Test Case Payout For Homefund Borrower
Sydney Morning Herald
Friday October 23, 1992
More than 50,000 HomeFund borrowers have won the right to seek compensation, totalling at least $5 million, following a test case ruling by the Consumer Claims Tribunal that the terms of a mortgage had been breached.
The tribunal ruled that Permanent Trustee Company Ltd, which oversees $3.6 billion worth of HomeFund loans, had breached the terms of its mortgage agreement with Mr Paul Zikking.
The company had collected his monthly repayments on the 20th of each month, but had not credited them until the end of the month. Mr Zikking, who took out a $60,000 mortgage with the company in 1989 to purchase a Federation worker's cottage in Dulwich Hill with his mother, was awarded damages of $100 - an estimate of the extra interest he paid as a result.
The practice of withholding the credit of mortgage repayments until the end of the month was stopped in February this year.
HomeFund is the State Government's subsidised home loans program for low-income borrowers. A program was first set up in 1986.
Mr Peter O'Keefe and Ms Suzanne Kennedy, the housing co-operative executives sacked in April for publicly criticising the HomeFund scheme, have campaigned with the Opposition's spokeswoman for housing, Mrs Deirdre Grusovin, to have it reformed.
Last night, Mr O'Keefe described the tribunal's ruling as "the first breakthrough we've had". "It's the first time our claims have stood up to a judicial review."
The case was the first of eight prepared on different aspects of the HomeFund scheme which are before the tribunal and the courts.
Mr O'Keefe said that the 53,600 HomeFund borrowers with mortgages taken out before February were now eligible to seek damages through the tribunal.
If each borrower was only awarded $100, the compensation bill would be more than $5.3 million, he said.
HomeFund and First Australian National Mortgage Acceptance Corporation(FANMAC), the government-backed financier which raises funds for the scheme and manages the mortgages, have been attacked sustainedly in Parliament since last year over the increasing number of borrowers who have abandoned HomeFund's comparatively expensive loans for private sector deals. Some HomeFund borrowers continue to pay interest rates as high as 15.9 per cent.
An independent review of the scheme is due to be completed at the end of November.
Last night, Mr Zikking said that he wasn't the winner, Peter O'Keefe and Suzanne Kennedy were: "They were the whistle-blowers who have been the friends of everyone who's been hard done by.
"They're the champions of the champions. (The) ruling is direct signal to these people that there's got to be a clean-up."
Mr Zikking, a public servant, has reduced his mortgage from $60,000 to$48,000 since 1989.
Yesterday, he was also celebrating the news that the Commonwealth Bank has agreed to refinance his loan - it will see his interest rate drop from 15.9 per cent to 9 per cent, with the first six months capped at 7.9 per cent.
The Herald was unable to contact a spokesperson for Permanent Trustee Company Ltd or the Minister for Housing, Mr Webster, last night.
© 1992 Sydney Morning Herald