Bank blamed for home loss

Lise and Steve Moody, with their children Charlotte and Ben, are now renting after being unable to keep up with mortgage payments. Photo / Jason Dorday

A family facing financial ruin after losing their home in a row over mortgage break fees blame their bank for their plight.

Steve and Lise Forbes Moody owe Westpac $145,000, eight months after the bank refused to waive a $28,500 fee to amend their home loan conditions.

The couple, who have two preschool children and another $50,000 of debt, can't afford to repay the money and are on the verge of declaring themselves bankrupt.

Westpac said it had worked hard to find a solution and blamed the family's financial decisions, coupled with changing personal circumstances.

The Forbes Moodys bought a three-bedroom "do-up" in Cambridge at the peak of the property boom in February 2007 for $295,000.

To pay for renovations, they refinanced with Westpac early last year on the strength of a registered valuation of $450,000.

They took a $390,000 mortgage, fixed at 9.35 per cent for 30 months, shortly before the credit crunch sent interest rates tumbling.

By September, their income from Steve's IT business had become sporadic. Lise returned to work as a nurse, but their outgoings were still too high.

The couple used credit to cover the shortfall and their debt spiralled to $50,000.

They tried unsuccessfully to sell their home at Christmas, but by January were two months behind on their $3200 monthly mortgage payments.

They asked Westpac to amend their mortgage to the floating rate - at that time, 5.75 per cent - which would have almost halved their mortgage payments. They were told it would cost almost $28,500 to break their mortgage.

Like thousands of other borrowers, they found themselves trapped with no cash to pay the break fee and not enough equity in their home to add it to their mortgage.

Lise said she asked for help when the Government was urging banks to show "greater flexibility in a major recession and to consider waiving break fees in cases of extreme hardship".

Westpac refused.

But the bank got in touch after they aired their concerns on television in March.

The couple were given three months to sell their home to avoid a mortgagee sale, but the best offer was only $315,000.

With interest arrears and the break cost added to the mortgage shortfall, the bank would still be owed $145,000, so Westpac offered to restructure the loan at a better interest rate, including the break fees.

Westpac spokesman Craig Dowling said they even offered to consolidate their other debt.

Lise said Westpac's proposal would have pushed the couple's borrowing to a level they couldn't afford.

They wanted the break fee waived, together with the extra interest paid since they first asked to break the mortgage.

The sale proceeded for $315,000, leaving the family living in a rental and on the verge of declaring bankruptcy.

Dowling said the break fee was not the problem - it was the Forbes Moody's other $50,000 of debt.

"Why isn't the blame being apportioned to those lenders - and why aren't they being asked to write off what they are owed, which is effectively what is being asked of us?"

He said the situation was down to the couple's financial decisions, followed by changed personal circumstances. "This has dramatically impacted a nice couple and exposed them financially beyond a level they could manage."