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who's liable; me or the bank?

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  • who's liable; me or the bank?

    Hi Everyone,
    I have been a long time reader of PT forum and enjoy it very much. I unfortunately now have a good question for you.


    I purchased a sub dividable property from someone I knew and part of the purchase arrangement was that the vendor left in $200K as finance for the subdivision. My lawyer presented me with an acknowledgment of debt for the $200K which had come from the vendor’s lawyer. The remainder of the purchase price came from a bank loan.



    Prior to my loan application being approved I had had a meeting with the vendor and his business partner where I disclosed my complete financial statement of position. This was because the vendor knew someone who would look after my loan application. I presumed a mortgage broker.



    A couple of weeks after I settled on the property I was called into the bank. The bank had frozen the vendors bank accounts and was now looking into all his transactions.



    At this bank meeting I was asked how I knew the vendor. I was then asked about the details of the subdivision. The bank then asked me about a Napier house that I was in the process of selling. I replied with “what house?” The bank said the Napier house that is providing the deposit for the loan. This was complete news to me. I told the bank that I signed a deed of debt for $200K that the vendor left in and there was absolutely no discussion of any property providing a deposit.



    The bank then showed me a hand written note stating that I owned a Napier house that was providing the deposit. There was no address for this house, no certificate of title, no proof of ownership, absolutely nothing. The handwritten note wasn’t even signed by anyone. When the bank showed me their loan application file the financial statement of position was fraudulent in that key financial information I disclosed was missing and nothing was signed or declared by me. In short it had been fraudulently put together. The bank said in no uncertain terms that without the Napier property this loan would not have been approved.



    The vendor is currently being investigated for millions of dollars worth of mortgage fraud. I gave evidence in a S.F.. interview about my transaction. The vendor finance of $200K also turned out to be fraudulent. It didn’t exist. My lawyer did not check to see if the money was in any account.


    The bank told me I had to sell the property or refinance the loan away from them. The property eventually sold and there was a shortfall.



    My position is that the bank employee, who i had never met and never had an conversations with made a misleading representation to the bank about my financial position. The bank employee submitted false financial information that was integral to the loan application being approved. I did not know about this false financial information. This false information created a fictitious Napier property that would become the deposit on which the loan was approved.



    To me, the bank employee failed in his role as the banks representative to check with me as to the accuracy of the financial information he was presented with (reasonable care??). This false information did not come from me or anyone authorized to represent me. This false financial information had not been signed and declared by myself. There was no Certificate of Title for this fictitious Napier property and no address was given. There was no proof of ownership.



    One email or phone call from the bank employee asking me for verification of the Napier property would have alerted me to the fact that I was about to enter a property transaction based on fraudulent information and I would have withdrawn the loan application immediately.



    I post this question in the hope that the wise can give me a perspective on my position. Am I legally obligated to the loan shortfall or is the bank liable for the dodgy actions of its former employee.



    Cheers


  • #2
    Wow it's sad how much of this there is going on.
    The correct thing and reality are sadly different in most of these cases. The correct thing is for the bank to acknowledge their staff incompetence and obvious fraud and pursue the vendor.
    However unless you commence a legal defence I would say the bank will pursue you.
    The cost of this can be enormous. Just a thought. I would consider getting the banking ombudsman or Fair Go involved. Even the TV media might be interested in it as a story which could cause the bank to drop you and go after the vendor.

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    • #3
      Wow this definitely sounds like a job for Fair Go!
      My Profile

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      • #4
        Good Luck with this. The Banking Ombudsman would be the person to talk to here I would suggest. I think they reccomend you to try to resolve the issue with the bank first. What are you trying to achieve as the final outcome.
        [email protected]

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        • #5
          I expect that Deannz wants to recover the money he lost on this transaction, which would be the shortfall on the forced sale plus the associated costs (eg, penalty interest, bank's legal fees, etc.). The argument will be that he would never have entered into the transaction if various people had done what they were supposed to do.

          The problem is that the information provided to date raises more questions than answers. All I can say is that the bank usually carries the can for relying of a forged document. (But why didn't the bank require a mortgage over the Napier property?).

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          • #6
            I would say a broker is involved somewhere. Had it been a bank employee they would surely be liable for such poor standards. I imagine the $200k against the Napier property evidenced by a 'note', was supposedly a letter from the client (supposedly you) confirming where their deposit funds had come from. Back in the days of ridiculously loose credit, evidence of deposit simply required the client (you) to advise its source. The note will have said it was borrowed against another property in Napier with another lender.

            The original loan was probably lo-doc, with the income declared sufficient to service the loan applied for and the $200k other debt (fictitious deposit loan against Napier property).

            The Vendor and agent cooked up the vendor finance as a story to you to raise the price, then instructed the broker or crooked bank employee to make it looked like you had declared the deposit.

            The bank was bascially duped into lending you 100% (or more) finance, and were a victim of their own low standards. There was no need to check the Napier property, as in their eyes you had borrowed against it with another lender. They could tell from your income declaration that you could afford to service the new loan and the Napier loan, so in their eyes there was no problem.

            Whoever communicated your financial position and dealt with the bank employee is who committed the fraud. Whether that was a broker or the vendors business partner perhaps, possibly the bank employee, but unlikely. Someone made up the lies, and it should be easy enough to figure out who, but either way - seems wrong that you should wear any of the shortfall. Although further checks into the validity of the vendor finance would have helped. Usually they will secure by way of a second mortgage or the like. Obviously that didn't happen.
            Last edited by Jurgs; 04-03-2009, 04:57 PM. Reason: Clarity and spelling (not achieved)

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            • #7
              Provided the vendor doesn't demand his $200k, aren't you $200k better off? or have you already paid that back?

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              • #8
                The Vendor and agent cooked up the vendor finance as a story to you to raise the price, then instructed the broker or crooked bank employee to make it looked like you had declared the deposit.
                Geez mate where did you get that from? Something goes wrong and with very scant details you blame the agent? I'm not even sure an agent was involved! Ridiculous.

                David
                Squadly dinky do!

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                • #9
                  Sorry Dave, I actually meant 'business partner', not land agent. The guy that was sitting with the vendor. his agent, as in acting for him, not his real estate agent. No offence intended.

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                  • #10
                    I don't think any of us here are truely qualified to provide a firm opinion on this. None of us have seen any of the documentation involved, so flying off the handle & pointing fingers of blame & recompense while being so heavily uninformed does nobody any benefit.

                    You really need to talk to an independent lawyer to see what position you are in. Make sure of course your lawyer has no conflict of interest with the vendor or any of their associates, and no link the lawyer you initially took advice on, as there is a possibility that your lawyer has provided you with flawed advice.

                    Banking ombudsman is the venue when you have a dispute over a banking issue and have exhausted other avenues of recourse. I doubt Fair Go will be of much assistance.

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                    • #11
                      Hi Guys,
                      Thanks for your feedback. You are pretty close in your assumptions.
                      The vendor was also a real estate agent and used his agencies letterhead paper to great effect.
                      I am looking for the bank to accept that it to was also duped by fraud and to accept its losses and move on. Instead they sniff a little equity in my personal residence, no where near enough to cover the shortfall, which i will eat up in fighting this legally. My wife has been made redundant and we have young son and mortgage to service.
                      The bank tried for a high court summary judgment against me which i successfully opposed. I am representing myself as i can no longer afford my lawyer. Hence i need more than the ethical or moral obligation of the bank to do the right thing.
                      i was defrauded, my lawyer was. The vendors lawyer was defrauded and sacked him as a client when he found out. The vendor is now bankrupt. The SFO investagation is due out soon and he is in serious trouble. The bank cant get anything out of him.
                      Fair Go is my last resort and i am more than happy to get infront of the camera and tell my story. Its unbelievable that a random, unsigned and unchecked handwritten note can be the basis for a $770,000 loan. Im wondering if there is a fair trading clause the bank is in breach of.

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                      • #12
                        Yeah OK, I'm starting to be a bit suspicious of you Deannz. It seems everyone else was guilty except for you. When I hear people in every day life complaining that the whole world is conspiring against them I tend to think that they are a bit deluded and that it's actually their own fault to a large extent.

                        So the vendor (who is a real estate agent - we all know they are 100% corrupt), the bank (big multinationals who screw the small guy), the lawyers on both sides (well need I say anything about lawyers?) are all against you. They have either stiched you up, are suing you, or are failing to represent you fairly. Well... I dunno. Next you'll be claiming the judge took a disliking to you.

                        Seems to me you need to stand up and take some responsibility here. You borrowed some money from a bank and also borrowed some money from the vendor who you say you knew. And then the bank employeee(s?) and the vendor have screwed you? Seems to me there's some gaps in all of this. It also seems to me that if you have done absolutely nothing wrong then it would be very unlikely that the banks would be suing you and very unlikely that you would be found guilty of anything.

                        David
                        Squadly dinky do!

                        Comment


                        • #13
                          Hi Davo,
                          I take responsibility for my actions. I am guilty of trusting the vendor of the property and that the bank would have done its due diligence. I have only ever purchased one other property. I am not a seasoned property trader/investor/ developer.
                          I refer back to my original posting. is it right for the bank to accept a hand written note as evidence of a property i supposedly own, with no adress given, no certificate of title and most importantly was not signed by me as being truthful? This house formed the equity on which the loan was approved and i knew absiolutely nothing about it. I have all the relavant documenst to back it up.
                          I dont want sympathy i want construtive opinion so unles you can offer some move on.

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                          • #14
                            So who wrote the hand written note then do you think? Are you saying the bank employee did this to get the loan through? That could be proved pretty quickly couldn't it? Just get them to give a sample of their handwriting.

                            Or do you think it was someone else?

                            David
                            Squadly dinky do!

                            Comment


                            • #15
                              At the meeting with the bank the bank asked me if i recognized who's writing it was. I said it definitely wasn't the vendors business partner (as he filled in the finance document that was on file).
                              When my new lawyer requested a copy of the banks file on us a copy of the handwritten note wasn't with the file. My lawyer could only conclude it was an internal bank communication and wasn't a requirement to be a part of the file.
                              In January this year my lawyer and I interviewed the former bank employee who processed the loan. He couldn't recall the specifics of it as it was nearly two years ago but he looked at the with the information we were given from the bank he said there's something missing and that there needs to be more information in this file to get it approved.
                              We have a high court trail date set and you are right in that i let the truth be told and let justice run its course. I will have to represent my self as I've spent 20K on lawyers fees to date. My affidavit was long and was being quoted up to $10,000 more to have it typed up and presented, hence the decision to stop with the lawyer.
                              The bank has till the second week of March to reply, perhaps they do let it go. If have to represent myself in court i thought seeking the insights of PT members to see if there was a specific breach that i could reference I could bring it to an early conclusion.
                              Cheers

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