Graham Filmer used to earn a living 30 kilometres off the coast of Corny Point in South Australia long-line fishing for sharks – mostly bronze whalers, gummies and schoolies – and catching snapper.
It was a hard life. Things had been better years before when he still had a licence to catch rock lobsters.
The deep sea fishing took its toll on Filmer, physically. Five years ago, he developed rheumatoid arthritis in both wrists. Now he can’t even reel in a hand-line.
Around the same time he was inveigled into taking out a loan he could not afford by a mortgage broker. His debts have risen since and he has fielded four letters from the Commonwealth Bank which is trying to repossess his home.
“I am in a desperate situation now. I am facing eviction and my health is failing,” Filmer told Fairfax Media.
Graham Filmer’s is a story of hard luck, and one which strongly evokes the principle of ‘buyer beware’. The 73 year old fisherman should never have taken out the loan, let alone the $30,000 line of credit from the bank and the Commonwealth gold credit card which went with the package.
But the story is not quite that simple. Equally, the bank should never have given Filmer a loan in the first place.
And now that he has found irregularities in his loan documents – that is, they have been tampered with to exaggerate his income and the value of his assets – he says he ought to have a case against his lenders for maladministration.
Like a host of other low-doc loan victims however, Graham Filmer’s appeals for an investigation are falling on deaf ears.
He is stuck in a rut of regulatory buck-passing.
Commonwealth Bank declined to comment on the circumstances of the matter as it is being reviewed by the Ombudsman. It took a while.
Trusting the mortgage broker
When his fishing business fell on hard times in 2005, Graham Filmer relied on his mortgage broker, Frank D’Antonio of Money Advisers, for financial advice.
D’Antonio, who has passed away, counselled Mr Filmer to take up a low-doc loan with Liberty Finance for $300,000. Filmer was told to use his home in Corny Point as security for the loan.
“I struggled to make an honest living for many years,” said Filmer. “The broker Frank D’Antonio advised me to get a loan on my home. I said no, we would sell my mother’s home, as she was getting older. The broker said, no, don’t sell her house, take out the loan instead”.
Filmer lost his first house after a divorce in 1973. He later suffered a bad fall which stopped him from fishing and so attempted to sell his fishing license in 1983. He ended up with a bankrupt buyer.
A year after he took out the Liberty loan in 2005, the broker D’Antonio advised Filmer to refinance with a fixed rate home loan from the Commonwealth Bank. The bank also gave him a $30,000 line of credit and the gold credit card.
He had never owned a credit card until then.
By 2008, through D’Antonio once again, Filmer obtained a third loan worth $70,000 to pay off his first line of credit and to subsidise his home loan repayments.
He is now struggling to pay both the $70,000 loan and his home loan of $300,000.
“I didn’t need the loan at that stage. I could have sold my mother’s house,” said Filmer. Now the economy has collapsed, and I am at the mercy of a fraudulent bank”.
Low-doc or low-documentation loans are higher risk loans typically offered to people who are self-employed and do not have enough documentation such as tax returns or financial statements to support a traditional home loan application. These loans usually carry higher interest rates. Their interest payments are also often supported by new loans, or ‘buffer’ loans.
Here is the catch however. Graham Filmer says the details on his loan application form, which Mr D’Antonio helped fill in, were wrong.
He had a business income of around $30,000 a year but the form stated $80,000. The value of his assets was also inflated. His house was valued at $600,000 when a valuation had suggested it was worth only $470,000.
The value of other assets such as a 54-foot Carvel fishing boat and a 20-foot Nereus boat were also overstated.
“I consulted Frank because he was a friend who I trusted and I respected his ability as an expert in financial matters. The interview process with him was short and I remember that I did sign some form with blank boxes after he told me he would fill in the details,” said Filmer. “Until I saw the loan application form I had no idea what had transpired.”
BusinessDay has seen the forms and note from a Commonwealth Bank staff member that Filmer might not be entitled to $300,000 because there was a “valuation shortfall (on the house) – $470,000 would only support a $282,000 loan.
The same staff member asked the broker for advice on “how to proceed”. A week later the $300,000 was approved based on a higher loan-to-valuation ratio (LVR).
An LVR is a measure of risk, calculated by dividing the borrowings by the value of the property.
Falling on deaf ears
Mr Filmer wants the loans to be waived saying his is a case of maladministration by the lenders.
After going through two rounds of hardship negotiations, the bank said “it was not prepared to waive Mr Filmer’s debts because his loan applications were approved appropriately”.
Filmer then applied to the Financial Ombudsman Service (FOS), the corporate watchdog Australian Securities & Investments Commission (ASIC) and the prudential regulator, APRA for assistance between October 2012 and February 2013.
APRA said it could not assist as it dealt with “systematic matters at an entity level rather than pursuing individual companies”. It advised Filmer to contact ASIC.
ASIC told him it could not act because the new National Credit Code which covers responsible lending did not apply as his loans had been struck before July 1, 2010 when the new code commenced.
It did however provide Filmer with some clarity on its handling of low-doc loans saying “the broker was not the agent of the lender (CBA).”
This agency argument is the common refrain from regulators and banks; that the lender is not at fault, rather the broker – even though it is the lender’s money and even though customers might expect some duty of care that application forms were correct and customers were not stuck with obligations they could not afford to meet.
By March 2013 the Ombudsman had still not allocated a case manager to Graham Filmer citing its “high caseload”.
In the meantime, the fisherman had sought help from consumer victims advocate Denise Brailey and her Banking & Finance Consumers Support Association (BFCSA).
The Ombudsman (FOS, which is funded by the banks) is finally now reviewing his complaint.
A spokesman for the bank provided a brief response which did not deal specifically with the Filmer situation:
“In the instances of low documentation loans the bank relies on the information that the applicant provides and signs on the application. Where a customer has difficulty meeting their loan repayments we encourage them to contact the bank in order to work out a solution… it is not in our customers’ or our interests for a customer to be in financial difficulty.”
Chris Burns, the chief executive of Money Advisers (now called Key Invest), declined to comment on Filmer’s original loan for privacy reasons.