Public Defender: Couple caught in bank debt trap may lose home

PUBLIC DEFENDER: This couple face losing their home after a bank increased their stated incomes so it could lend them more than 120 per cent of what it secretly knew an investment property was worth.

Michael and Kaye Downer / Picture: Stewart Allen

THIS husband and wife say they face losing their home after a bank substantially increased their stated incomes beyond what they say they earned so it could lend them more than 120 per cent of what it secretly knew an investment property was worth.

Michael and Kaye Downer made the mistake of listening to a doorknocking investment property spruiker in 2011. He was selling house-and-land packages in Zilzie, a small Queensland town east of Rockhampton.

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At the time the Downers, both in their 60s, owed Westpac $106,000 on their home, which was worth $600,000. The Downers say their mortgage broker inflated Michael’s earnings after they had signed the application, which was to Westpac. The broker didn’t work for Westpac.

The bank’s subsequent internal loan assessment process put both their ­incomes even higher.

“We do our own income verification tests for accuracy,” a Westpac spokeswoman said.

The Downers say they didn’t see either set of income figures until 2014, after pressuring the bank. Westpac did send a letter to the couple warning that its valuer thought the Zilzie land was worth $24,000 less than the asking price of $189,000.

But the letter did not convey the valuer’s view the finished home would only fetch $400,000, $89,000 less than Westpac was about to lend over 30 years.

Zilzie is a small township east of Rockhampton.

Mrs Downer, of Perth, told The Daily Telegraph: “If we had seen that low valuation number we would not have gone ahead.”

They are in Westpac’s hardship scheme on reduced repayments. But that will end as soon as this month.

“Westpac has said if we can’t meet the full repayments they will have to start the recovery process,” Mrs Downer said.

If the Zilzie property was sold they would be $150,000 short of what is owed on it, meaning they may have to sell their Perth home.

Westpac told The Daily Telegraph the couple can afford to make the full Zilzie repayments and simply refused to do so.

Michael and Kaye Downer / Picture: Stewart Allen

To support this claim it provided cashflow analysis to us, with the Downers’ permission. The couple says Westpac included income that is not ongoing.

Banking and Finance Consumers Support Association president Denise Brailey, who is assisting the couple, said: “The loan should have been marked as unaffordable and rejected.”

Since July more than 20,000 people have signed a change.org petition in support of the Downers.

To sign the change.org petition CLICK HERE