5 billion between March last year and September, an increase of 41 per cent. The growth rate slowed to five per cent in the latest half, as gross impaired assets grew from $5.5 to $5.8 billion.

The bank’s gross impaired assets plus loans 90 days past due as a percentage of gross loans and acceptances has risen from 1.3 to 1.8 per cent.

Westpac’s bad and doubtful debt charge rose from $1.5 billion in March last year to $1.7 billion in the September half but then fell 48 per cent to $879 million in the latest half.

ANZ’s bad debt charge rose from $1.4 billion in March last year to $1.6 billion in September and then fell 34 per cent to $1.1 billion in the latest half.

The value of ANZ’s gross impaired assets has increased by 19 per cent from $3.7 billion in March last year to $4.4 billion in September and then 20 per cent to $5.3 billion in the latest half. Gross impaired assets as a percentage of net advances have risen from 1.03 per cent to 1.53 per cent over the past year.

CBA’s bad debt charge fell from $1.9 billion in December 2008 to $1.4 billion in June last year and then fell to $1.38 billion in December 2009.

Thousands of debt-ridden Aussies are likely to have problems with defaults over the coming months as the cost of living continues to rise.

Every year for the past three years, the total dollar value of defaults has spiked in the month of May by an average of 196 per cent, according to credit agency Dun & Bradstreet.

There is an expectation that non-bank defaults will start to grow again shortly.

The main  reason for credit defaults, is customers over-extending themselves.

There has been an increase in the number of unpaid phone and utility bills by over 113% during two of the past three years, based on Dunn & Bradstreet data.

Being late in paying even a small utility bill can seriously damage your credit history and impact the ability that you have to qualify for any form of credit in the future..

The RBA’s latest rise took the commercial mortgage rates to more than 7 per cent.

Weaker-than-expected March retail figures released today showed households had cut expenditure as the growing cost of living bites into disposable income. The growth in inflation is a major contributor to the financial stress being experienced by most Australians.