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Anybody had dealings with these people?
Auckland families shattered house dreams
Sunday Star Times | Sunday, 20 April 2008
Email a Friend | Printable View | Have Your Say
Phil Doyle/Sunday Star-Times
Families have become crippled with debt or lost their houses after dealing with a property company that offers to get low income immigrants into their own homes. Tony Wall and Emma Page follow the trail of misery.
It's a Wednesday night in Otahuhu, South Auckland, and a trickle of Samoan families are arriving at the Home Ownership Company's offices armed with big dreams, but no money.
The company's general manager, Scott Ball, presents a slick slideshow explaining how they can buy their first home or an investment property with 100% finance, even if they have no savings or bad credit histories.
"Don't the banks have to see a savings history?" asks a Samoan woman in the front row. "No," says Ball, "we've never had to show that."
Ball explains that the Home Ownership Company does not charge fees, taking its cut from the banks, but lends people the difference to cover other fees and a deposit. "You end up with two loans you are paying off."
The company then goes looking for homes that best suit the family involved, he says. "All you have to do is focus on going to work, earning money, and we'll do it all for you," says Ball. "Are there any questions?"
Just one, from the woman who spoke earlier: "Where do we sign up?"
If only it were that simple.
A Sunday Star-Times investigation has found that not only has the Home Ownership Company and its affiliated offshoots made millions of dollars by adding up to $40,000 to the price of each property, concerns have been expressed about the financial information the company has provided to lending institutions. Even more troubling, there have been cases where families who thought their existing debts had been consolidated as part of a complicated two-tier mortgage structure have found that their other debts have not been cleared at all, and that other finance companies have caveats over their homes.
Some families are spending most of their incomes on their mortgages, including penalty interest payments of 25%, often while working in low-paid jobs. Some are skimping on food and other essentials in a desperate effort to keep afloat.
The BNZ severed ties with the company in 2005. "The Bank of New Zealand terminated the relationship with the Home Ownership Company following a review of the business which raised multiple concerns about both the quality of the information we were receiving and whether clients were being fully and independently informed about the commitment they were undertaking," says Blair Vernon, the bank's general manager of strategy and marketing.
Rob Thumath, a South Auckland mortgage manager, says he financed about 60 of Home Ownership's clients before breaking ties with the company because it had failed to disclose in many cases that families were paying off a second mortgage with the company's lending arm, Ready Finance.
He is concerned it is targeting naive and vulnerable people. He says about a third of those clients have defaulted on repayments and he would not have approved the loans if he had known the full picture. "We have people in here crying every week," he says. "It's sale at all costs and to hell with the consequences. They sure as hell aren't doing this on the North Shore it's a niche market Samoans in south and west Auckland."
THE HOME Ownership Company finds it clients by advertising on Samoan-language radio, going into churches, and running stalls at the Otara markets. It claims to have helped 750 families buy their first home or investment property.
The company was founded by Russell Findlay, who first appeared in these pages in 2003 when we reported how he had gone from being one of Auckland's largest residential property developers to bankruptcy. He lost more than $3 million of other people's money and was banned from directing or being involved in the management of any company for four years.
The Home Ownership Company was taken over by Grant Collecutt, formerly a partner in law firm Simpson Dowsett. He is also a director and co-owner of Ready Finance. When Thumath emailed Collecutt last year to say one of Home Ownership's clients had been on the phone crying because consumer loans which were supposed to have been paid off by the company were not, Collecutt denied that was the case.
He wrote back: "Hopefully this is a case of the client making an innocent mistake (as opposed to wasting their time using the crying tactic to try and get us to advance them more money crying doesn't work with me)."
In a statement to the Star-Times defending his companies' practices, Collecutt said: "Without the assistance of Home Ownership the goal of escaping the rent trap and owning their own home is virtually an impossible dream for these clients. Most lenders simply aren't prepared to provide a 100% mortgage plus debt consolidation finance package to people with no material assets."
He says a "vast majority" of clients have built up equity in their properties. "Of course in spite of our best endeavours, some clients simply can't be helped," he added. "If a client does not pay their mortgage(s) and does not take reasonable steps to sort out their financial problems, then they will ultimately end up losing their homes."
Collecutt says the company takes steps to ensure people understand the transactions they are entering into, including having native language-speaking staff, getting independent valuations and ensuring they are represented by independent legal advisers.
But several families the Star-Times spoke to say when they raised the idea of bringing in their own lawyer, Home Ownership strongly advised them to use Bryan Yolland of Auckland Property Legal Service, who signed most of the loan documents we saw. The Star-Times spoke to some of the "testimonial" families featured in the Home Ownership Company's brochures and while they had not experienced any problems, they were surprised to learn how much profit the company had made on their property when shown land records.
At their three-bedroom house in Otara, which they bought for $272,000 at the end of 2006, Maua and Tala Ah Siu talk about how their experience with the company has left them on the verge of losing their home.
Economists say that if households spend more than 40% of their take-home pay on home loan repayments they are in "mortgage stress" this couple pays 80% in a desperate attempt to ward off foreclosure threats, which are coming thick and fast.
Buying their own home was a dream for carpenter Maua, 31, and Tala, 26, who came to New Zealand from Samoa about 10 years ago. They heard about the Home Ownership Company on Samoan radio and were reassured that the company's spokeswoman was Samoan. But when they went into the company's offices they dealt with "palagis", and things became confusing.
Their first application was declined because of Maua's bad credit rating.
Tala claims the Home Ownership consultant told them to get a relative to go in with her on the loan application, so they brought in her brother-in-law. His name is on the mortgage and property title but he has not lived with them and has not contributed to any loan repayments. "They knew he wasn't with us when we got the house," Tala says.
Collecutt claims his staff did not know about the situation, and that the family gave the impression the brother-in-law was living there.
Land records show Home Ownership's property-buying arm, South West Homes, paid the previous owners $250,000, settling the two deals on the same day, meaning it didn't have to outlay any money. This is known as a "contemporaneous settlement" and gets around real estate laws for non-registered property sellers but creates doubt around the true value of the home.
Collecutt: "At the end of the day, we will not buy a property unless we are buying it below market value. Our buyers work hard to hunt out and negotiate bargains for our business."
The Ah Sius say a Home Ownership consultant advised Maua to sign a letter "gifting" $38,617 to Tala and her brother-in-law "to assist them in the purchase of their home". This is Home Ownership's standard practice and was the common factor causing confusion for the families we spoke to. This "gift" effectively becomes a second mortgage with Ready Finance. The second mortgage, in Maua's name and at an interest rate of 18% and penalty rate of 25%, included Ready Finance's fee of $2100, legal fees and refinancing of a $10,000 car loan the couple had with Provincial Finance.
The couple got into arrears paying the two mortgages when Tala stopped working to have her third child. Collecutt accuses her of withholding the fact she was pregnant when she signed Tala says she was never asked. After six months a new, higher second mortgage contract was signed, this time for $49,859 and in Tala and her brother-in-law's name.
"Unfortunately for us, we believed their representations and advanced the funds required to settle the first mortgage arrears, throwing good money after bad," Collecutt says. He claims Home Ownership offered to buy the property back at the same price they paid for it Tala says she knows of no offer and lines of communication with the company were virtually non-existent.
She says a car loan that Ready Finance took over as part of the second mortgage was not paid, and the car was repossessed. Collecutt says the family withheld the fact that they were in arrears on the payments.
He confirms his company no longer pays off exisiting debts immediately as part of the debt consolidation agreement but takes over weekly payments to other finance companies to minimise its own risk. This arrangement was described as "weird" and "unusual" by financial advisers the Star-Times spoke to.
Mortgage manager Thumath, who arranged the first mortgage for the couple and has had to place foreclosure warning notices on their fence, believes they have been badly treated by Home Ownership.
Meanwhile, the Ah Sius are struggling on, desperate to keep their house. Most weeks they pay $780 on the two mortgages out of a total weekly income of $977. When Maua's work runs out, they miss payments. They sometimes miss meals.
Senior managers from Ready Finance have come to the home. "They said if we don't pay the mortgage we have to leave the house, they were going to give us seven days. It makes our family argue all the time. I wish we didn't buy the house in the first place," Tala says.
Collecutt fired a parting shot at the family. "We have bent over backwards to help the Ah Siu family. Given what we have done for them to date, we are quite frankly astounded that they appear to have turned around and defamed us to the media.
"If they had any material assets [I] would seriously consider issuing defamation proceedings against them. Given that [I] am a litigator with 15 years' high court experience it costs [me] a lot less than the average man in the street to take such action."
South Auckland mortgage broker and financial adviser Rapi Ieremia has dealt with distressed clients of the Home Ownership Company and says in every case he has seen the family's mortgage is greater than the value of their house. "Some I explain that it's too late to help... and that I can't refinance them now because there is no equity. It's just a nightmare."
Confusion is the biggest problem, Ieremia says. "There is a lack of understanding of the enormity and implications of getting into a... 100% mortgage plus an incorporation of debt, and they end up with three mortgages. They don't understand. The emotion of owning a home becomes so great when you are not financially educated... it can lead to a lot of problems."
Lawyer Momoe Saseve has dealt with Home Ownership clients wanting advice about investment properties they were looking at buying. She was concerned about a lease agreement Home Ownership's property management arm, Auckland Property Leasing, was asking clients to sign.
Copies of rental agreements obtained by the Star-Times restrict the amount of rental income owners can receive and demand a $5000 "exit fee" if they sell. "Essentially, it restricted the client immensely in so far as their asset and what they could do with it, and that was why I was telling everyone that it wasn't in their best interests to do this," Saseve says.
The Commerce Commission received complaints last year about the Home Ownership Company, but its investigation was whether it was charging an unreasonable full prepayment fee and it found no contravention of the relevant acts.
But the drums are beating for the Home Ownership Company, with warnings about it going out on Samoan radio and the Public Watchdogs website.
Saseve says she once saw an advertisement on a local television station for a Christmas party run by the company. "I just had to shake my head and think, `Boy, those poor people'."
http://www.stuff.co.nz/sundaystartim...8703a6619.html
Sunday Star Times | Sunday, 20 April 2008
Email a Friend | Printable View | Have Your Say
Phil Doyle/Sunday Star-Times
Families have become crippled with debt or lost their houses after dealing with a property company that offers to get low income immigrants into their own homes. Tony Wall and Emma Page follow the trail of misery.
It's a Wednesday night in Otahuhu, South Auckland, and a trickle of Samoan families are arriving at the Home Ownership Company's offices armed with big dreams, but no money.
The company's general manager, Scott Ball, presents a slick slideshow explaining how they can buy their first home or an investment property with 100% finance, even if they have no savings or bad credit histories.
"Don't the banks have to see a savings history?" asks a Samoan woman in the front row. "No," says Ball, "we've never had to show that."
Ball explains that the Home Ownership Company does not charge fees, taking its cut from the banks, but lends people the difference to cover other fees and a deposit. "You end up with two loans you are paying off."
The company then goes looking for homes that best suit the family involved, he says. "All you have to do is focus on going to work, earning money, and we'll do it all for you," says Ball. "Are there any questions?"
Just one, from the woman who spoke earlier: "Where do we sign up?"
If only it were that simple.
A Sunday Star-Times investigation has found that not only has the Home Ownership Company and its affiliated offshoots made millions of dollars by adding up to $40,000 to the price of each property, concerns have been expressed about the financial information the company has provided to lending institutions. Even more troubling, there have been cases where families who thought their existing debts had been consolidated as part of a complicated two-tier mortgage structure have found that their other debts have not been cleared at all, and that other finance companies have caveats over their homes.
Some families are spending most of their incomes on their mortgages, including penalty interest payments of 25%, often while working in low-paid jobs. Some are skimping on food and other essentials in a desperate effort to keep afloat.
The BNZ severed ties with the company in 2005. "The Bank of New Zealand terminated the relationship with the Home Ownership Company following a review of the business which raised multiple concerns about both the quality of the information we were receiving and whether clients were being fully and independently informed about the commitment they were undertaking," says Blair Vernon, the bank's general manager of strategy and marketing.
Rob Thumath, a South Auckland mortgage manager, says he financed about 60 of Home Ownership's clients before breaking ties with the company because it had failed to disclose in many cases that families were paying off a second mortgage with the company's lending arm, Ready Finance.
He is concerned it is targeting naive and vulnerable people. He says about a third of those clients have defaulted on repayments and he would not have approved the loans if he had known the full picture. "We have people in here crying every week," he says. "It's sale at all costs and to hell with the consequences. They sure as hell aren't doing this on the North Shore it's a niche market Samoans in south and west Auckland."
THE HOME Ownership Company finds it clients by advertising on Samoan-language radio, going into churches, and running stalls at the Otara markets. It claims to have helped 750 families buy their first home or investment property.
The company was founded by Russell Findlay, who first appeared in these pages in 2003 when we reported how he had gone from being one of Auckland's largest residential property developers to bankruptcy. He lost more than $3 million of other people's money and was banned from directing or being involved in the management of any company for four years.
The Home Ownership Company was taken over by Grant Collecutt, formerly a partner in law firm Simpson Dowsett. He is also a director and co-owner of Ready Finance. When Thumath emailed Collecutt last year to say one of Home Ownership's clients had been on the phone crying because consumer loans which were supposed to have been paid off by the company were not, Collecutt denied that was the case.
He wrote back: "Hopefully this is a case of the client making an innocent mistake (as opposed to wasting their time using the crying tactic to try and get us to advance them more money crying doesn't work with me)."
In a statement to the Star-Times defending his companies' practices, Collecutt said: "Without the assistance of Home Ownership the goal of escaping the rent trap and owning their own home is virtually an impossible dream for these clients. Most lenders simply aren't prepared to provide a 100% mortgage plus debt consolidation finance package to people with no material assets."
He says a "vast majority" of clients have built up equity in their properties. "Of course in spite of our best endeavours, some clients simply can't be helped," he added. "If a client does not pay their mortgage(s) and does not take reasonable steps to sort out their financial problems, then they will ultimately end up losing their homes."
Collecutt says the company takes steps to ensure people understand the transactions they are entering into, including having native language-speaking staff, getting independent valuations and ensuring they are represented by independent legal advisers.
But several families the Star-Times spoke to say when they raised the idea of bringing in their own lawyer, Home Ownership strongly advised them to use Bryan Yolland of Auckland Property Legal Service, who signed most of the loan documents we saw. The Star-Times spoke to some of the "testimonial" families featured in the Home Ownership Company's brochures and while they had not experienced any problems, they were surprised to learn how much profit the company had made on their property when shown land records.
At their three-bedroom house in Otara, which they bought for $272,000 at the end of 2006, Maua and Tala Ah Siu talk about how their experience with the company has left them on the verge of losing their home.
Economists say that if households spend more than 40% of their take-home pay on home loan repayments they are in "mortgage stress" this couple pays 80% in a desperate attempt to ward off foreclosure threats, which are coming thick and fast.
Buying their own home was a dream for carpenter Maua, 31, and Tala, 26, who came to New Zealand from Samoa about 10 years ago. They heard about the Home Ownership Company on Samoan radio and were reassured that the company's spokeswoman was Samoan. But when they went into the company's offices they dealt with "palagis", and things became confusing.
Their first application was declined because of Maua's bad credit rating.
Tala claims the Home Ownership consultant told them to get a relative to go in with her on the loan application, so they brought in her brother-in-law. His name is on the mortgage and property title but he has not lived with them and has not contributed to any loan repayments. "They knew he wasn't with us when we got the house," Tala says.
Collecutt claims his staff did not know about the situation, and that the family gave the impression the brother-in-law was living there.
Land records show Home Ownership's property-buying arm, South West Homes, paid the previous owners $250,000, settling the two deals on the same day, meaning it didn't have to outlay any money. This is known as a "contemporaneous settlement" and gets around real estate laws for non-registered property sellers but creates doubt around the true value of the home.
Collecutt: "At the end of the day, we will not buy a property unless we are buying it below market value. Our buyers work hard to hunt out and negotiate bargains for our business."
The Ah Sius say a Home Ownership consultant advised Maua to sign a letter "gifting" $38,617 to Tala and her brother-in-law "to assist them in the purchase of their home". This is Home Ownership's standard practice and was the common factor causing confusion for the families we spoke to. This "gift" effectively becomes a second mortgage with Ready Finance. The second mortgage, in Maua's name and at an interest rate of 18% and penalty rate of 25%, included Ready Finance's fee of $2100, legal fees and refinancing of a $10,000 car loan the couple had with Provincial Finance.
The couple got into arrears paying the two mortgages when Tala stopped working to have her third child. Collecutt accuses her of withholding the fact she was pregnant when she signed Tala says she was never asked. After six months a new, higher second mortgage contract was signed, this time for $49,859 and in Tala and her brother-in-law's name.
"Unfortunately for us, we believed their representations and advanced the funds required to settle the first mortgage arrears, throwing good money after bad," Collecutt says. He claims Home Ownership offered to buy the property back at the same price they paid for it Tala says she knows of no offer and lines of communication with the company were virtually non-existent.
She says a car loan that Ready Finance took over as part of the second mortgage was not paid, and the car was repossessed. Collecutt says the family withheld the fact that they were in arrears on the payments.
He confirms his company no longer pays off exisiting debts immediately as part of the debt consolidation agreement but takes over weekly payments to other finance companies to minimise its own risk. This arrangement was described as "weird" and "unusual" by financial advisers the Star-Times spoke to.
Mortgage manager Thumath, who arranged the first mortgage for the couple and has had to place foreclosure warning notices on their fence, believes they have been badly treated by Home Ownership.
Meanwhile, the Ah Sius are struggling on, desperate to keep their house. Most weeks they pay $780 on the two mortgages out of a total weekly income of $977. When Maua's work runs out, they miss payments. They sometimes miss meals.
Senior managers from Ready Finance have come to the home. "They said if we don't pay the mortgage we have to leave the house, they were going to give us seven days. It makes our family argue all the time. I wish we didn't buy the house in the first place," Tala says.
Collecutt fired a parting shot at the family. "We have bent over backwards to help the Ah Siu family. Given what we have done for them to date, we are quite frankly astounded that they appear to have turned around and defamed us to the media.
"If they had any material assets [I] would seriously consider issuing defamation proceedings against them. Given that [I] am a litigator with 15 years' high court experience it costs [me] a lot less than the average man in the street to take such action."
South Auckland mortgage broker and financial adviser Rapi Ieremia has dealt with distressed clients of the Home Ownership Company and says in every case he has seen the family's mortgage is greater than the value of their house. "Some I explain that it's too late to help... and that I can't refinance them now because there is no equity. It's just a nightmare."
Confusion is the biggest problem, Ieremia says. "There is a lack of understanding of the enormity and implications of getting into a... 100% mortgage plus an incorporation of debt, and they end up with three mortgages. They don't understand. The emotion of owning a home becomes so great when you are not financially educated... it can lead to a lot of problems."
Lawyer Momoe Saseve has dealt with Home Ownership clients wanting advice about investment properties they were looking at buying. She was concerned about a lease agreement Home Ownership's property management arm, Auckland Property Leasing, was asking clients to sign.
Copies of rental agreements obtained by the Star-Times restrict the amount of rental income owners can receive and demand a $5000 "exit fee" if they sell. "Essentially, it restricted the client immensely in so far as their asset and what they could do with it, and that was why I was telling everyone that it wasn't in their best interests to do this," Saseve says.
The Commerce Commission received complaints last year about the Home Ownership Company, but its investigation was whether it was charging an unreasonable full prepayment fee and it found no contravention of the relevant acts.
But the drums are beating for the Home Ownership Company, with warnings about it going out on Samoan radio and the Public Watchdogs website.
Saseve says she once saw an advertisement on a local television station for a Christmas party run by the company. "I just had to shake my head and think, `Boy, those poor people'."
http://www.stuff.co.nz/sundaystartim...8703a6619.html
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